Last week, "It's Our Money" brought you a detailed explanation of the process used to negotiate contracts for police officers and firefighters. Well, it turns out we published that information just in time. An arbitration award was issued for police officers and we now have the details of the new contract for more than 6,000 members of the Fraternal Order of Police.
You can read Nutter's statement on the decision by clicking here. Also, the FOP has put a copy of the actual decision on their website.
So, what is in the new contract? The agreement, which only lasts for one year, provides a modest pay increase and decreases the city contribution for healthcare. Police officers will receive a 4% salary bump. Pension benefits for most employees will remain unchanged. An increase will be given to the beneficiaries of police officers who are killed in the line of duty. The bump is retroactive and will include the family of Sergeant Stephen Liczbinski.
Probably the biggest shocker in the award was the decrease in the amount of money that the city is required to contribute for health insurance. The city pays a fixed dollar amount per employee for a plan that is administered by the union. The award lowered that amount from $1,303 per employee in FY08 to $1,165 per employee in FY09. The total cost per year will change from from $100.7 million to $95.4 million. This is the first time in recent memory that the cost has actually gone down. It's particularly surprising because the overall cost of healthcare is rapidly increasing.
Another interesting component is the creation of a healthcare cooperation committee. According to a post on Philly Clout, many insiders believe this might be the first step towards consolidating all of the union-run healthcare funds into a single plan.
However, one union source told me that the committee is a "toothless tiger" because it has no real power. Alternations to the health plan will need to be approved by both sides, which makes radical change unlikely. It will be worth keeping an eye on this committee and see what develops. I wonder if the other unions will join the committee as as result of their contracts.
Still, this contract does not really address one of the major issues facing the city: pensions. As we've covered previously on "It's Our Money", the city pension system has been chronically underfunded. Despite this fact, the pension benefits for police officers was not changed by the award.
Why? Well, it seems likely that the Nutter Administration is hoping that the proposed pension obligation bond-- which would borrow $3 billion to bring the funding level of the pension system to 95%-- can be worked out over the next year. In fact, the pension issue might be one of the reasons that the contract only lasts for a year. The Administration might go for a longer agreement when (or if) the pension bond is approved.
Finally, this arbitration award has interesting implications for the other unions. Will the Nutter Administration seek a one year deal with them? If so, that means that negotiations for all four unions could happen all over again in twelve months. I'm personally happy about that prospect, because it means that we'll get to use the countdown clock again.
Also, the lower healthcare payment has to worry the firefighters union. Currently, the city pays more money for healthcare for firefighters than any other municipal employee. The arbitration panel that decides the firefighters contract will see much of the same information presented to the police arbitration panel. It therefore seems likely that the panel might lower the amount of the city's contribution.
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