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Kenney administration, municipal unions go head-to-head over pensions

As expiration date approaches for the city contracts with three of the largest labor unions, city officials want the police, firefighter and white collar municipal workers unions to agree to the same pension plan changes that AFSCME District Council 33. Current contracts for the three other unions expire June 30.

Mayor Kenney's administration is gearing up for a fight over pensions.
Mayor Kenney's administration is gearing up for a fight over pensions.Read moreMICHAEL BRYANT / Staff Photographer / File

As the expiration date approaches for contracts with three of the city's largest labor unions, the Kenney administration is gearing up for a fight over pensions.

City officials want the police, firefighters, and white-collar municipal workers unions to agree to pension plan changes that AFSCME District Council 33, which represents 9,000 of the city's blue-collar workers, accepted last year. Contracts for the three other unions expire June 30.

D.C. 33 signed a four-year contract  July 15 worth $170 million that included an 11.5 percent wage increase over the life of the pact. In exchange, the union agreed to increased pension contributions from its highest-paid current employees and a hybrid pension plan for new ones.

But presidents of the police, firefighters, and white-collar workers unions expressed skepticism this week over the proposed plan that would cap annual pension payments at $50,000 for future employees, while anything above that would come from contributions to a 401(k) plan.

"We're not open to any pension reform," John McNesby, president of the Philadelphia Fraternal Order of Police, said Wednesday. "We already pay the most into the pension. We don't get three highest years. We don't receive Social Security."

Ed Marks, president of Philadelphia Firefighters' and Paramedics' Union Local 22, predicted that pensions were "going to be the biggest stumbling block" in the negotiations.

Meanwhile, AFSCME District Council 47 president Fred Wright said he was open to negotiating with the city on the pension front, but he wants the city to increase the defined-benefits cap for his members.

"We see some issues with the baseline being too low," Wright said, referencing the $50,000 cap for future employees. "Our members make much more than that."

Finance Director Rob Dubow said the city wanted all municipal union members, elected officials, and exempt employees to agree to the same pension plan as D.C. 33, which mandates that anyone paid an annual salary of more than $45,000  pay between 0.5 percent and 3 percent more toward one's pension, depending on the salary bracket. For example, those earning $55,000 to $75,000 contribute 1.5 percent and those earning $100,000 or more pay 3 percent more than their current contributions, which vary among the unions. (The average salary of a D.C. 33 employee is $38,000, so most current employees wouldn't be affected by the changes.)

Additionally, the city wants all new employees, unionized and not, to participate in the new hybrid plan that would allow for a traditional defined contribution benefit of up to $50,000 annually. Above that, they could enroll in a 401(k) plan. The city would match half of the employee's contribution up to 1.5 percent of annual compensation.

According to the city, if everyone agrees to the same changes, if the city continues to make its minimum pension payment plus pump sales tax revenue into the pension plan, and if the investment gods shine down on the fund with constant assumed rates of return, then in 13 years the fund would be more than 80 percent funded. Currently, the fund has only 45 percent of the money it needs to satisfy its $11 billion liability.

The administration tried to get City Council to pass legislation that would impose the D.C. 33 changes on the city's elected officials and nonunion workers, in part to convince the three unions now in negotiations that everyone is on board with the plan. Council balked at the idea.

"The plan is 45 percent funded. We just need to take action as quickly as possible," Dubow said.

On Thursday, Council President Darrell L. Clarke declined to discuss the administration's pension bill and its potential effect on current labor negotiations.

"Should I answer that, Jane?" Clarke asked, looking at his spokeswoman, Jane Roh, who said he should not answer. "I'm not feeding into that," he said.

Clarke has previously said that he wants to wait until all other union contracts are signed before legislating pension changes for nonrepresented workers and elected officials.

Council on Thursday approved a $4.4 billion budget for the 2018 fiscal year, and a five-year plan, which has $200 million reserved for labor contracts.

It will be up to a panel of arbitrators to decide how much money the city will have to pay for the new police and firefighters contracts. Each side will make its argument and have rebuttals, and then the arbitration panel will decide.

McNesby said he would push for higher pay for his members.

"We just want to be paid fairly," he said. "We've been making the city look good in the last few years with the DNC, the papal visit, the NFL draft. You don't see the stuff that is going on around the country here. We should be paid accordingly."

For the firefighters, Marks said investment into the union's health-care plan, pensions, and wages were the three major items he would be advocating for during arbitration, currently scheduled through late July. Like police, firefighters also don't pay into Social Security or receive the benefit, making their pensions their only government-funded retirement income.

D.C. 47 is negotiating directly with the city. Wright said his negotiating team met with the city for the first time at the start of this month and has future meetings scheduled. He said he doesn't expect a new contract to be reached before the current one expires.

Aside from pensions, the city declined to discuss its negotiations with the unions.