COUNCIL OF THE CITY OF PHILADELPHIA2 COMMITTEE ON LABOR AND CIVIL SERVICE3 Room 400, City Hall6 Philadelphia, Pennsylvania Monday, December 5, 20117 2:05 p.m. PRESENT: COUNCILMAN BILL GREEN, CHAIR10 COUNCILMAN FRANK DiCICCO COUNCILMAN W. WILSON GOODE, JR.11 COUNCILMAN WILLIAM K. GREENLEE COUNCILMAN CURTIS JONES, JR.12 COUNCILMAN JAMES KENNEY COUNCILWOMAN BLONDELL REYNOLDS BROWN13 BILL 110836 - An ordinance amending Title 2215 of The Philadelphia Code, entitled "Public Employees Retirement Code," to expand the16 scope of "Plan '10" and "DC Plan" to cover additional employees pursuant to an17 arbitration decision... BILL 110841 - An ordinance amending Title of The Philadelphia Code, entitled "Public19 Employees Retirement Code"... 20 - - -21 22 2
This is2 Committee on Labor and Civil Service3 hearing called to order. We have a4 quorum in the presence of Councilman5 Curtis Jones, Councilman William6 Greenlee, Councilman Frank DiCicco,7 Councilman James Kenney.8 And I'd ask the Clerk to please9 read the first bill.10
Bill No. 110836, an11 ordinance amending Title 22 of The12 Philadelphia Code, entitled "Public13 Employees Retirement Code," to expand the14 scope of "Plan '10" and "DC Plan" to15 cover additional employees pursuant to an16 arbitration decision, and to make17 technical amendments, all under certain18 terms and conditions.19
Thank you.20 I'd ask the witnesses for this21 bill, Rob Dubow, to please approach the22 witness table.23 (Witness approached witness24 table.)25 3 12/5/11 - LABOR - BILLS 110836 & 1108411
Thank you. Good4 afternoon, Chairman Green and members of5 the Committee. 8 110836, which was introduced on behalf of9 the Administration. The bill amends the10 Public Employees Retirement Code to11 include certain employees hired or12 rehired on or after January 1st, 2012 in13 the two new pension plans created under14 Bill No. 15 Earlier this year, an16 arbitration panel was convened under Act17 195 to issue an award regarding the18 contract between the City and employees19 of the Sheriff's Office and the Office of20 the Register of Wills who are represented21 by the Fraternal Order of Police, Lodge22 5. The panel's award provided that new23 Sheriff's Office employees represented by24 the FOP would have the option to enroll25 4 12/5/11 - LABOR - BILLS 110836 & 1108411 in the two new pension plans created2 under Bill No. 100286, Plan '10 and the3 DC Plan. Any new bargaining unit member4 hired by the Register of Wills will be5 enrolled in the new plans. 9 These plans begin to reduce the10 City's pension costs at a time when the11 fund's health is deteriorating and while12 it is consuming ever-increasing portions13 of the City's General Fund. In just five14 years, our pension costs doubled from15 about $230 million in 2004 to about 46016 million in FY09. 23 Pension costs make up almost 1524 percent of the FY12 General Fund budget,25 5 12/5/11 - LABOR - BILLS 110836 & 1108411 and this number is projected to continue2 to increase significantly in the upcoming3 years. 8 The award provides that all Sheriff's9 Office employees who are represented by10 the FOP hired or rehired after January11 1st, 2012 must make a one-time12 irrevocable election between13 participating in the City's current14 defined benefit pension plan and15 increasing their contribution from 3016 percent of normal cost to 50 percent of17 normal cost or participating in a hybrid18 plan containing both the defined benefit19 plan, Plan '10, and a voluntary defined20 contribution component. 3 Increasing employee pension4 contributions and the creation of a5 hybrid pension plan will help reduce6 costs to the City both in the short and7 the long run, allowing the City to devote8 more resources to services. Moreover,9 these changes will help cushion the City10 against dramatic decreases in the stock11 market like those that decimated the12 City's pension fund over the last few13 years. Thank you for the opportunity4 to testify.
Thank you,7 Mr. Dubow.8 For the record, I recognize the9 presence of Vice-Chairman of this10 Committee, Councilman Goode.11 I notice that the FOP has a12 representative here in the form of13 Mr. Blagmond. Are you going to be14 testifying today?15
For the17 record, the Administration is properly18 describing the arbitration and outcome19 and you're not here in opposition?20 (Witness approached witness21 table.)22
No, we're not23 here in opposition. The language in our24 contract and the language in the25 9 12/5/11 - LABOR - BILLS 110836 & 1108411 ordinance is enough that we are2 comfortable with it.3
Thank you.4 Can you please state your name for the5 record.6
Eugene Blagmond,7 Public Relations for the Fraternal Order8 of Police, Lodge 5.9
Thank you10 very much.11 Mr. Dubow, Plan '10 is a plan12 that just covers these employees or is it13 broader than these employees?14
Plan '10 also would15 cover employees from the FOP and the16 firefighters who opted into it and these17 employees.18
So this19 covers -- so there are employees who will20 be part of Plan '10 who will have this21 outcome and nobody represented them; is22 that correct?23
Are there25 10 12/5/11 - LABOR - BILLS 110836 & 1108411 unrepresented employees in Plan '10?2
Plan '10 has just6 been -- there's no one in Plan '10 yet,7 so it doesn't have --8
Right. It's been15 set up administratively, but there's no16 one in it yet.17
And how much18 will the City save as a result of this19 change over the next Five Year Plan?20
For just these21 employees, it's a relatively small22 number, because it's how many employees23 are hired. So, I mean, I can get you the24 number, but it would be relatively small.25 11 12/5/11 - LABOR - BILLS 110836 & 1108411
Okay. I5 have no further questions.6 Any questions of the Committee?7 (No response.)8
Thank you,9 Mr. Dubow.10 I have on my list Bill Rubin.11 (Witness approached witness12 table.)13
Good14 afternoon. Please state your name for15 the record and begin your testimony.16 We'll get it. Thanks.17 Please proceed.18
Good afternoon,19 Chairman Green, members of the Labor and20 Civil Service Committee. I'm Bill Rubin.21 I'm here today to testify in regard to22 Bill 110836 on behalf of the members of23 District Council 33, both presently24 employed and retired.25 12 12/5/11 - LABOR - BILLS 110836 & 1108411 As you're aware, there are many2 issues surrounding the Philadelphia3 pension fund. There's been prior4 testimony concerning the health of the5 pension fund, and will hopefully be more6 opportunities discussed in-depth the7 history and the outlook for the health8 and vibrant retirement system that will9 provide security for all dedicated, loyal10 and hard-working civil servants.11 Today we're here to discuss the12 arbitration award of June 21st, 2011 as13 it pertains to the Sheriff's Office and14 Register of Wills employees.15 While neither of those groups16 is represented by District Council 33,17 the effect of the arbitration award does18 directly have an impact on the benefits19 the members will receive.20 As you can see by the21 illustration provided, there are three22 sources of capital to fund the benefits23 and expenses of the retirement fund -24 investment returns, employee25 13 12/5/11 - LABOR - BILLS 110836 & 1108411 contributions and employer contributions.2 In the Police arbitration and the3 Sheriff's portion of this award, there4 was an allowance for an increased5 contribution to remain in the defined6 benefit pension system.7 Our position is not including8 the Register of Wills in this option9 portion of the award and forcing all new10 hires into the newly created but untested11 Plan '10, the effect will be all new12 hires will not be contributing the13 necessary funds to continue in covering14 the outflow of expenses.15 One outcome is, the shortfall16 will add to the unfunded liability and17 require a higher payment from the18 taxpayers of the City of Philadelphia.19 Again, while this arbitration20 award has no bearing on any ongoing21 negotiations between District Council 3322 and the City of Philadelphia, the result23 will have an impact on the health of the24 pension fund and the people that the25 14 12/5/11 - LABOR - BILLS 110836 & 1108411 unions do represent.2 The request is being presented3 today, in writing the amendment, you4 include the Register of Wills in all5 applicable sections to allow for the6 opt-out of Plan '10 provision.7 Thank you for your attention8 and this consideration in this important9 matter, and I would answer any questions10 that you may have.11
Thank15 you, Mr. Chairman.16 Good afternoon, Mr. Rubin.17
When this19 arbitration decision was made, was there20 any appeal taken by anyone?21
I don't believe22 that the FOP did appeal the arbitration23 award. We just feel that right now the24 way that the system has been set up, the25 15 12/5/11 - LABOR - BILLS 110836 & 1108411 Police arbitration and the Fire2 arbitration, although it is being3 appealed, it's not being appealed in that4 area. They do create the situation5 where, as Mr. Dubow testified, no one is6 going into this plan because they have7 taken that option. This arbitration does8 allow for the Sheriff's Department to9 have that same option, but not the10 Register of Wills.11
I guess12 I'm just thinking if the representative's13 employees did not appeal it, it kind of14 limits our argument. I mean, I hear what15 you're saying. I just --16
I can't speak for17 the individuals that did the arbitration,18 but on behalf of our members from19 District Council 33 and all other pension20 members, including yourself who are in21 the plan, it does have a negative impact22 on how much money will be available, and23 if that money is not going in at the same24 rate and the money is being diverted to25 16 12/5/11 - LABOR - BILLS 110836 & 1108411 Plan '10, then someone has to make up2 that shortfall, and that increase is3 going to come back on the taxpayers.4
Thank you,7 Mr. Rubin. It's my understanding that8 actually there are no contributions9 currently made by Sheriff's Department10 employees and this will move them up to 611 percent.12
We're not talking13 about the Sheriff employees. We're14 talking about the people from the15 Register of Wills office.16
Correct. It's only19 those individuals that we're dealing20 with. Sheriff's Department has been21 included in this and we have no problem22 with that, a portion of what they've23 arbitrated and they haven't appealed it,24 and that's fine. It's just that one25 17 12/5/11 - LABOR - BILLS 110836 & 1108411 group of people that are not being given2 continuity of benefits that all other3 arbitrations have been given.4
I'm very5 sensitive to your testimony. You6 represent a great number of employees. I7 think in this case there may be ten new8 employees over the next five years in the9 Register of Wills Office or something10 like that, and then I don't think that11 the impact will be significant on the12 rest of the plan given the small, small13 number of employees that this pertains14 to.15 So I thank you for your16 testimony.17
I20 understand.21 Any further questions for22 Mr. Rubin?23 (No response.)24
Thank you25 18 12/5/11 - LABOR - BILLS 110836 & 1108411 for your testimony, Mr. Rubin.2
Anybody else4 here to testify on this bill?5 (No response.)6
Seeing none,7 will the Clerk please read the title of8 the next bill.9
Bill No. 110841, an10 ordinance amending Title 22 of The11 Philadelphia Code, entitled "Public12 Employees Retirement Code," by further13 providing conditions under which an14 employee or any designated beneficiary15 may be disqualified from receiving any16 retirement or other benefit or payment.17
Thank you.18 I notice the presence of19 Councilwoman Blondell Reynolds Brown, who20 is the sponsor of this bill. Would you21 like to say anything before we begin22 testimony?23
Thank you,24 Mr. Chairman. Yes, I would like to offer25 19 12/5/11 - LABOR - BILLS 110836 & 1108411 a couple comments and then, at your2 instruction, speak to the anticipated3 amendment.4 I want to thank Chairman Green5 and members of the Labor and Civil6 Service Committee for an opportunity to7 speak briefly about Bill No. 110841,8 known as the Pension Forfeiture Bill.9 On November 17th, 2011, I10 introduced legislation that would ensure11 that any City of Philadelphia employee12 who is convicted, underscored, of13 committing sexual offenses against minors14 will be disqualified from receiving their15 City of Philadelphia retirement and16 pension benefits.17 In light of the alleged child18 abuse sex scandal at my alma mater and19 former employer, Penn State University,20 and in response to the fact that the21 alleged offender, former Assistant Coach22 Jerry Sandusky, is still eligible to23 collect the taxpayer-funded state24 pension, I was compelled to take some25 20 12/5/11 - LABOR - BILLS 110836 & 1108411 action on this matter in the City of2 Philadelphia separate from that which we3 see happening in Harrisburg.4 When appropriate, we should5 look for and seize opportunities and take6 the necessary steps so we can always7 further strengthen measures designed to8 protect our city's children and ensure9 that sexual offenders who violate our10 children should not in this case be11 eligible to receive benefits from the12 tax-paying citizens of our city.13 A number of advocacy groups14 were invited to join us, but given the15 hour were not able to offer testimony16 today.17 I would be remiss not to thank18 the Administration whom we have worked19 closely with, working closely with my20 office to construct an amendment that21 will ultimately make this a better bill,22 and at the appropriate hour, I will offer23 the amendment.24 I would ask that members of the25 21 12/5/11 - LABOR - BILLS 110836 & 1108411 Committee please review the2 correspondence from Mr. Masters and3 Mr. Feder, who provide background on this4 anticipated amendment, and I thank you5 for an opportunity to offer comments.6 Mr. Chairman?7
If I could9 do one more thing. In that memo is very10 descriptive provisions of the Megan's11 Law, and that will be helpful to you,12 because we used the Megan's Law as the13 framework for this bill.14 Thank you.15
Thank you16 very much, Councilwoman.17 I believe Mr. Dubow is here to18 testify on this bill.19 (Witness approached witness20 table.)21
Good afternoon,24 Councilman Green and members of the25 22 12/5/11 - LABOR - BILLS 110836 & 1108411 Committee. I'm Rob Dubow, Finance2 Director. I'm here to provide testimony3 regarding Bill No. 110841, introduced by4 Councilwoman Reynolds Brown.5 If enacted, the bill would6 disqualify City employees and their7 designated beneficiaries from receiving8 any retirement or other benefit if such9 employee pleads or is found guilty of an10 offense listed on the Pennsylvania11 Registration of Sexual Offenders or its12 statutory equivalent. And I understand13 the amendment will require that that be14 related to employees' work.15
The offenses listed17 in the Act can generally be described as18 sexual offenses involving minors. Under19 this bill, individuals disqualified would20 have the monies that they paid into the21 system returned without interest, but22 would not be eligible for pension or23 health benefits that they would otherwise24 have received.25 23 12/5/11 - LABOR - BILLS 110836 & 1108411 While we are supportive of the2 concept of the bill, the Law Department3 has raised a number of concerns regarding4 the enforceability of this measure. And5 I know there's an amendment that attempts6 to address some of those issues. And a7 copy of the Law Department's memorandum8 has been provided to the Committee and I9 believe Mr. Masters has also been10 provided.11 Thank you for the opportunity12 to testify, and I'd be happy to answer13 any questions that you have.14
One quick15 question. Is the Administration in favor16 of or opposed to this bill?17
We are in favor of18 it so long as the legal issues are19 resolved.20
And does the21 amendment that's proposed resolve the22 legal issues?23
I don't know. I24 know you've had conversations with the25 24 12/5/11 - LABOR - BILLS 110836 & 1108411 Law Department, so the Councilwoman may2 have a better sense of that than I have.3
Yes. It's7 my understanding from the Law Department8 that once this amendment is adopted, it9 will be to the satisfaction of the10 Administration.11
Thank14 you, Mr. Chairman. I was going to ask15 kind of the same question, what the16 Administration's position was.17 I guess I'm still not clear,18 and maybe Councilwoman Brown can help.19 It seems like it said if present20 employees, if their condition does not21 change, that this could not be -- this22 law could not be effected on them. Is23 that what I'm hearing? Maybe Mr. Masters24 can talk about that. I don't know.25 25 12/5/11 - LABOR - BILLS 110836 & 1108411
Mr. Masters,2 would you mind responding to Councilman3 Greenlee.4 (Witness approached witness5 table.)6
Good afternoon.7 Steven Masters, attorney for City8 Council.9 The basic constitutional law10 that's at play here is that the City11 cannot change the terms of the pension12 plan for an existing employee if there's13 no change in that employee's status. But14 once a current employee changes some15 aspect of their terms and conditions of16 employment - they get a raise, they get a17 promotion, they get some kind of a new18 arrangement in some way - this19 legislation would then apply to them.20 But there's no way that we can pass21 legislation that amends the pension plan22 that would affect current employees that23 are vested in the pension plan.24
So you'd25 26 12/5/11 - LABOR - BILLS 110836 & 1108411 have kind of two different sets of2 employees, right, with two different sets3 of regulations? I'm not criticizing the4 bill. I'm trying to be clear on that.5 So if a person got a6 promotion -- the way you see it, if a7 person got a promotion or a raise, they8 could be affected by this bill? But if9 they didn't, they wouldn't be? Is that a10 succinct way of putting it, or as11 succinct as I can make succinct?12
Right, and it's13 based on the constitutional principles of14 property rights, that when someone vests15 in their pension, they have a vested16 property right. We as the employer17 cannot alter that contract unless there18 is some new employment arrangement that19 the employee voluntarily enters into. So20 if they choose to take a raise or a21 transfer or a new position in some way,22 then they have entered into a new23 employment contract, so to speak, with24 the City, whether they have a collective25 27 12/5/11 - LABOR - BILLS 110836 & 1108411 bargaining agreement or not.2
How3 about -- so the collective bargaining, it4 doesn't -- as far as you see, the5 collective bargaining, it doesn't have to6 be done through corrective bargaining if7 you're a represented employee?8
No. The Law9 Department's position is that they're10 unsure, and we don't have any separate11 analysis from that. It very well may12 need to be subject to collective13 bargaining for the members of the14 bargaining unit, but this is a separate15 question as to whether an existing16 employee -- it could apply to them if17 they have no change in their pay grade or18 their position from now until their19 retirement.20
But you21 say it could -- the issue of collective22 bargaining is still in play, right? I23 mean, there's still a question there,24 right?25 28 12/5/11 - LABOR - BILLS 110836 & 1108411
Absolutely. But2 that affects virtually any legislation3 that we would do on the pension.4
There's some7 indication that there may be an exception8 to the normal rule that any change in9 pension benefits would be subject to10 collective bargaining. Because we're11 here dealing with the forfeiture criteria12 and basically tweaking the crimes that13 people commit while they're connected to14 their employment that would disqualify15 them, that is typically not a subject of16 collective bargaining. But the Law17 Department wasn't able to provide a18 definitive analysis.19
I mean,20 the amendment certainly addresses some of21 our concerns -- or some of my concerns, I22 should say.23 All right. Thank you.24
Thank you.25 29 12/5/11 - LABOR - BILLS 110836 & 1108411 Mr. Masters, just on a totally2 separate matter but while you're sitting3 there, wouldn't that same analysis that4 the Law Department is applying to this5 change in the pension that may or may not6 be the subject of collective bargaining7 apply with respect to the DROP8 legislation that was passed and signed by9 the Mayor in terms of the same analysis10 would apply to pension changes that11 aren't bargained?12
The same thing13 occurred to me, Councilman, yes. I14 believe the same analysis would apply to15 any legislation that Council passes that16 would alter in any way the pension17 ordinance.18
I'm sorry.22 Mr. Masters, the amendment, did this23 address the Law Department's concerns?24
The Law25 30 12/5/11 - LABOR - BILLS 110836 & 1108411 Department's primary concern was that as2 originally worded, the legislation was3 not related to the employee's conduct as4 an employee. It was global. It was5 whenever they were doing horrible things6 to children, not necessarily related to7 their job.8 So the amendment does. The Law9 Department's memo was written after our10 amendment was presented to them, and so11 they told us that they removed the entire12 section from the memo that addressed that13 area, because we had dealt with it in the14 amendment.15 So the three remaining issues16 that the Law Department presented in17 their memo were more in the -- I would18 describe them as more legal concerns that19 they were flagging. They didn't suggest20 any amendments, and I don't think that21 any amendments really could be proposed22 that would provide any more clarity to23 the concerns. They simply were noting24 that there's a possibility that there's a25 31 12/5/11 - LABOR - BILLS 110836 & 1108411 preemption issue, although the caselaw2 looks fairly good for us. There's a3 possibility that this legislation may be4 subject to collective bargaining as it5 relates to employees inside the6 bargaining units. And they also raised7 the issue about its impacts on current8 employees, and in Section 2 of the9 legislation it says that this legislation10 is not intended to be retroactive, as of11 course no legislation can be retroactive12 in our society.13 So the Law Department's memo,14 from my perspective, was really15 highlighting some legal issues of16 concern, but not presenting any case that17 would come down against this legislation.18
Okay. With19 that explanation, Mr. Dubow, is the20 Administration in favor of or opposed to21 this?22
You support25 32 12/5/11 - LABOR - BILLS 110836 & 1108411 it? Thank you.2 Councilwoman Brown, would you3 like to describe the amendment before we4 move into the meeting?5
Sure. A6 number of legitimate questions and7 concerns were raised about a City8 employee and where they engage in this9 inappropriate activity. So in keeping10 with the stipulations and the signals11 that were raised in the memo, the12 amendment is designed to narrow very13 strictly where the conduct happens, and14 as long as the conduct happens on that15 person's job or in connection with that16 person's job, only then does this bill17 apply.18
And so the20 reading is "if committed incident to or21 in connection with the employee's office22 or employment."23
Thank you.24 Is there anybody else here to25 33 12/5/11 - LABOR - BILLS 110836 & 1108411 testify on this bill?2 (No response.)3
Seeing no4 one, we will close the hearing on Bill5 Nos. 110836 and 110841 and take a6 two-minute recess before we move into the7 meeting.8 (Very brief pause.)9
Two minutes10 having elapsed, we move into the meeting11 on Bill Nos. 110836 and 110841.12 Are there any amendments on13 110836?14
Thank you,18 Mr. Chairman. I move that Bill No.19 110836 be reported out of Committee with20 a favorable recommendation, that the21 rules of Council be suspended so as to22 permit first reading at our next Council23 session.24 (Duly seconded.)25 34 12/5/11 - LABOR - BILLS 110836 & 1108411
The ayes7 have it. No opposition.8 Councilman Goode, would you9 please introduce the amendment to 110841.10
Thank you,11 Mr. Chairman. I move that the amendment12 to Bill No. 110841 as described by13 Councilwoman Brown and circulated to all14 members of the Committee be approved.15 (Duly seconded.)16
Thank you,25 35 12/5/11 - LABOR - BILLS 110836 & 1108411 Mr. Chairman. I move that Bill 110841,2 as amended, be reported out of this3 Committee with a favorable4 recommendation, that the rules of Council5 be suspended so as to permit first6 reading at our next Council session.7 (Duly seconded.)8
The bill14 passes.15 We will close the meeting on16 Bill Nos. 110836 and 110841. Thank you.17 (Committee on Labor and Civil18 Service concluded at 2:35 p.m.)19 - - -20 21 22 23 24 25 36 1 CERTIFICATE2 I HEREBY CERTIFY that the3 proceedings, evidence and objections are4 contained fully and accurately in the5 stenographic notes taken by me upon the6 foregoing matter on December 5, 2011, and that7 this is a true and correct transcript of same.8 9 10 11 12 --------------------13 MICHELE L. MURPHY14 RPR-Notary Public15 16 17 18 (The foregoing certification of this19 transcript does not apply to any reproduction20 of the same by any means, unless under the21 direct control and/or supervision of the22 certifying reporter.)23 24 25