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Labor Lawyer Deborah Willig Quoted Concerning Pennsylvania Pension Proposal

August 25, 2009

Pa. Pension Proposal Raises Union Ire (Philadelphia Inquirer)

By: Patrick Kerkstra, Marcia Gelbart and Jeff Shields

Newly amended legislation that could clear the State Senate as early as tomorrow would give Nutter the authority to temporarily raise the sales tax and defer pension payments, measures that will save $700 million over the next five years and prevent mass layoffs and deep cuts to basic services like sanitation and criminal justice.

In exchange, the bill demands that the city cut the retirement benefits of future employees by 25 percent, while capping the benefits of existing workers at current levels.

The legislation, which is fiercely opposed by city labor leaders, represents an unprecedented state intervention into Philadelphia's dealings with its municipal unions.

The bill, as drafted, would "all but eviscerate collective bargaining," said Deborah Willig, a leading labor attorney who represents public employee unions across the state.

The bill also requires that elected officials, such as City Council members, be excluded from the controversial Deferred Retirement Option Plan, or DROP. The DROP ban would apply only to future elected officials, not anyone already in office.

Mayor Nutter today said he welcomed the state assistance, but he was non-committal when asked repeatedly about the pension reforms that were added to the legislation yesterday.

Labor leaders, however, said they would do all they can to defeat it.

"It's ridiculous, it's ludicrous and it's unacceptable," said John McNesby, president of Lodge 5 of the Fraternal Order of Police. "We are not going to devastate our pension plan."

Pete Matthews, president of District Council 33, with 9,400 members, said "I want the city to get their money. But this is terrible, an outrage, and I'm going to do everything I can to stop it."

The senate, labor leaders said, had done a rush job, jamming serious legislation into a crucial fiscal relief bill without due diligence.

"Any time a legislative body considers pension reform it should do so in a deliberative and thoughtful fashion. That hasn't been done here," said Willig, the labor attorney.

Senate Republicans who pushed the reforms said they wanted the legislation to address longstanding problems, and not just serve as a short-term fix to Philadelphia's fiscal woes.

"I believe those reforms are necessary both to improve the long-term health of municipal pension systems in Pennsylvania and to win the support of a majority of the Senate for this legislation," Senate Majority Leader Dominic Pileggi (R., Del) said in a statement.

The bill's future is uncertain. The Senate could still change it, and the Democrat-controlled House would have to sign off on any pension reforms that make it into the final bill.

But there were signs today that the basic outlines of the legislation had bipartisan support. Two Philadelphia Democrats serving on the Senate Finance committee, Anthony Williams and LeAnna Washington, voted for the bill on Monday. Through a spokesman, Gov. Rendell, a Democrat, endorsed the bill's basic framework.

"The Governor believes that a balanced approach that provides the city the revenue to meet its pension obligations, with expectations that future pension costs are contained, is necessary to win legislative approval of the taxing powers the city needs," Rendell spokesman Gary Tuma said in an e-mail.

Both the Nutter administration and union attorneys were poring over the revised language today, struggling to understand the full implications of the sweeping legislation.

In theory, the bill preserves unions' ability to bargain over retirement benefits. In practice, though, the city would face such staggering financial penalties for failing to enact the pension reforms that the unions may have little choice but to accept the reduced benefits.

For instance, according to the legislation, if the city's blue-collar and white-collar unions refused to accept the pension provisions, the city would lose out on sales tax proceeds and potentially hundreds of millions of dollars in state funding. Union workers would be laid off by the thousands if that occurred.

Police and fire fighters may be in an even tougher spot. Their contracts are determined through arbitration. The arbitration panel is required to consider the city's five-year fiscal plan when setting the terms of new contracts. If the arbitrators refused to include the pension reform provisions, the state would rescind its financial assistance, utterly wrecking the five-year plan.

Given that, the unions will likely try to head the bill off before it ever becomes law.

"We are going to fight it with everything we have legally and politically," said Bill Rubin, vice-chairman of the Philadelphia Board of Pensions and Retirement representing District Council 33, the city's blue collar union and its largest.

Bob Bedard, spokesman for Local 22 of the International Association of Fire Fighers said, "If you are a firefighter and you get killed, under the new plan, your spouse will only get 75 percent of what they would have gotten a year before."

As drafted, the legislation would improve the long-term fiscal health of the city's underfunded pension system. Forcing future employees to contribute more to the system and limiting what benefits they will receive would help ensure the city's pension problems do not continue to grow. But the bill would do little for the pension fund's short-term health, city budget observers said.

The bill does seem to give Nutter increased leverage with the city's unions. City contracts with all four unions expired June 30, and Nutter had already been seeking pension savings in the new contracts.

"To me, it definitely strengthens Nutter's hand in dealing with the unions," said Zack Stalberg, president of the Committee of Seventy, a veteran government watchdog organization.

He said he viewed the pending Senate legislation as "a warning shot" to city unions, signaling state lawmakers' willingness to involve themselves in nitty-gritty local issues.

For that reason, Stalberg said, "I would urge them not to fight pension reform tooth and nail."

The pending bill's DROP provisions will not stop current City Council members from using the program, a practice that has stirred considerable public outrage.

But any future officeholder, in Philadelphia and across the state, would be excluded from DROP. The legislation also provides statewide standards and regulations for DROP programs.

State Sen. Larry Farnese, D. Phila, who proposed the elimination of elected officials from DROP, said legal concerns resulted in the law not applying to any current Council members. A total of seven of 17 Council members have enrolled in DROP since its inception in 1999, and legal precedent generally prohibits municipalities from taking away pension benefits.

City Council would be required under the bill to amend its own DROP law within six months to bar any officials elected after the law goes into effect. But, Farnese said, City Council might consider a stricter law that would not grandfather in all current Council members.

"There's another opportunity for further reform," Farnese said. "It's up to City Council whether they want to go further."
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