Mayor Nutter and District Council 47 Reach Contract Agreement

Tuesday, February 25, 2014                               FOR IMMEDIATE RELEASE

MAYOR NUTTER AND DISTRICT COUNCIL 47

REACH CONTRACT AGREEMENT

Philadelphia, February 25, 2014 – Mayor Michael A. Nutter and District Council Union 47 signed an eight-year contract.  Mayor Nutter’s prepared remarks and a brief summary of contract terms are as follows.  Please check against delivery:

“I’m very pleased to announce that our Administration’s labor team a short time ago came to an agreement with representatives from AFSCME District Council 47 on an 8-year contract that provides critically important reforms in the areas of pensions, healthcare and work rules, while providing pay raises for thousands of members of this union.

This agreement has been a long time in coming, and not for a moment would I suggest that it’s been an easy process. It has not.

Since 2009, I have consistently said that I want pay increases for our hard-working city employees, but I also said that any contract must balance the needs of employees and other taxpayers.

Now, every day in this City, city employees and the Administration work together to provide high-quality services to the people who live in, work and visit Philadelphia.

And the Administration works with union officials on hundreds of issues every day. We work in partnership, just as the City works in partnership with the business community and the non-profit sector to advance the health and prosperity of this great City.

What we’ve achieved today in partnership is significant and historic. And it’s proof that when people who are committed to our city’s future sit down for an honest exchange, we can achieve anything.

This contract provides the kind of short-term and long-term savings that will help this City progress toward a sustainable financial future, while at the same time providing much anticipated raises.

Before I get into the reform elements in this agreement, let me note that the term of this contract runs from July 1, 2009 through June 30, 2017.

There are no retroactive pay increases, and the overall Five Year Plan cost of the agreement  is an estimated $122 million, which presents a substantial challenge for our budget but one that we believe is warranted on behalf of our employees and taxpayers.

Turning to the reform issues: with the Pension Fund only 48 percent funded and the City’s annual payments to the Pension Fund consuming more than 16 percent of our budget, the need for reform has been obvious for many years.

The new pension provisions in this agreement with DC47, coupled with earlier agreements with police, fire and other unions, put us on course to strengthen our Pension Fund, something that all city employees and taxpayers should applaud.

Specifically, by Jan. 1, 2016, current employees will pay 1 percent more of their pay toward their pensions.

New employees can choose Plan 10 – our hybrid plan that has both a traditional defined benefit pension and a 401(k)-style element – or they can remain in the current pension plan and pay 1 percent more than current employees toward their pensions.

By Jan. 1, 2016, new employee contributions for employees who choose the current plan over Plan 10 will rise an additional 1 percent to 2 percent of pay for a total of about 4 percent of pay.

It’s also worth noting that this two percentage point increase by new employees is relatively close to our actuarial consultant’s estimate that Plan 10 will save an estimated 2.5 percent of pay.

Overtime has been an on-going concern of the Administration.  Under the agreement, starting in 2015, sick time will no longer be counted as hours worked when determining when overtime is due on a weekly basis. In addition to savings in overtime costs, we hope this provision will begin to change behavior among the small segment of employees who may be misusing sick leave.

So, for example, take an employee who calls out sick on a Monday and then works a Saturday – any of those Saturday hours will not be paid at time-and-a-half unless the employee actually worked more than 40 hours that week.

On Health care, DC47’s health fund would move to a self-funding arrangement starting in January 2015. It would be similar to what is in place for the police. DC47 would manage the plan and use an aggressive wellness program with monetary incentives to help employees and their families stay healthier and control costs.

The City will only pay the cost of benefits and administration as compared to the current system that sets projected costs via a per member per month payment system.

The current system will remain in effect through 2014 with the PMPM payment rising to $1,100 from $975. The City will also make a one-time lump sum payment to the DC47 health fund of $5 million.

By way of comparison, DC47 employees will be contributing at least 9 percent of the total cost of their health benefits, which is in line with the arrangement now in place for employees in the City-administered plan.

Finally, the issue of furloughs: for many years the City has had the contractual right to lay off employees when economic circumstances warrant, either temporarily or permanently.

But we have faced practical barriers to using layoffs on a temporary basis.

This agreement commits the union and the Administration to work at removing those barriers by changing how layoff scores are calculated and clarifying that if an employee, enrolled in DROP, has a short-term layoff, they are not permanently separated as is now the case.

The Union has agreed to support changes in the civil service regulations to accommodate the layoff scoring issue and changes in the pension ordinance to protect employees in DROP from facing permanent separation when the City’s intention is only a temporary layoff.

With these critical issues in place, the City is pleased to support wage increases of 9 percent over the term of this contract.

We start with a $2,000 bonus in recognition of the time that employees received no wage increases, and an across the board 3.5 percent wage increase, both payable after ratification. And going forward, employees will prospectively receive step and longevity increases, frozen since July 2009.

On July 1, 2015, employees will receive a 2.5 percent wage increase, followed on July 1, 2016, with a 3 percent wage increase.”

Contract Terms Summary

TERM:           July 1, 2009 – June 30, 2017

WAGES:

Ratification bonus of $2,000 per person

Effective 30 days after ratification, there shall be an across the board wage increase of 3.5%

Effective July 1, 2015, there shall be an across the board wage increase of 2.5%

Effective July 1, 2016, there shall be an across the board wage increase of 3%

PENSION:

Effective January 1, 2015, employee pension contributions increase by .5% of pay.

Effective January 1, 2016, employee pension contributions increase by an additional .5% of pay.

New hires either go into Plan 10 or pay an additional 1% of pay, which will go up as the contributions for current employees do up to an additional 2% of pay as of January 1, 2016.

Current employees have 90 days to elect to move into Plan 10.

OVERTIME:

Effective July 1, 2014, the overtime rate for all employees who are entitled to cash overtime will be based on their EP pay range and step.

Effective January 1, 2015, sick time will not be counted as hours worked for purposes of determining when overtime is due on a weekly basis.

HEALTH & WELFARE:

Through December 31, 2014, the City’s contribution to the health fund will be $1,100 per member per month.  In addition, the City will make a one-time lump sum payment to the health fund of $5 million.

Effective January 1, 2015, the health fund will move to a self-insured arrangement and the City will pay only the cost of benefits and administration.

Effective January 1, 2015, the employee contributions will be set at no less than 9% of projected total cost.

The health fund will continue to maintain an aggressive wellness program, including financial incentives.

LAYOFF/FURLOUGHSIn lieu of creating a separate mechanism for furloughs or temporary layoffs, the Union agrees to support the change to civil service regulations to allow the City to streamline the layoff process through a change in calculation of the layoff score and to change the pension ordinance to provide that a layoff of fewer than 15 consecutive days will not be considered a separation for purposes of the DROP to prevent employees who are in the DROP from experiencing a permanent separation as a result of a temporary layoff.

CONTRACTING OUTThe parties agree to a pilot program to evaluate the use of contract pharmacists in the Department of Public Health.

WORKPLACE VIOLENCE PROGRAM:  The City will contribute $50,000 to the AFSCME DC 47 Health and Welfare Fund for FY2014 through FY2017 to continue the Workplace Violence Prevention Program. 

GRANT-FUNDED POSITIONS:  The parties will continue the 2008 pilot program regarding grant-funded positions in the Health Department.

Posted in Mayor's Press Releases, Press Release
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