Philadelphia firefighters union President Bill Gault held the attention of an entire city, but for the first time in a long while, did not use it to admonish Mayor Michael Nutter.
Out of respect to fallen Fire Capt. Michael Goodwin, Gault did not rant about Local 22’s unfulfilled labor contract. Speaking in front of Goodwin’s Parkwood home on April 8, two days after the captain lost his life in a South Philly blaze, Gault, instead, told of heroism, dedication and service. He did not want to interject topics like wages, pensions and healthcare benefits into a public period of mourning.
But the pastor at St. Michael’s Evangelical Lutheran Church in Kensington had no such qualms during Goodwin’s April 11 funeral service. With the captain’s flag-draped casket resting at the altar and Nutter sitting in a front pew, the Rev. Marjorie J. Neal called upon the mayor to end the city’s four-year contract dispute with its 1,900 firefighters and paramedics.
Applause erupted inside the church. Outside, after the service, Nutter boiled over, dismissing the reverend’s charge as “so inappropriate at the funeral of our hero,” according to The Philadelphia Inquirer.
And thus the war of attrition resumed with Nutter’s latest salvo clearly intended to halt recent union advances on the public opinion front, but with the primary courtroom fight mired in legal mud.
A ‘BIG BATTLE’
The city’s latest appeal of the firefighters’ most recent arbitration award likely will not be resolved before the award expires on June 30. Officially, the sides already have entered a new round of arbitration for the union’s next collective bargaining agreement, although the city still refuses to implement the current one.
This is not to say that the pending appeal, which now sits in Commonwealth Court, will become moot on July 1. Rather, the union — which also represents 2,100 retired firefighters — will continue to fight for tens of millions of dollars in back wages and benefits, while the outcome could reshape bargaining between the city and its uniformed employees for years to come.
“This is part of a big battle by the Nutter administration to impose its own will on these contracts,” said Arthur Hochner, an associate professor of human resources management with Temple University’s Fox School of Business, who also serves as the Temple faculty union’s president.
“[Administration officials] want the city budget to be the most important thing and to have everything else, the collective bargaining, fit into that framework. They’re trying to overturn an entire system that’s been in place for 40 years at least.”
Nutter’s chief spokesman, Mark McDonald, declined to comment on the firefighters contract dispute, citing the ongoing litigation. He noted that the city’s legal filings, authored by the Ballard Spahr firm, spell out the administration’s position.
The firefighters’ last contract expired on June 30, 2009. In October 2010, a three-member arbitration panel awarded a new four-year contract. Citing financial reasons, the city appealed to Common Pleas Court, a move that resulted in a second round of arbitration. The same panel in July 2012 awarded a similar contract, but one slightly more favorable to the firefighters.
The city appealed again. Judge Idee Fox rejected the city’s case last November, so the administration filed a third appeal, this time to Commonwealth Court. The sides have yet to appear in court to argue the latest filing.
“It’s highly unusual,” said Joseph Loewenberg, a retired professor of human resources management with Temple’s Fox School and a former researcher of police and firefighter contract arbitration.
“People have appealed certain provisions [in the past], but to have entire awards not accepted — particularly when the first court rejected [an appeal] — I’ve never seen that. To have an entire award appealed twice to higher courts is quite unusual.”
As a result, Local 22 members have been working essentially without a contract since June 30, 2009. The city continues to apply the terms of the expired contract. Base salaries range from $40,036 a year for rookie firefighters to $95,558 for deputy chiefs, notwithstanding seniority and overtime pay.
While wages remain stagnant, tensions continue to escalate. In January, dozens of the city’s firefighters, many of their spouses and even some of their children picketed appearances by Nutter and Fire Commissioner Lloyd Ayers at the opening of a new firehouse in Tacony. Then last month, firefighters were among hundreds of unionized city workers who relentlessly heckled Nutter during his annual City Council budget address, forcing the chief executive to abandon his speech midstream and flee to the friendlier confines of his own City Hall office.
Aside from these two most-public displays of defiance, Gault often has accused Nutter and his administration of neglecting the basic needs of Local 22 members and jeopardizing the safety of the city’s 1.5 million residents. Besides the wage freeze, the city has similarly held the line on its contributions to the union’s health-care fund, despite the fund’s drastic depletion amid rising health-care costs. Meanwhile, the fire department continues to employ operational cost-saving measures such as the controversial “Brown Out” program, in which selected fire companies are placed temporarily out of service on a daily rotation.
PICA ENTERS THE PICTURE
The union’s street-corner sign-waving and inflammatory rhetoric reflect the similarly passionate courtroom struggle, a legal tug-of-war between the union’s right to arbitration under Pennsylvania’s Act 111 of 1968 and the city’s obligation to craft a viable long-term financial plan in accordance with the Pennsylvania Intergovernmental Cooperation Authority Act of 1991.
The central issues have remained consistent at each stage. Local 22 maintains that it is entitled to “binding” arbitration (and that the city is obligated to honor it) under Act 111, which granted police and firefighters collective bargaining rights. The legislation prevents them from striking for public safety reasons, but it provides the unions and their municipal employers with the right to demand contract arbitration.
The law requires unions and municipal employers to begin negotiations at least six months before a labor contract is to expire. If talks break down, either side can declare an “impasse” and file for arbitration. The union and administration each pick one arbitrator for the panel. The two chosen arbitrators then pick a third neutral arbitrator who serves as the panel chairman.
Experts characterize arbitration ideally as a last resort. It’s intended as an incentive for the sides to negotiate in good faith, because there is always a risk for both that they may not like the outcome.
“You’re taking it out of your own hands and putting it into a third party’s hands,” Hochner said. “It’s a crap shoot like any legal case.”
“The intent is you don’t use it at all,” Loewenberg said.
Things work differently in Philadelphia. The city and its uniformed employees end up in arbitration just about every time. Since 1986, all 10 firefighter contract negotiations have gone to arbitration. The city’s police, meanwhile, now work under terms of a December 2009 arbitration award, which is due to expire June 30, 2014. The city did not appeal that award, which included raises and benefit improvements for police, as well as cost-cutting measures for the city.
The experts believe that arbitration has become a convenient political tool.
“When you give it over to a third party, there are risks, but you’re also not responsible for a decision,” Hochner said. “You can avoid making a tough decision.”
3 PERCENT RAISES
In appealing the firefighters’ 2012 award, the city has claimed that it cannot afford the wage and benefits increases ordered by the arbitration panel. The panel granted Local 22 members no wage increase in the first year of the four-year deal, followed by 3 percent increases in years two, three and four. Further, the award required the city to increase incrementally its monthly health fund contributions from $1,270 per union member to more than $1,600 per member by the fourth year.
The panel ordered the city to pay $10 million into the union’s pension fund, but it increased pension contribution requirements for future fire department hires, while reducing their potential benefits. The city sought the right to furlough — or temporarily lay off — Local 22 members for up to 240 hours a year, but the panel denied that demand.
The Nutter administration maintains that the award could cost the city as much as $238 million more than it had budgeted for fire department labor costs in its latest approved five-year financial plan. The city’s annual operating budget is about $3.75 billion. The administration has argued that the arbitration panel failed to give proper consideration to the five-year financial plan as required by the PICA Act.
Created in response to a fiscal crisis that nearly bankrupted the city, the PICA Act granted the city new financial tools while subjecting it to oversight by a state board. With the city unable to borrow money and in need of cash to pay its bills, the newly created PICA board was granted the authority to borrow on the city’s behalf. The city is still paying back those debts from the early 1990s and will probably continue to do so for another decade, according to Sam Katz, the PICA board chairman.
Legally, the city must remain under PICA oversight until the debts are repaid. The administration’s primary duty is to submit itemized five-year financial plans to PICA annually for approval.
“The basic function of PICA is to review and approve the city’s budget and five-year plan, its income and expenditures through a 60-month period,” said Katz, a former mayoral candidate who was appointed by Gov. Tom Corbett as PICA chairman in 2011.
Five directors sit on the board. They each review the submitted five-year plan independently and must determine if the city’s projections for each year of the plan are “reasonable.” If the board rejects the plan, the city must amend it or risk losing state funding.
Another provision of the PICA Act was to amend Act 111 to require arbitration panels to consider and accord “substantial weight” to the city’s approved financial plan as well as its ability to pay the costs of an arbitration award without “adversely affecting” city services. The Act granted the city the right to appeal an arbitration award if the panel failed to meet those requirements.
The city has appealed prior arbitration awards, but it generally honors the awards pending appeals — or following the first round of appeals — according to Richard Poulson, an attorney who represents Local 22 on behalf of Willig Williams & Davidson.
“For the first time since we’ve had the PICA statute and appeals, the city isn’t honoring the award pending the appeals,” Poulson said. “[Mayor Ed] Rendell never sunk to that level. [Mayor John] Street never sunk to that level.
“Every time they’ve appealed, they’ve lost. They know they’re going to lose. They’re either delaying the inevitable or they’re just leveraging the firefighters into accepting less than they’ve already won, and that is despicable.”
THE CITY’S CASE
The city has claimed in its appeals that the arbitration panel did not give enough consideration to the applicable five-year plan when it awarded the firefighters wage increases, higher healthcare contributions and other costly benefits. Further, the city argues that it would have to cut services in other areas to pay the firefighters’ arbitration award.
The administration has been forced to make spending cuts already, even without the increased fire department personnel costs. In a Common Pleas Court memorandum filed last Aug. 1, the city stated: “Since the beginning of [arbitration] hearings with Local 22, the city has been forced to make numerous cuts to the services and programs on which its roughly 1.5 million citizens rely, including reducing the number of fire companies. The city has been in the throes of a significant financial crisis since 2008 that has forced billions in budget cuts and tax increases.”
Local 22 officials scoff at the administration’s math. Their attorneys argue that the city historically underestimates its tax revenue. In fact, its five-year financial plans have under-predicted revenue every year since 1992, excluding the recessionary period of 2009 and 2010, the union claims. The union further argues that the city’s population has risen, while the economy has shown “substantial positive growth” since 2010.
Regarding the total cost of the award, the union claims that the administration is falsely inflating the figure. The real cost over four years may be $70 million to $80 million above what the city is currently paying for fire personnel, according to Poulson. The union’s numbers are a far cry from the city’s $238 million figure.
The arbitration award covered only four years, so the city should not exceed four years when calculating the cost, Poulson said. Also, the city hasn’t budgeted for any increase in firefighter labor costs. In fact, it was counting on cost savings and included those projected savings in its five-year plan — and in its accounting of the arbitration award.
Nutter has not budgeted for firefighter raises in the city’s last four annual five-year PICA plans, although Local 22 members have been awarded 20 separate raises since 1988, including at least one every year from 1995 to 2009. Meanwhile, Nutter has projected $2.7 million in annual savings in the recent five-year plans to account for firefighter furloughs, which the city did not have the authority to implement under the terms of the expired contract.
Katz, the PICA board chairman, said municipal labor costs were a major consideration when the legislature crafted the PICA Act. The city “had a long history going back to the 1960s of labor settlements that arguably were not affordable,” he said.
Yet, he said, it’s not the PICA board’s function to determine what the city pays its workers or if it’s fair.
“The city could take all of its money, wrap it up in little dollar bills, place them in bottles and drop the bottles into the Schuylkill River,” Katz said. “They could do that. We [at PICA] do not have policy-making responsibility, and for good reason because we were not elected. We do not have the authority to decide where they allocate their money.
“Disagreeing with how Philadelphia government allocates its money does not provide the basis, in my opinion, for rejecting their five-year plan,” he said.
Allocating money for city firefighters was foremost on Goodwin’s mind, according to the Rev. Neal from St. Michael’s. In explaining her choice of words at Goodwin’s funeral, Neal told the Northeast Times that she merely echoed the captain’s own dissatisfaction with the city’s treatment of its firefighters.
“As Lutherans, we are ones who speak truth to power,” Neal said. “If we see injustice, we are called to speak to that. Knowing how Mike felt, I felt it was the most appropriate time to bring it up.”
Neal and Goodwin, the president of the church council, had in fact discussed that very subject during their frequent conversations.
“He wanted the men to be taken care of,” Neal said. “It’s just not right for the men, and women, to be working without a contract.”
Neal asked Goodwin if he would consider going on strike. The captain replied that he wouldn’t, even were he not prevented by law from doing so.
The pastor recalled Goodwin’s reason. “He said, ‘Morally, I couldn’t leave the city unprotected.’ ” ••
Reporter William Kenny can be reached at 215-354-3031 or email@example.com