Negotiations appear to be going nowhere. But tension is escalating, spurred by the Nutter administration's bid to overturn a 20-year-old legal precedent and impose its own contract terms on about 6,800 city workers in AFSCME District Council 33.
Thursday's budget address promises to be the most raucous of Nutter's tenure, with unions of all stripes pledging to attend in support of their municipal brethren.
One provision Nutter wants to impose would force new workers into a less-expensive hybrid pension system, limiting guaranteed pensions to one-quarter of a worker's final salary with additional city contributions toward a 401(k)-type pension account. Currently, some city workers can match or exceed their salaries after they retire.
Nutter says the city cannot afford to continue putting new employees into the current pension system, but that's what's happening as long as the impasse continues.
Since January, when the administration asked the state Supreme Court to step into the dispute with D.C. 33, public employee unions and government employers throughout Pennsylvania have lined up on opposite sides, agreeing on only one point - that the outcome could have lasting repercussions on collective bargaining between government agencies and their employees.
The administration is trying to overturn a 1993 decision by Commonwealth Court that a public employer cannot impose contract terms on government employees unless the employees strike - a step that Philadelphia's unions have not come close to taking, despite their frustration.
"At this point, we are no closer to an agreement than we were four years ago," said Shannon Farmer, the lawyer who serves as the Nutter administration's chief labor negotiator.
But because of the 1993 court decision, she said, "the unions are in a position where they can hold the city and the taxpayers hostage if there are terms of reform that they don't like."
D.C. 33 president Herman J. "Pete" Matthews disputed her account. "We've actually come a long way and there's been no movement at all from the mayor," he said.
Some independent analysts worry that the administration is running out of time before the unions give up talking and focus on the next crop of mayoral candidates in 2015.
"The persons who vie to replace [Nutter] will have to win the Democratic primary, where the unions collectively represent a significant number of votes," said Sam Katz, a four-time mayoral contender who now chairs the Pennsylvania Intergovernmental Cooperation Authority (PICA), a state agency providing oversight on city fiscal issues.
"At some point, the heads of these unions are going to decide it will be better to wait," Katz said. "With a wink and a nod, a mayoral candidate could privately make concessions that he shouldn't be making . . . and those unions could determine the outcome of the election."
Just about any candidate running for mayor in 2015 is likely to run on having a better relationship with the unions, said Uri Monson, PICA's former executive director and now chief financial officer of Montgomery County. "They're not going to want to have this kind of fight."
And if the concessions Nutter has been promoting get kicked down the road - the hybrid pension plan, new work rules to curtail overtime, and the ability to furlough employees - they may be dead in the water for years, Monson said.
"If something's going to happen, it's got to happen now," Monson said. "You won't get another shot for a long time."
The city's labor expenses over the last 30 years remained a fairly steady share of the general fund budget, around 60 percent.
But that changed markedly in fiscal 2012.
Even with salary expenses declining because of workforce reductions and the contract stalemate with city unions, increased payments for the ailing pension system pushed overall personnel costs to 68 percent of the general fund.
The higher pension costs last year were partly the result of a one-time deal - the city made up for reduced pension payments for 2009 and 2010 that were authorized by the state to help get the city through the recession.
But even after paying off those shortfalls this year, the Nutter administration projects no real drop in that percentage over the next five years, the result of still-rising pension payments and marginal growth in city revenue.
Of the city's four municipal unions, only the Fraternal Order of Police has a solid contract with the city, the result of binding arbitration that provided police officers with raises totaling about 15 percent over five years.
The administration praised that deal and began paying the raises, though the agreement did little to reduce police pension costs and was not budgeted in the city's five-year plan.
Because an arbitrator gave similar raises, 9 percent over three years, to Local 22 of the International Association of Fire Fighters, the city has appealed twice to the courts, saying it cannot afford to pay. Common Pleas Court Judge Idee Fox upheld the award in November but the city is now appealing to Commonwealth Court.
"The mayor's just trying to stall, kick the can down the road," firefighters union president Bill Gault said. "As far as the firefighters and medics are concerned, it's illegal."
The other municipal union, AFSCME District Council 47, along with D.C. 33, remains in a stalemate over Nutter's demands for bigger employee pension contributions, the less-expensive pension system for new employees, furlough authority to lay off workers without pay for up to three weeks a year, and new work rules to reduce overtime.
The administration's last offer to D.C. 33 included 4.5 percent in raises this year and next, but nothing for the period since mid-2009, when the last AFSCME contracts ran out.
The unions say that between higher pension costs and unpaid furloughs, the proposed contracts would amount to a pay cut.
There's room in the city's five-year plan to provide 4.5 percent raises to D.C. 33 and D.C. 47 as well as the firefighters, Nutter said, without relying on furloughs, as long as the rest of the labor package is accepted.
Cathy Scott, D.C. 47's president, said a 2.25 percent wage increase Nutter offered would be directly offset by increased pension contributions from workers.
In many respects, the current course is politically expedient for Nutter. He can say that he's standing up for local taxpayers as he pushes to restructure the city pension system, cut overtime, and seek authority to furlough city workers as an alternative to layoffs.
At the same time, the standoff has facilitated Nutter's short-term budget-making. Without new contracts, the administration has been able to write budgets in the last three years without having to find money for salary increases beyond the raises arbitrators granted for police officers and prison guards.
In an interview last week, Nutter said he wanted contract settlements as long as they were fair to taxpayers as well as city workers.
Workers "deserve the security of knowing their wages and pension benefits and health care are in place for some specified period of time," Nutter said. "On the government side, it's not good public policy or financial management to have so many variables and unknowns."
The union leaders said they want the same thing - except it hasn't been offered to them.
"My intent, and [Pete Matthews'] too, is to attempt to get a contract, a fair contract with real raises for our members," Scott said. "But that is not what's on the table. . . . The mayor wants the contract only on his own terms, and that's not negotiation."
Contact Bob Warner at 215-854-5885 or warnerb@phillynews.com.
