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Wednesday, Dec. 26, 2007 | San Diego’s unions and city officials are gearing up for a perfect storm in municipal labor negotiations in the new year.
The upcoming season of labor talks, which should last from mid-January through April, will see all five of the city’s labor unions returning to the table to discuss monumental changes to their pension and healthcare plans, as well as sticky salary issues. And it will all be taking place a few months before voters decide whether Mayor Jerry Sanders’ tenure has lived up to the promises he made on the campaign trail in 2005, when he pledged to fix the city’s broken finances, in no small part by getting tough with unions.
With the October wildfires still etched in the public’s mind, public safety is likely to take center stage in next year’s negotiations. The San Diego Police Officers Association hopes to build on a pay raise it secured last year and Local 145, the firefighters’ union, is hoping this year it can convince the Mayor’s Office to hand firefighters their first raise in four years.
Meanwhile, the unions for white- and blue-collar city employees are crying foul over the city’s failure to live up to a condition of the last labor contract they inked in 2005. In exchange for a freeze in workers’ salary increases, the city promised to find $600 million to pay into the pension system. So far, it’s only been able to drum up about $107 million.
There are three significant issues that are likely to come to a head during the labor negotiations season: Pay raises for police officers and firefighters, a comprehensive redesign of the city’s retirement plan, and expansion of the city’s new employee healthcare plan to cover all city employees.
The mayor’s proposal to rewrite the way the city pays into its pension system is likely to face stiff opposition from the labor unions. Likewise, his proposal to expand a healthcare plan that was introduced this year to the Fire Department, Police Department and City Attorney’s Office to all city employees will face scrutiny from skeptical unions wary of putting their members’ healthcare plans in the hands of the city.
And likely to hamper the mayor’s healthcare proposal are figures recently released by the Mayor’s Office showing that while the new plan has saved the city money, it’s come far short of offering the savings city officials predicted in the spring.
“It’s going to be an extremely busy spring because of, obviously, the city’s delicate position as well as the goals that the mayor’s going to establish in this season of bargaining,” said Fred Sainz, Sanders spokesman.
Pay Raises for Police Officers and Firefighters
In the spring, the POA secured a 9 percent raise for most of its employees. It was the first raise for officers in almost three years and came after two years of increased pension and medical payments by police officers.
Next year, the police union hopes to build on their pay increase by arguing that the department still lags well behind other local agencies in terms of take-home pay.
“We’re hoping to build on the successes that we experienced in this year’s negotiations and to continue the steps toward bringing our pay and our benefits into parity, or at least close, to the other departments in our region,” said Bill Nemec, POA president.
In the spring, POA officials were quick to point out that they considered the raise a first step in bringing their officers’ pay into line with law enforcement wages in the area. A study commissioned by the city in December 2006, just prior to the negotiations, had shown that SDPD officers were among the lowest-paid law enforcement officers in the region.
City officials proposed to pay for a large chunk of the police pay raises by reformatting the department’s medical benefits system. They shifted the SDPD and the SDFD’s medical plans from a one-size-fits-all approach to a more tailored plan with different levels of benefits for officers depending on their experience level and their number of dependants. By doing so, city officials said, they would save hundreds of thousands of dollars.
The new medical benefits plan was agreed to somewhat reluctantly by the POA but was rejected by Local 145. The city eventually imposed the plan on firefighters.
At the SDPD, the new plan increased the take-home pay of some experienced officers with families because the city covered more of their healthcare costs. But new hires, less experienced officers and officers who opted out of the city’s coverage saw much lower overall increases to their take-home pay.
Thus some experienced officers received take-home pay increases of 13.4 percent while many officers who opted out of the medical plan saw their actual take-home pay rise by less than 3 percent.
Nemec said the reconfiguration of the union’s medical benefits has appeased some police officers and has gone some way towards stemming the flow of officers leaving the department. However, he said many other officers are still waiting to see if the city will make good on its promise to keep upping their pay.
A continued commitment to increasing police pay is an essential tourniquet to keep the Police Department from losing experienced officers to other agencies, Nemec said. The flow of officers from the department slowed significantly in the second half of 2007 after reaching its peak before and during this year’s labor negotiations.
But Nemec acknowledged that the city’s ongoing financial woes and the current political climate do not help his union’s cause. Also possibly complicating the Police Department’s chances of a raise will be what happens in the firefighters’ negotiations, Nemec said.
Last year, Sanders refused to give firefighters a raise. Despite opposition from some members of the City Council and grumbles from the firefighters union that it could be facing a Police Department-style attrition crisis, Local 145’s firefighters left the negotiating table last year with no increase in their pay and stuck with a healthcare plan they didn’t want.
This year, of course, catastrophic wildfires struck San Diego for the second time in four years.
Ron Saathoff, president of Local 145, said he expects to see the city pony up for the three years his firefighters have gone without even cost-of-living increases to their pay.
“Clearly, we’re well behind, we’ve gone backwards on our pay,” Saathoff said.
The new medical benefits plan has killed the union’s ability to compete on the open market for the best healthcare plan for its employees, Saathoff said. Since the spring, the union has been beholden to the city’s healthcare monopoly, he said, a situation that’s not good for firefighters.
Redesigning the City’s Pension Contributions
In 2005, Sanders promised during his campaign that he would redesign the city’s pension system, which had become the single dominating City Hall issue, spurring a billion-dollar deficit and federal and state investigations. He has hinted that the time to do so would be when all five employee groups are at the negotiating table, as they will be next spring.
To understand what the mayor has proposed, it’s important to understand the basics of pension contributions.
In simple terms, there are two types of pension systems: A defined benefits system and a defined contribution system. In the former, the municipality defines the level of benefits its employees will receive upon retirement based on their experience and pay. In the latter, (which is akin to a 401(k) plan), the municipality defines an amount it will pay into the pension system and pays out whatever benefits the initial investment affords them.
Currently, the city of San Diego operates under the defined benefits system. Because the city has historically under-funded its system, while raising benefits, it has dug itself into a billion-dollar deficit. Supporters of the defined contribution system say it would avoid the mistakes of the past by not allowing the city to make expensive promises it can’t keep.
Officials from the Mayor’s Office would not comment on the upcoming negotiations, saying that to do so would breach a good faith agreement they have with the unions.
Completely overhauling the pension system is not likely to sit well with those unions.
Ed Lehman, business representative of Local 127 of the American Federation of State County Municipal Employees, which represents City Hall’s blue-collar workers, said defined contributions systems are generally not in employees’ best interests.
“In general, unions favor defined benefits plans, because there’s more security in that,” Lehman said. “And actually we think that there’s enough evidence to show that they’re more efficient in delivering benefits to employees and in administration costs too.”
Lehman said his union has been working with the city to study the feasibility of a defined contributions system, however, and that they’re not against at least considering such a system if it proposed.
But Saathoff said his union is adamantly opposed to defined contributions. He said the current contributions system is in line with other municipalities in California and is competitive for employees and good for the city.
Lurking in the backdrop of the labor discussions will be the promises the city made the last time the white-collar and blue-collar workers were at the table. In 2005, the unions agreed to pay freezes or cuts on the condition that the funds not spent on employee salaries would be used to help inject $600 million into the troubled pension system.
Because of enduring credit problems, the city remains unable to borrow the money that would’ve been injected into the system. The details of the city’s failure are still to be ironed out, but the contract called for the money saved by the city to be returned to the employees if its conditions were not met. What’s more, union officials argue that the city is still liable for the payment.
Expanding the New Healthcare Plan
In spring 2008, it will have been a full year since the city redesigned the healthcare plans for firefighters and police officers.
When the new healthcare plans were introduced, they were touted as a way of saving the city hundreds of thousands of dollars while re-engineering health benefits to better suit the needs of employees.
City officials have said that the mayor plans to expand the new healthcare model to all 10,000-plus city employees, a move that officials hope will save the city millions of dollars a year.
But figures obtained from the Mayor’s Office show that the city has not saved as much as it had hoped on the new healthcare plans issued for firefighters and police officers. For example, the city hoped to save $775,000 on police healthcare in fiscal year 2007, but in fact saved just $8,450. The city hoped to save $664,000 on firefighter healthcare but actually saved $238,394.
The other labor unions will likely use that shortfall as ammunition if they choose to fight the new healthcare plans, but there’s no indication yet if they will even put up a fight.
Lehman said his union is ready to get out of the medical insurance business anyway, and that it will happily consider the plan the city puts on the table. As long as the medical plan doesn’t sneak away benefits or increase co-pays for his employees, Lehman said, they will seriously consider it.