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Mayor Nutter’s Statement on the Firefighters’ Arbitration Award

Mayor Nutter’s Statement on the Firefighters’ Arbitration Award
Oct. 15, 2010

After hearings that began in mid-September 2009 and ended in late April, a panel of arbitrators earlier today issued an Arbitration Award for the International Association of Firefighters Local 22 and the City of Philadelphia.

Since taking office, I have been committed to making fundamental reforms in the conduct of city government.

At root, reform has to do with better controlling our costs on behalf of the hard-pressed taxpayers of this great city.

Though the arbitrators’ contract award takes a crucial step toward reform by establishing a hybrid pension system, it imposes more than $100 million in new costs over the Five Year Plan without giving the City the required tools to manage these costs.

This award offers the City no flexibility to cope with these costs short of simply cutting services.

And that is something we’ve already been forced to do over the last two years in the Fire Department and throughout municipal government.

For these reasons – exorbitant costs and the absence of fiscal tools to manage those costs – the City of Philadelphia will appeal this contract award to the court.

Unlike the contract for members of the Fraternal Order of Police, this award does not give the city the right to furlough, which can be used to help fund the added cost of a contract.

Furthermore, where the FOP contract provided ways to save tax dollars in the area of healthcare costs, lesser savings can be anticipated in this firefighter’s award even though it has a self-insurance mechanism similar to the FOP.

From the start of this arbitration process, the City had sought an equitable system that would have shared the risk of rising healthcare costs between union members and taxpayers.

Instead, this award places the burden on taxpayers while union members have little incentive to reduce their costs.

Through cost management and wellness efforts, the FOP has controlled its healthcare costs over the past several years.

Local 22 has not gone down that path, and as a result, its cost per person was 12.5 percent higher than the FOP plan last fiscal year.

With the constraints built into this award, the city would face an even more painful future. In fact, the City’s healthcare expert projects that taxpayers would be left vulnerable to tens of millions of dollars in added costs.

By the end of the four-year contract, the healthcare costs are projected to be 20 percent higher than the FOP plan, though both plans have essentially the same benefits.

And by way of analogy, the more than $100 million in added costs this Award imposes above what we’ve projected in our Five Year Plan would compensate more than 200 additional firefighters over that same period.

In short, the FOP contract provided the tools to manage the additional costs while the firefighters’ Award does not offer that flexibility. We simply can’t afford this.

There are other serious concerns in this award. Let me mention two areas involving management rights.

The award requires us to continue deploying Chief’s aides for all battalion chiefs and deputy chiefs. It also would dictate the manner in which promotional exams for deputy chief and battalion chief are weighted.

Standards of service in the former and selection of personnel in the latter case are clearly the province of department managers, and we’re compelled to appeal this language.

By now, I believe Philadelphians understand that the process of reform is long and arduous. I am as committed today as I was when I took office to that cause. I will not let the taxpayers down.

In the last two years, my job has been to weather the storm of Recession while building the foundation of a streamlined and sustainable city government for our children and their children.

This contract award ignores the City’s ability to pay and locks us into a course filled with even more pain of the type we’ve weathered in recent years.

For these reasons, I will appeal this contract award.

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