Jul 1, 2009 7:00 pm US/Eastern
City Union Contracts Expire
PHILADELPHIA (CBS 3) ―
Philadelphia has once again started a new fiscal year without employee contracts in place, and it could be several more weeks before negotiations move forward.
For their part, city officials are waiting for lawmakers in Harrisburg to approve a one-cent increase in the city's sales tax and allow them to spread out and delay some pension payments.
The unions, however, are not pleased with several significant elements of the city's offer.
Despite Mayor Michael Nutter's call for across-the-board pay freezes for four years, the biggest sticking point in the negotiations does not appear to be pay. Instead, it is pension and health care benefits.
"The pension fund particularly is in bad shape," said Larry Eichel, director of the Philadelphia Research Initiative at the Pew Charitable Trusts. Pew released a study this week that lays out the dire position of Philadelphia's pension fund.
Since last year, the pension fund has dropped from $4.66 billion to $3.26 billion, a 30 percent decline.
"We know that they have less than 50 percent of the money they need to pay the obligations that they've incurred to current workers and current retirees," Eichel said. "Out of 84 major state and local pension funds, Philadelphia was the fifth worst off."
Part of the problem, Eichel says, the city has routinely delayed or skipped payments into the pension fund over decades.
By 2013, pension and health care costs could amount to 26 percent, or $1.1 billion, of the city's general fund budget. That is due in part to the payments Mayor Nutter wants to defer over the next two years to help the city through the budget crisis.
Nutter says the pension and health care plans are also too generous.
As part of a long-term plan to make the pension fund solvent, Mayor Nutter (D) is asking current workers to contribute more toward their pensions, and he wants to reduce the guaranteed benefits for all new hires.
"We have to reduce the costs of our pension and health care services," Nutter said. "We are looking for our public employees to pay a little more in terms of the cost of health care. We need to change the pension system that we have today."
But the city's unions don't want to give up benefits they say they have already earned.
"The pension problem was created by the city," said Cathy Scott, President of AFSCME District Council 47, the city's white-collar union. "That is the city not making any contributions, or significantly underfunding what they should have funded."
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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