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February 10, 2005
TO THE PRESIDENT AND MEMBERS OF THE
COUNCIL OF THE CITY OF PHILADELPHIA:
I am returning as disapproved Bill No. 040326, passed by the Council on January 25, 2005.
This bill amends the Pension Code to grants rights to current and former City employees outside the collective bargaining process. I have been advised that certain provisions of the bill are illegal, others are simply too costly or reflect poor policy. I, therefore, return Bill No 040326 as disapproved.
Sections 22-401 and 22-402 of The Philadelphia Code currently provide for an offset against disability benefits as a result of any subsequent non-City employment by the disabled member. Where the disability is service-connected; disability pay is reduced by one dollar for every three dollars of outside income. Where disability is not service-connected, the offset is one dollar for every two dollars earned. This offset was agreed to as a result of the collective bargaining process between the City and its municipal unions, and has been in effect since 1993.
While there are several exemptions from the disability benefit offset – for example, police officers who incur a disability as a result of heroic action are exempt – each of these exemptions, like the offset itself, exists as a result of the normal “give-and-take” of the City’s collective bargaining process with its municipal workforce. Bill No. 040326 would eliminate this offset entirely, for all City employees, retroactive to July 12, 1993, the date the offset took effect. Based on extensive research the City Solicitor has advised that Pennsylvania law prohibits City Council’s interference in the collective bargaining process to the extent that Council’s unilateral increase in benefits would apply during the life of current collective bargaining agreements.
A second problem raised by Bill No. 040326 is its retroactivity. While Solicitor Ramos’ Opinion concludes that the bill can be lawfully applied, at least in part, with respect to current City workers who, sometime after the bill’s enactment and after the expiration of their current employment agreements, become separated and entitled to a disability pension, this bill also reaches backwards and awards benefits retroactively to former employees. Not only does Council lack the authority under Pennsylvania law to award such retroactive benefits, this problem raises issues of fundamental fairness as well. For former employees who worked under collective bargaining agreements that were freely and fairly reached between the City and its municipal workforce, those agreements should be upheld - and not changed - after the employee’s work for the City has concluded.
The fundamental idea of the collective bargaining process is a give and take between the City and its workforce. Issues such as these benefits must be – and indeed, have been – fairly bargained. The balance struck through collective bargaining should not be disrupted through the legislative process. Unilaterally awarding these benefits – after the collective bargaining process has been completed – violates Pennsylvania law, unbalances our Five-Year Financial Plan, and undermines basic, core issues of equity and fiscal responsibility that I must uphold.
Moreover, this particular benefit undermines a key reform in our disability system, adopted by the prior Administration through collective bargaining. The disability offset specifically, or a reversion to the J Plan more generally, has been an ongoing issue in bargaining between the City and the represented workforce. Management won the offset through fair negotiations and with contract concessions. Disability pensions are appropriately paid to former City workers who no longer are able to work; we provide these former employees with this benefit to compensate them for their loss of income. Disabled former employees who are able to acquire outside income through new jobs, however, no longer have the same need, and thus the equitable reasons for the City’s appropriate generosity no longer exist. Since 1993, the City has been offsetting disability pension payments to account for this new source of income for the former employee. There is no sound reason why the City’s pension system should pay former employees to make up for lost income as if they are unable to work, when they are capable of working and in fact are earning income. Repeal of this reform would be a large step backward for the City and its Pension Fund.
The elimination of this offset entirely, for all City employees, retroactive to 1993, is projected to cost the General Fund $722,500 annually, according to financial analysis performed for the Pension Board. At a time when City government must contend with an austere FY2006 Budget with a minimal General Fund balance, and with deep federal budget cuts to a wide range of programs that support and sustain our City, we cannot
afford the proposed in benefits over the life of the next Five-Year Financial Plan. The City simply cannot afford the added financial burden imposed by this legislation.
For these reasons, I am returning Bill No. 040326 to City Council as disapproved.
Respectfully submitted,
John F. Street
Mayor
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