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Philadelphia, September 26, 2012 – Mayor Michael A. Nutter announced that the roughly 5,500 civil service non-represented and exempt employees and first-level supervisors in AFSCME District Council 47 Local 2186 will receive a new compensation/benefits reform package that includes a 2.5 percent pay raise and the reinstatement of step and longevity increases – effective Oct. 1 – as well as healthcare adjustments, proposed pension changes and work rule changes related to overtime and furloughs.

The employees who will receive the new compensation/benefits reform package are throughout the executive branch of city government, but also employees in independently elected offices, including City Council, the City Controller’s office, the District Attorney’s Office, the Sheriff’s Office, the Register of Wills and the First Judicial District.

The net cost to the City’s General Fund of the raises and related changes for the FY 2013-17 Five Year Plan is $17 million, a cost that does not assume the use of any furloughs. The city’s General Fund, which has a budget of $3.6 billion this year and a projected FY17 fund balance of about $60 million, will absorb the costs.

“At the heart of this compensation package is a connection between employee pay raises and benefits reform that will move the City toward fiscal sustainability,” said Mayor Nutter. “As we struggle past the impact of the Great Recession, we must simultaneously act with fairness toward both hard-working public servants and taxpayers. Fair and fiscally responsible, this package is almost the same as proposals that union leaders representing the City’s non-uniformed employees have refused to consider.

“In years past, non-represented employees and exempt employees were given the same compensation enhancements that had been negotiated with the two municipal unions. But the non-reps and exempts have not had a pay raise since 2007, did not receive a lump sum bonus in 2008 and some exempts have had furloughs and pay cuts,” said Mayor Nutter. “It is unfair to deny compensation improvements to one group simply because union leaders representing non-uniformed employees decline to act in the interests of current and future employees and taxpayers.”

In 2008, the Nutter Administration came to a series of one-year agreements with all four municipal unions, agreements that included substantial savings in health costs. During that contract year, the Administration and union leaders also worked on longer term contracts that included proposals aimed at reforming the City’s ever rising pension and healthcare costs. But the parties were unable to reach agreement, and since July 1, 2009, the City has operated under the terms of the contract negotiated in 2008 with no subsequent raises, no increases in health care payments for the non-uniformed unions and the suspension of step and longevity increases. In addition, the non-represented and exempt employees in 2008 did not receive the $1,100 bonus payment that union members were provided. And many exempt employees took furlough days and pay cuts as part of the reductions to help balance the budget during the Great Recession.

The elements of the compensation/benefits reform package for supervisors in District Council 47’s Local 2186, often referred to as a “meet and discuss” unit where the City has the authority under the law to impose terms of employment, and for civil service non-represented and exempt employees include the following:

Wages: Effective Oct. 1, most employees in the above categories will receive a 2.5 percent pay increase.

Step and Longevity increments: Also effective Oct. 1, employees will have restored step and longevity increments. These increments were frozen on July 1, 2009. Employees will now be placed at the levels where they would have been had the increments not been frozen. For example, an employee at Step 1 in June 2009 will now be at Step 4. However, no back pay will be provided.

Pensions: Legislation will be transmitted to City Council for introduction to accomplish two goals regarding employee pensions – new employees will be placed in Plan 10, an existing hybrid plan that has a defined benefit provision and a 401-K style defined contribution component. In addition, employees who are not in Plan 10 will contribute more of their pay, about 1.5 percent more, for their pensions.

Furloughs: When the City’s fiscal condition warrants such action, City departments will be able to furlough non-represented employees. The Administration already has the authority to furlough exempt employees.

Overtime: The rules for overtime will change in two ways – double time will be eliminated and a new rule will be implemented that requires employees to work 40 hours in order to get overtime. The city will no longer count paid leave, except for vacation, in determining whether an employee is eligible for overtime.

Health Care: Employees who participate in the City Administered Plan’s HMO will see an increase in the employee contribution beginning in January 2013. The City will no longer offer a Point of Service plan. These changes aim to counter the impact of increased health care costs, holding unchanged the net costs to taxpayers. Depending on the plan, the City will continue to contribute between 89 percent and 92 percent of the total cost of employees’ health care.

The individual impact on employees of the compensation/benefits reform package outlined above will depend on a number of variables, including whether the employee is eligible for step and longevity increases, whether the employee has entered the DROP and no longer makes pension contributions, and in which health care plan the employee participates.

Employees in the PPO will not see any increase in their health care contributions, which currently cover 11 percent of plan cost. Employee HMO costs will rise from 2.5 percent of plan cost to 8 percent. By contrast, a 2012 survey of employer sponsored health benefits found that in the government sector employee contributions for an HMO for a single employee averaged 10 percent of plan cost and 13 percent of plan cost for a PPO for a single member.

For non-represented employees, the step and longevity increments that will be restored Oct. 1 will mean an average pay increase of $2,100. About 75 percent of non-represented employees will qualify for the increments.

In all, about 13,000 city employees including those announced today will have received pay raises by Oct. 1. This total includes those employees who received arbitration awards, namely police, corrections officers, deputy sheriffs and probation officers. Approximately 15,000 employees are also seeing changes to their pensions that will lower costs for taxpayers while preserving benefits for employees. Police, firefighters, deputy sheriffs, correctional officers, probation officers and employees in the Register of Wills office are in this category in addition to the employee categories announced today.