Fiscal overseer balking at Phila.'s budget plan

Sam Katz heads PICA, which signs off on the city's plans.
Sam Katz heads PICA, which signs off on the city's plans.
Posted: August 05, 2012

The recent contract awarded to Philadelphia firefighters by an arbitration panel would plunge the city's budget into the red, Mayor Nutter contends, while firefighters and their supporters think the city's budget wizards could find the money for hard-won raises and benefit increases if they chose to.

That leaves the city's financial overseer, the state-appointed Pennsylvania Intergovernmental Cooperation Authority (PICA), in the position of refereeing the dispute.

PICA's chairman, Sam Katz, doesn't like that position, and he also doesn't appear to appreciate the city's math.

Under the 1991 law that created PICA, the city must submit a balanced five-year budget to the agency every year.

This year's plan does not include any money for the firefighters' arbitration award, which the administration officially appealed Wednesday.

PICA is scheduled to meet Thursday to consider whether to approve the plan. What the five-member board decides will instantly bolster either the city's position or the firefighters.

PICA has never voted down a five-year plan - to do so could threaten the city's ability to spend state funds - but Katz said this week that he was concerned about the administration's assumptions and PICA's role in the process.

"There's an element of this being a seal of good housekeeping approval that reinforces the city's contention," Katz said. "That makes me uncomfortable."

Katz said there is a public belief that "there's more money than what's in the plan."

"I suspect there is, but I don't know there is," he said. "I guess the question is whether that should be true."

Firefighters have been working without a contract - and a raise - since 2009. Traditionally, Katz noted, there had been parity between firefighters and police officers, who got a five-year contract with 7 percent raises in 2009.

"Zero isn't a reasonable assumption anymore, if it ever was," he said.

Katz, however, would not say if he planned to vote against the five-year plan and send it back to the city for revisions. Nor would he say if his fellow PICA members shared his concerns.

"Let's just say I've said what I've said," he said. "PICA is five independent people. We're not monolithic."

Board member Greg Rost said he could not comment because he had not reviewed the plan or a draft report from PICA staff. Member Sam Hopkins declined to comment.

Two other members, Michael Karp and Joseph DiAngelo, could not be reached this week.

PICA Executive Director Fran Burns - who was Nutter's Licenses and Inspections commissioner until May - also declined to comment. She said the staff report on the five-year plan - which provides thorough analysis of the plan's viability - would not be available until Thursday's meeting.

During a PICA meeting last year, Katz and DiAngelo also questioned whether the 2011 five-year plan was based on "reasonable assumptions" because it included large payments for a controversial pension program, the Deferred Retirement Option Plan (DROP).

Katz also raised concerns about the health of the overall pension system, but eventually joined the other PICA members in approving the 2011 plan.

The city's appeal of the firefighters' award, filed in Common Pleas Court, is based on the PICA law's requirement that the administration have a balanced five-year budget.

This year's plan projects a fund balance of $62 million five years from now, while the administration estimates the cost of the firefighters' award over five years to be more than $200 million.

"The award creates a large deficit for the plan," said Finance Director Rob Dubow. "In order to fill that hole, we'd probably have to make severe cuts that would impact services."

Brett Mandel, a frequent critic of the Nutter administration and a candidate for city controller next year, urged PICA to vote down last year's plan.

He is again calling for PICA to reject the administration's math - not only because of the lack of money for the firefighters but because the plan calls for $50 million in workforce savings over five years.

Mandel criticized the administration as failing to include cash reserves for possible wage and benefit increases, something the administration had done in previous years.

Dubow said the administration stopped that practice after the recession hit. Ever since, the plans have required concessions from the workforce to be balanced.

One argument against budgeting for raises and benefit increases is that doing so would establish a "floor" in contract negotiations.

The city's large blue- and white-collar unions, AFSCME District Councils 33 and 47, have been working without contracts since 2009 and negotiations have not been fruitful. Unlike public safety employees barred from striking, D.C. 33 and 47 are not eligible for arbitration.

Dubow said the five-year plan does not mean no raises for city employees, just that any increases in wages or benefits must be offset by savings elsewhere.

For the firefighters, the city sought the right to furlough workers. The arbitration panel denied that request.

The city won the right to furlough in the police officers' contract but has never used the tool. Some critics cite that as evidence the city's financial situation isn't as dire as portrayed.

The city won other concessions in the police officers' contract, including higher medical co-payments and pension contributions.

A contract for corrections officers earlier this year contained similar concessions and would cost the city just $9 million over what had been budgeted over five years, despite a lump-sum payment to workers and two wage hikes.

"If you look at the awards we've gotten that provide savings, that's what we need to push for," Dubow said.

Katz was skeptical that the administration could count on never having to open its wallet for the workforce.

"I do think," Katz said, "we're coming to a come-home-to-roost-day, pretty soon."

Contact Troy Graham at 215-854-2730 or, or follow on Twitter @troyjgraham.

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