COUNCIL OF THE CITY OF PHILADELPHIA2 COMMITTEE ON LABOR AND CIVIL SERVICE3 Room 400, City Hall6 Philadelphia, Pennsylvania Wednesday, December 15, 20107 11:20 a.m. PRESENT: COUNCILMAN BILL GREEN, CHAIR10 COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN WILLIAM K. GREENLEE11 COUNCILMAN CURTIS JONES, JR. BILL 100780 - An ordinance amending Title of The Philadelphia Code, entitled "Public14 Employees Retirement Code," by expanding the scope of "Plan '10" and "DC Plan" to cover15 additional employees, including Fire Department employees; by revising the16 definition of "Fire employee"; and by making technical changes; all under certain terms and17 conditions. 18 - - -19 20 21 22 2
This hearing2 of this Committee on Labor and Civil3 Service is now in session.4 Would the Clerk please read the5 title of the bill.6
Bill No. 100780, an7 ordinance amending Title 22 of The8 Philadelphia Code, entitled "Public9 Employees Retirement Code," by expanding10 the scope of "Plan '10" and "DC Plan" to11 cover additional employees, including12 Fire Department employees; by revising13 the definition of "Fire employee"; and by14 making technical changes; all under15 certain terms and conditions.16
Thank you.17 I'm waiting for a quorum. If18 someone could go to the hallway and19 please get Councilman Greenlee.20 (Pause.)21
Thank you.22 Let the record reflect that Councilman23 Greenlee, Councilman Jones, Councilman24 Goode are here, and we'd like to begin25 3 12/15/10 - LABOR - BILL 1007801 testimony with Mr. Dubow.2 (Witness approached witness3 table.)4
Good morning,7 Chairman Green and members of the8 Committee. My name is Rob Dubow. I'm9 the City's Finance Director and I'm here10 to testify in support of Bill No. 100780,11 which was introduced on behalf of the12 Administration. The Bill amends the13 Public Employees Retirement Code to14 include certain employees hired or15 rehired on or after October 10, 2010 in16 two new pension plans created under Bill17 100286. 24 Earlier this year, an25 4 12/15/10 - LABOR - BILL 1007801 arbitration panel was convened under Act2 111 to issue an award regarding the3 contract between the City and the4 Firefighters. The panel's award provided5 that new employees hired or rehired on or6 after October 15th would have the option7 to enroll in two new pension plans, Plan8 '10 and the DC Plan. 11 The plans begin to reduce the12 City's pension costs at a time when the13 fund's health is deteriorating and while14 it's consuming ever-increasing portions15 of the City's General Fund. In just five16 years, our pension costs have doubled,17 from about $230 million to about 46018 million. 24 While the City has appealed the25 5 12/15/10 - LABOR - BILL 1007801 economic provisions of the award, neither2 the City nor the Firefighters appealed3 the award's pension provisions. 5 Pension costs make up just over6 12 and a half percent of the City's FY117 budget, and that's a number that's8 projected to continue to increase9 significantly in the upcoming years. The10 steep rises in the pension costs are11 projected to continue throughout our12 Five-Year Plan. Those costs are13 projected to be 562 million in FY12 and14 over 600 million in FY15. That would be15 about 15 percent of the budget. 23 As previously noted, earlier24 this year an arbitration panel was25 6 12/15/10 - LABOR - BILL 1007801 convened under Act 111 and issued an2 award regarding the contract between the3 City and the Firefighters. 14 This bill would codify the Act15 111 award for IAFF members. These16 provisions are similar to the ones17 included in the Act 111 award for the FOP18 that were codified in Bill No. 14 These reforms are in15 conjunction with other ongoing efforts to16 stabilize the City's pension fund. 15 percent. Lowering that7 assumption allows funds to moderate the8 risks of their investments, which can9 also help reduce the likelihood of10 losses. 8
Thank you,12 Mr. Chairman.13 Rob, Mr. Dubow, I always hear14 increases in pension costs. Can you just15 briefly educate us as to what those16 increases actually are, and is there a17 cost of living increase, COLA, that is a18 part of that?19
So the costs that20 we're talking about are the amounts that21 the City pays into the pension fund and22 the amount we pay for our pension23 obligation bonds. Those costs are based24 on what the actuary tells us we need to25 10 12/15/10 - LABOR - BILL 1007801 pay each year. So he looks at things2 like our assumed earnings assumption, how3 long people will live, when they'll4 retire, and comes up with a payment.5 Our payment has increased since6 '04 from under $200 million to well over7 400 and then will be over 600 by the end8 of our current Five-Year Plan.9
I mean, just10 out of course of business, do we ever11 challenge those assumptions?12
We go through --13 the Pension Board goes through these14 assumptions with the actuary to make sure15 that they make sense to us. Actually,16 just yesterday there were some components17 to the assumptions that we went over at a18 Pension Board meeting and agreed were19 reasonable.20 So I don't think it's the21 assumptions are unreasonable. I think22 it's just that the costs are escalating.23
Cost of24 living increases?25 11 12/15/10 - LABOR - BILL 1007801
When you say "cost2 of living increases," do you mean do we3 build in -- does he build in salary4 increases or does he build in cost of5 living increases for pensioners?6
No, because we8 don't have that -- they would only get9 those through the pension adjustment10 fund.11
So as a19 question of timing, I understand there's20 some dispute between lawyers for the21 union and lawyers for the City with22 respect to whether or not the arbitrators23 on remand, were that to happen from24 Common Pleas, could come out with an25 12 12/15/10 - LABOR - BILL 1007801 award that does not -- that is different2 even with respect to pensions. I have an3 opinion from Ballard Spahr which --4
-- which we7 will make part of the record. I'm just8 wondering what the impact would be of9 that eventuality occurring if we've put10 people into this plan.11
As you'll see in12 the Ballard opinion, they said that that13 can't happen.14
Okay. So15 just for the record, the Administration's16 position is, that provision could not be17 changed --18
Right. I would use19 the Ballard letter that you said you're20 going to put into the record as our21 position.22
Any further2 questions from the Committee?3 (No response.)4
10 Good morning, Council. My name11 is William Gault. I'm a Fire Lieutenant12 and proud almost 27-year member of the13 Philadelphia Fire Department. 21 I appear today before this22 Committee to comment on Bill No. 100780,23 which is intended to revise the City's24 pension ordinance in order to incorporate25 14 12/15/10 - LABOR - BILL 1007801 the pension provisions of the most recent2 IAFF Local 22 Act 111 award. 5 On the immediate question6 whether Bill 100780 accurately picks up7 the changes from the most recent award,8 the answer is, yes, it does. 11 I wish to remind the Committee12 members that the award's pension13 provisions represent a reduction in14 benefits for my members. We are not15 happy about the pension reduction. 23 I say "supposed to be" because24 the Nutter Administration does not share25 15 12/15/10 - LABOR - BILL 1007801 our position. Despite the fact that our2 most recent award contains significant3 economic concessions, including a wage4 freeze, medical benefit changes and the5 pension reduction before you today, the6 Administration has nonetheless chosen to7 appeal the entire award under the PICA8 law. 20 While Local 22's position on21 the bill is neutral, we do not think that22 action on the bill may be premature at23 this time. This is because the24 Administration's appeal of the award25 16 12/15/10 - LABOR - BILL 1007801 threatens the very pension concessions2 that it is seeking to implement with this3 bill. In other words, if the City wins4 its legal challenge, which was to the5 economic provisions of the award, then6 the award will be returned to the Act 1117 panel with instructions to essentially go8 back to the drawing board. At that9 point, the panel could very well decide10 to issue a completely different pension11 provision. 12 In light of this, it makes more13 sense for this Committee to defer14 consideration of Bill 100780 until after15 the Court of Common Pleas has issued a16 decision on the Administration's appeal,17 which we expect in a few months. But18 because it is IAFF Local 22's19 longstanding position that Act 111 awards20 should be enforced, win or lose, I cannot21 in good conscience come here today and22 ask Council not to implement any aspect23 of the award. That's why our position on24 the bill is neutral. 4 Finally, I would like to5 highlight the inconsistency in the Nutter6 Administration's position on whether the7 award should be implemented. Today, the8 Administration asks Council to implement9 the award's pension provision. In fact,10 calling it a mandate. But at the same11 time, the Administration neglects to tell12 Council that to date it has refused to13 implement the award's salary increase or14 its medical provisions, which will15 actually save money. 19 So when the Administration20 argues that the award acts as a mandate,21 what they really mean is that the award22 is only a mandate to implement the23 provisions they like. That's not honest24 and it isn't fair to firefighters and25 18 12/15/10 - LABOR - BILL 1007801 medics. 16 The pension bill accurately17 picks up the award's changes. The18 changes are concessions, but we are19 willing to live with them because Act 11120 awards are final and binding. 22 Because of the pending appeal,23 Council should go slow on this bill. No24 reason to hurry. 3 The Mayor's appeal of our award4 is wrong. By appealing, he is risking5 some of the reforms won by the City in6 the award, including medical and pension7 changes. He is risking residency, which8 they won. 9 There was no reason to appeal10 our award given that Nutter did not11 appeal the police award. 13 Furloughs won't work in the14 Fire Department. We're already cut to15 the bone. 19 Fire deaths are up from 25 to 3120 currently. 3
Thank7 you, Mr. Chairman.8 Just so I'm clear here, as a9 non-attorney -- Mr. Chairman, maybe you10 could explain it. I'm reading the11 Ballard Spahr opinion and it says in the12 first paragraph, "As explained below, the13 pension provisions of the award are not14 likely to be impacted by the City's15 appeal of other provisions of the award,"16 and then in the end, "The pension17 provisions of the award will not be18 altered by the City's pending appeal."19 Was the whole award appealed,20 the entire thing?21
The City22 appealed the entire award, excluding23 Sections 5 and 6, which relate to the24 pension award in their specific appeal.25 21 12/15/10 - LABOR - BILL 1007801 The Firefighters appealed that appeal,2 did not specifically appeal the award3 with respect to 5 and 6. But so the4 question of law really is, can you appeal5 a portion when you're appealing under the6 PICA statute, or by virtue of the PICA7 statute, do you have to appeal the entire8 award, which will then be remanded.9 There is no caselaw on the10 topic. So what we have between the11 lawyers for the City and the lawyers for12 the Firefighters is a difference of13 opinion. The Firefighters' position is14 that a court would rule that the entire15 award would be remanded and the16 arbitrators will just start over, a clean17 slate, and can do whatever they want to18 make the award. The City's position will19 be, in that circumstance, that they can20 appeal specific provisions of the award.21 And so if a different award22 that were to affect these provisions23 comes out, I imagine it will be years in24 courts until the Supreme Court resolves25 22 12/15/10 - LABOR - BILL 1007801 that one legal issue, because it's never2 been decided with respect to the PICA3 statute.4
In the7 interim, since there's no fire class, I8 guess we can move this out of Committee9 and watch progress.10
Watch how11 the appeal goes, okay. I guess I was12 just taken aback by the first paragraph.13 I know, with all due respect, that's14 sometimes how lawyers talk, but the first15 paragraph says "not likely to be16 impacted." Then in the last paragraph it17 says "will not be altered." So it seems18 like that's kind of a contradiction.19
Mr. Gault,25 23 12/15/10 - LABOR - BILL 1007801 have I fairly summarized the positions of2 the --3
Thank you.6 Are there any other questions7 on the part of this Committee?8 Councilman Jones.9
Thank you,10 Mr. Chairman.11 Councilwoman Sanchez is not12 here, but I understand a few firefighters13 were injured --14
Yes. They received21 ear burns, face burns, shoulder burns.22 They're healing well. They're in pain,23 but they're okay.24
It never25 24 12/15/10 - LABOR - BILL 1007801 ceases to concern me as we juggle with2 all of the economic issues, at the end of3 the day, they are our first responders.4 They're responsible for fighting fires5 and preserving life, and it's important6 that we note while we haggle about these7 things, that that process goes on.8 And so our prayers are with9 them during this holiday season that they10 recover.11
Currently, we have12 a lot of injured off, sir, and what13 happened there was the same thing that14 happens the same -- they have a ladder15 running by itself with no fire engine in16 that building. The ladder arrives on17 scene first. They're waiting for water.18 These guys can't stand around. They're19 going to try -- they're assuming somebody20 is in there. They're running in there21 without the aid of a hose line and22 they're getting burnt.23 We're still going to do what we24 have to do. It's just you're taking away25 25 12/15/10 - LABOR - BILL 1007801 so many of our tools and you're putting2 us in a bad, unsafe position. You can't3 keep cutting us. Our own Commissioner4 already said that we're cut to the bone.5 And this whole fight, all over their6 appeal, was because they didn't get7 furloughs. They haven't furloughed a8 cop, but they will furlough firemen and9 47's and 33's they will furlough. And10 that's basically what this fight is over,11 because they didn't get the furloughs.12 We didn't get everything we13 wanted in that award, but we believe in14 the process, Act 111. What we don't get15 this time, we'll get in next time. Right16 now they're just prolonging this, which17 means they are not going to get the 33's,18 they are not going to get the 47's, and19 they're just going to keep playing around20 until they try to get furloughs off of21 firefighters.22
Meanwhile, that's24 why this is here, because they can't hire25 26 12/15/10 - LABOR - BILL 1007801 a class. We haven't hired a class in2 over two and a half years. Over. And3 right now I think we need 60 overtimes a4 day to open the doors. And because of5 what happened to the medics with them6 trying to take them out and then us7 getting them back in the union and then8 forming the second bargaining unit, a9 third of them are leaving. They're tired10 of it.11 What they're basically doing is12 trying to destroy the Fire Department.13 They have a grand vision that nobody14 sees, but it's not working.15
Well, again,16 my prayers -- and I'm sure I'm speaking17 for this body --18
So far, our23 injuries are up to 250. I don't know of24 any other bargaining unit in the City25 27 12/15/10 - LABOR - BILL 1007801 with that many injuries.2 Thank you for your time.3 COUNCILMAN JONES:4 Mr. Chairman.5
Thank you.6 I'm just curious, Mr. Gault, whether the7 union has taken a position on the8 investigation by PICA of the sort of Fire9 Department --10
Yes. We met with11 PICA and we agreed, and PICA is working12 with the International and with us and13 we're all on the same page, and right now14 they're currently trying to formulate the15 RFP to send out to do the study. Yes,16 we're working with them.17
We want a20 professional study. I mean, for two21 years they've been saying they did a22 study, and now PICA is going to fund the23 real study, a study that's going to be24 done.25 28 12/15/10 - LABOR - BILL 1007801
Well, to say5 PICA is funding it is not exactly6 accurate, just --7
Anything9 that PICA does not spend on their10 operating expenses comes back to our11 General Fund. So there's no -- it is our12 money.13
I'd also like to14 remind this Committee that a year and a15 half ago -- two years ago, actually,16 you's gave -- you, this body, gave the17 City $200,000, which they refused to use,18 for a study.19
But then they got21 some bad press and decided, Well, let's22 do it a different way, and that's where23 we're at today.24
Thank you25 29 12/15/10 - LABOR - BILL 1007801 very much for your testimony, Mr. Gault.2 Any further questions from the3 Committee?4 (No response.)5
I recognize6 Councilman Goode -- I'm sorry. That ends7 this -- anybody else here to testify on8 this matter?9 (No response.)10
That ends11 the hearing on Bill No. 100780. I now12 move us into a meeting and recognize13 Councilman Goode for a motion.14
Thank you,15 Mr. Chairman. I move that Bill No.16 100780 be reported out of the Committee17 with a favorable recommendation.18 (Duly seconded.)19
Bill No.20 100780 has been moved and seconded.21 All in favor?22 (Aye.)23
All opposed?24 (No response.)25 30 12/15/10 - LABOR - BILL 1007801
The ayes2 have it.3 That ends this meeting on Bill4 No. 100780. Thank you.5 (Committee on Labor and Civil6 Services concluded at 11:45 a.m.)7 - - -8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 31 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 15, 2010, and7 that this is a true and correct transcript of8 same.9 10 11 12 13 --------------------14 MICHELE L. MURPHY15 RPR-Notary Public16 17 18 19 (The foregoing certification of this20 transcript does not apply to any reproduction21 of the same by any means, unless under the22 direct control and/or supervision of the23 certifying reporter.)24 25