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Every city budget sends a message, and the message contained in Mayor Michael Nutter’s latest budget proposal is simple: The recession is over.
Tax revenues are up a modest 3 percent. The budget for the next fiscal year will rise by a slightly more modest 2.7 percent — to a total $3.7 billion. The tough times of the past four years — with deep cuts in services, a slump in tax revenue, a downsizing of the city payroll by 1,200 jobs — are over.
There’s only one thing wrong with this picture — the rising cost of city employee fringe benefits. Which is a bit like saying the only thing wrong with the Titanic was the big hole in its hull.
Fringe benefit costs continue to rise and rise and rise. In 2001, John Street’s first full year as mayor, employee fringe benefit costs equaled 17 percent of the total city budget. In 2008, Michael Nutter’s first full year as mayor, they equaled 25 percent of the budget.
Next year, when the new budget goes into effect, they will equal 31 percent of the total city budget.
As the Mayor’s Five-Year Plan notes: “Employees costs — in particular pensions and health care — have grown much more quickly that the city’s revenues and other expenditures, which means that more and more of the city’s budget has to be diverted to pay for employee benefits instead of…services.”
I’ll say. Of the $99 million in new spending proposed by Mayor Nutter for the new fiscal year, $73 million must be set aside to pay for employee benefits or pay raises. The raises are going to the police, the only city union with a contract.
When you add it all up, employee benefits will cost the city nearly $1.2 billion next year. That works out to an average of $53,000 per city employee.
Just to make a comparison, the average household income in Philadelphia is $36,000 a year, according to the latest U.S. Census data.
In your household, if income is nearly stagnant and you face additional expenses — say, a $7,000 high school tuition bill for your new ninth grader — you have to rearrange your expenses to find the money for tuition. No more vacations. Forget new shoes. Start eating pasta two nights a week.
The same is true in a billion-dollar budget. City revenues have not kept pace with the rising cost of fringe benefits, so the city has rearranged its spending: Cutting jobs and department budgets. Only the police and fire departments have been spared cuts in recent years. The result is that the capacity of the city to deliver services has diminished.
It’s pretty simple. Adjusted for inflation, city spending on benefits has increased 35 percent over the past five years, and spending on everything else has declined 10 percent.
The Nutter administration has had enough of robbing of Peter to pay Paul.
It is trying to extract concessions from the city’s unions on pension and health and welfare costs in exchange for modest pay increases. They also want the right to furlough employees (to take unpaid leave days) and want to change rules on overtime.
As anyone who tuned into the Mayor’s budget speech before Council last week already knows, the unions are opposed. Adamantly, vocally, passionately opposed. They filled the chambers Friday and shouted, whistled and blew air horns until Council President Darrell Clarke gaveled the session closed.
Only the police, prison guards and a handful of other municipal unions have reached contracts with the city. They all contain some elements of the concessions Nutter is seeking. The firefighters union won an arbitration that included no concessions, but the administration has appealed that decision twice to the courts. The city’s white- and blue-collar workers have been working without a contract since 2009 — and recently the city went to court to ask for permission to impose the terms of its last offer for these workers.
Meanwhile, the blue- and white-collar unions have developed a strategy to stall on getting a contract until 2015, when we will elect a new mayor.
Presumably, the unions will use their considerable political power to support a candidate to their liking, who will do what they want. And what happens then?
If that mayor gives them a contract that makes no concessions on fringe benefits and includes a generous pay increase, the trajectory of benefit costs will continue upward. Less and less money will be available for city services, and we will have a government that exists primarily to serve the needs of its 22,000 employees.
Unlike city workers, most city taxpayers do not have guaranteed pensions, and many have no health coverage. Sixty-two percent of the households in Philadelphia make less than $50,000 a year – a sum that wouldn’t even cover the $53,000 per worker that the city now spends just on fringe benefits.
The unions who protested last week at City Hall accused the mayor of waging war against the working people of Philadelphia. It seems to me the reverse is true.
Nutter is trying to protect the taxpayers of Philadelphia — the 1 million plus adults who do not work for city government — so the taxes they pay aren’t siphoned off to pay for Mercedes-Benz benefits in an age of austerity.