WE'VE said it before, and we'll repeat it: Last week's arbitration award for Philadelphia police is a big deal.
Police gain because it grants raises to police for the next two years, and allows them to move out of the city.
The city gains by being able to recast health and pension benefits for police. The award mandates that the police union administer its own self-insurance program, which means that all doctors and dentists bills are paid directly by the union instead of an outside health-insurance plan; the city will get an accounting each year of how much money was spent.
This is a supremely big deal. To see why, we quote Finding #57 in the arbitration ruling:
"At the time of the 2009 Award issued, the city's contributions to the Joint Trust [the fund that pays police health care] exceeded the cost of the benefits, allowing the Joint Trust to accumulate substantial reserves."
In 2009, the city paid police union members $5 million more than their health benefits cost; over time, that reserve fund — overpayments by the city — has grown to $48 million.
Those overpayments go to the heart of why it's so critical that the city gain more control over the spiraling health-care and pension costs for its unions.
In fact, the city's health-care expenditures are 45 percent higher than they were five years ago, according to a recent Pew report on pensions and health care. As the arbitration panel pointed out, 60 percent of the city's general-fund spending is on compensation and benefits for city employees. And since 2001, health-benefit costs have risen 123 percent, at the same time revenues have grown 38 percent.
The system is clearly broken. This new award doesn't fix it, but it goes a long way to helping the city grapple with what is definitely a crisis.
The pension plan has also changed, so new hires will have a choice between contributing more of their pay into a defined benefit plan or less into a hybrid plan.
Members will now be required to contribute more to their pensions, as well as to health care. For the first time, police union members will have co-pays for doctor visits and drugs.
Both these changes could provide a new template for realigning health and benefits for other city unions. That's the biggest news of all.
The police arbitration awards are considered the "ceiling" for other contract awards; while it could happen, no one can expect to do better than the police. This award could, for the municipal unions, provide an early glimpse what their contracts might start looking like.
We don't underestimate how difficult it will be to find the money to pay for the raises granted by arbitration; even though the city was granted the right to furlough police up to 30 days a year, furloughing police is hardly a smart public-safety strategy.
But as states and cities struggle to cope with pension and benefit costs that keep spiraling upward, this award could pave a trail.
The default mode for governments has been to push off grappling with complex structural changes to health coverage and pensions for as long as possible, which only exacerbate the future problems.