Budget relief bill a poison pill

If the State Senate has its way, collective bargaining will be crippled in Philadelphia.

The bill that gives us pension relief and a 1% sales tax increase, also mandates that "the city cut the retirement benefits of future employees 25 percent, while capping the benefits of existing workers at current levels."

This is wrong on two levels.

First, because pension benefits should be the subject of collective bargaining.

Second, because pension benefits are critical to providing good wages and attracting good employees in the city.

Yes, there is room for debate about how high those benefits should be. But any adjustments in benefits should take place carefully not as a result of a blunderbuss pointed at the city.

I'm as concerned about capping benefits of current workers as I am at the immediate 25% cut for new workers. Suppose we have another period of high inflation, as we did in the 1970s, that dramatically reduces the value of pensions while at the same time making it easier for the city to fund them. Will it be impossible to adjust those benefits?

Given the consequences for the city and its workers if we reject this law, it is imperative that, first, we try to change it on the floor of the Senate and in the House.

And, second, if that won't work, then we should figure out if we will be stuck with it for more than one year.

I'm not sure of the details with regard to this legislation. But Council certainly can replace the 1% sales tax increase with other taxes under its own control for the next four fiscal years and perhaps come out from under this onerous law. A new five year plan is submitted every year and can be modify decisions make under a previous five year plan.

Since property and business tax increaes would be fairer than a sales tax increase anyway, Council should take this action regardless.

And lets not forget that the Mayor and Council got us into this mess by putting all its eggs in one basket and relying on the General Assembly to fix a fiscal problem it could have fixed with other, better taxes.

The Save the Libraries Coalition will Rally Against This Deal

The rally will be tomorrow outside City Council Chambers at noon. Please come and share your outrage.

This is the biggest failure in living memory of the entire political establishment of our State. Everyone has played a shameful role in bringing this fiasco to our doorstep. It started with the Mayor and Council's failure to enact a progressive tax package to fund this year's budget, out of fear of the business elite. Council and the Mayor knew -- they had to know -- that placing the City's fate in the hands of the completely amoral leadership of the State Senate would cost us dearly. The State Senate, of course, hasn't disappointed in seeking to impose as much punishment as it could conjure up for the workers of the City. In doing so, it has also managed to once again take a rip out of the poor pathetic remnants of Philly Home Rule.

What's particularly disheartening is the complicity of Senate Democrats and the Governor in the atrocity coming out of the Senate Finance Committee. The Governor has actually praised this deal, and he's brought at least some Philly Senate Democrats with him. But that should really be no surprise since he did everything he could as Mayor to accomplish the goal of weakening Philly labor while in office.

The Mayor hasn't said whether he supports the Senate package or not. But he's clearly turning the screws in favor of it by offering no alternative except his infamous Plan C. Plan C is basically a way to strangle the City within one fiscal year. And worse than Plan C -- for our version of local democracy -- is that the Mayor and most of Council have agreed to implement it without so much as holding a single public hearing of any kind to hear what we have to say about it.

All of this is intolerable. Marc is right that we can replace the sales taxes going forward and fully fund our pension system without state help. And we should try to do at least some of it this year. Replacing the sales tax this year would not constitute interim taxation, because it wouldn't be in support of new unbudgeted spending, but merely a replacement for the City's choice of tax to fund the existing budget. And some parts of the Senate package may be so sloppily drafted that they can be legally attacked. In that case, perhaps we can have a basis for fully replacing the Mayor's entire package this year since there may be no fully legal alternative.

But the bottom line of this mess is that Council has clearly forfeited its vacation and staying out of session now is simply its way of hiding from its duty to look at this mess and come up with an answer. The Library Coalition asks all of us to come out to City Hall to express our outrage both at the substance of what our elected officials are doing to us, and the horrible, cowardly way in which they're doing it. Please be there to raise your voice at noon tomorrow!

A couple of things to note

#1 Absolutely such an extraordinary demand - 25% reduction in retirement benefit costs in one year - is 100% fully intended as end run around collective bargaining. It isn't a proscription from the state for how healthy the pension fund should be in 5 or 10 years, its a direct dictate from the Republican State Senate Caucus as to what sort retirement benefit city workers recieve. In effect the Republican State Senate Caucus is taking the Mayor and Council out of process and turning negotiation into a one-way street. State Senators from other parts of the state telling Philly workers what they can even hope to ask for, no ifs, no buts, no maybes. And no trade-offs (giving some on this to get more on that). Its by its very design intended to derail that whole process.

#2 Its not just Philly - because we here in Philly are focused on our town we tend to skip to the part of Senator Browne's 80 pages of "amendments" that applies only to us. And it would make sense for any bill about Philly's city budget only to apply to Philly. But the amendments dramatically change the rules for contract negotiations for every single city or township employee of every single municipality in Pennsylvania. The erratic stock market that wreaked disaster on Philly's pension fund's health also wreaked disaster on the holdings of every other township and town's pension fund holdings. Literally hundreds of townships and cities are in equal or worse shape than Philly.

This bill dictates that for municipal governments that fall into its category II and category III of pension fund health that they have to switch over to a 401(k) defined benefit plan. Thats a huge reach into local government's ability to self-regulate across the state - and it has nothing what so ever to do with Philly's budget. Its a pure power grab over local authority state wide by the State Senate. And by pure guestimate, I'm going to say it probably directly effects at least 40% or 50% of the municipal workers in the state - every cop, every firefighter, every inspector, every garbage collector.

So its the type of thing that folks in the state level of AFSCME should be looking at bringing pain directly to Pileggi and Browne over, logically. Its something with state-wide, not just Philly lasting consequences.

#3 City Council - yeah you gotta love Council people who come out to express some vague "support" for unions at rallies in Love Park but then are stone silent when Republican party bosses from suburban counties effectively strip away those same workers ability to use collective bargaining at all. You don't actually have collective bargaining when the State Senate Republican Caucus makes all the decisions for local government before the negotiations even start. Its well past time for Council to own up to political decisions it made to get us to this point.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

One more

In all fairness I think Council and the Mayor to be fair are limited on what they can tell the State to do at this point because of letting it get to this late date but there are some things they can do to change the negotiating dynamics between the PA House and the PA Senate.

#1 its really a time for both labor and progressive groups in the region as a whole to radically rethink how they approach State government, specifically Republican State Senators from Philly suburbs that vote Democratic in presidential elections. You really don't need any more clear evidence than today that these people specifically are scheming day and night for ways to throw you under a bus - and to make matters worse they are often easily toppled but Philly leaders have typically given them a pass because sometimes "they'll cut a deal" - usually at a specific cost in terms of patronage and KOZ's (read corporate welfare) in their districts.

#2 the best way for Council to give the House leverage right now on the Senate's bill and still not force Plan C in terms of timeliness is for it to give up the idiotic but symbolically toxic DROP benefit for electeds volluntarily (to steal Senate Republican's thunder) but push to stand firm on Philly's and the rest of the state's ability to self-govern. Then hope for the best in conference negotiations between the two houses while planning revenge on key State Senators.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

It's an uncertain legal terrain out there

to be sure. But we're on the brink of one catastrophe (Plan C) or another (adoption of the Senate Republican death sentence for Philly labor). In that context, I think Council has to come back and think about putting some other options up there. That may give us more bargaining power if a) Pileggi concludes that the City doesn't need his kindness, and b) Pileggi's friends in the biz community go beserk on Pileggi because they face much higher local taxes unless he relents.

I'm not sure the business community is egging this on

I think they are for the most part every bit as much trapped like deer in the headlights as we plow toward Plan C as the rest of us. They mostly want a lean, clean but smoothly functioning city machine. They may be more willing to look the other way instead of fixing some of the city's social injustices than you Stan but Plan C is for the most part a disaster for them as well. They may have Nutter's ear more than you like, they may like running the city more cheaply than you think is fair but they like the city actually running. They don't want to sabotage the sales tax plan and make Philly an unsafe place to do business. Pileggi is clearly "off the reservation" if he steers us to "Plan C" as far as a good deal of the city's business community is concerned, in as much as they understand or are focused on this.

I'm sort of curious what options you think are on the table, Stan. Certainly one is to take the money and run - i.e. let the bill pass and then challenge the pension fund amendments on both state and US constitutional grounds. Some of the restrictions on being able to lobby for how your own pension fund is managed seem to my untrained eye to stray perilously close to conflicting with the First Amendment. A very fast injunction on that front is a powerful persuader in legislative conference committe between the House and the Senate. The wholesale trampling on not just Philly's but dozens, maybe hundreds, of cities Home Rule Charter seems like another legal avenue.

If you are urging going with Plan C dammit all because you would rather just fire almost 1,000 cops, more than 3,000 city workers, shut all libraries, all rec centers than to try and challenge the pension "amendments" in conference or in the courts, I don't think that sounds like a very smart strategy.

Also it really seems like this whole tactic from the State Senate GOP caucus is gaming on anti-Philly sentiment around the state but the broad strokes of the State Senate pension "amendments" should also be getting under the skin of municipal workers in every township, town and city because it takes away their right to bargain as well. Isn't there the possibility of stirring a state-wide objection? Wouldn't that do a better job of short-circuiting the anti-Philly knee-jerk response Pileggi and pals are betting will carry this through? It seems like the best way to break down a united partisan front in the State Senate is to cause some pain from municipal workers in a lot of different State Senate districts. Doesn't it help when State Senators hear from city workers in Erie and Williamsport and Pittsburgh and York? Who works on those lines of communication? And is very, very fast?
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Not First Amendment. Think ERISA.

Stan/Luigi, Harrisburg still has the wherewithal to put the pension plan into administration anyway by severing it from City control then starving it.

I would call this "Pulling an IBM" since this is what the Armonk, NY computer conglomerate did to eviscerate its own pension plan and it was one of the first large F100 companies to do this [they started the process of killing it back in 1995 when Lou came in as CEO].

Harrisburg also has the option of immunizing the pension plan from changes by local government, which is in essence what this bill was trying to reach for by giving more power to the City to take the pension off the negotiating table. This would turn the City's pension benefit into a non-negotiable item. That's no different than in private employment, where employees have little say in their benefit structure. If you don't like the benefits, then walk. Nobody is forcing you to accept the benefits.

IMO the City's unions should have saw this coming and pushed for a pension restructuring on their own but they've got the budgeting skills of a 17-year-old prom queen in need of a dress.

This will all be moot if the House goes along

with the Senate amendments. But until it does that, it would be irresponsible for Council not to start moving on an alternative. And that would be to reopen the budget and adopt new revenue options to replace the sales tax, including enough to make the pension payment. Those options would include the ones we talked about in the Spring, but maybe with fewer legal question marks. Councilman Green recently called for abolishing the net income tax and sharply raising the rate of the gross receipts tax to make up the difference. He also called for exempting the first $100,000 of receipts from that tax, but maybe that would have to wait until next year's budget. I understand that some in Council now think that the 2% exception to the casino law that would allow a wage tax increase is presently in play. Council should consider raising that tax, along with reinstitution of the Cohen wage tax rebate. We can debate the merits of these approaches or others, but the key is, Council needs to get back and get another ball rolling.

I don't disagree that the Chamber is probably as appalled by Plan C as anyone, but their minds might be more concentrated still if they see a big tax hike coming their way while the State legislature diddles. The only way to bring them to that good mental state is to start working on that alternative. And even if Pileggi doesn't have big individual contributions from Philly business, his caucus in general listens when big biz talks.

I just don't like submitting to this blackmail without at least putting up a fight.

I'd rather just start over

Nothing is stopping the City Law Department from drawing up a Chapter 9 bankruptcy filing and walking it over a few blocks down Market Street and turning it in.

The City Pension fund goes into administration, and then AFSCME and District will have a Federal judge sitting at the other end of the negotiating table instead of Michael Nutter and they can work out whatever resolution they want, the City is then free to focus on whatever restructured payment obligation that comes out of BK9, plus any bond penalties that would have normally triggered due to missed payments would be quashed and also eligible for restructuring into re-fi'd debt, if it comes to that.

That raises the issue of PICA and whether the City is even legally permitted to go to Federal Bankruptcy court to file for a Municipal Bankruptcy. But that is the beauty of this option. The City can still submit the filing, and then Harrisburg (PICA legal and AG of PA) will have to make a case that Philadelphia doesn't really own its debt, Harrisburg does, thus Philadelphia can't seek protection from creditors.

It also will trigger a shockwave in the muni markets and because HBG can't pass a budget, every single public agency in Pennsylvania that has an outstanding bond will get it thrown to the wolves in an orgasm of credit downgrades which can trigger deposit requirements on the bonds if any are attached.

This is the nuclear option I think Philadelphia should seriously look at along with Plan C. Pileggi might be trying to manipulate the City, but a Philadelphia BK9 would create a HUGE amount of problems for the General Assembly that make the budget impasse look like peanuts.

Um, let's not forget

Council is more responsible for this whole mess than the mayor or anybody else.

Council is "as appalled by Plan C as anyone"? That's rather generous.

Try Council is "more responsible for Plan C than anyone else."

Council created the legislation for the sales tax hike, and thus advocated risking just this kind of fight with -- and victimization by -- the State legislature.

Sure, they should help now. But they should be less appalled than contrite.

The present rout at Harrisburg never happens if Council supports the mayor's real estate tax hike and doesn't counter with a (far more regressive) tax contingent on Harrisburg support.

Plan B or C is the direct result of the (regressive) means of raising revenue that Council created and advocated for.

It's fine to look for a quarterback to throw one last budget Hail Mary. Go team.

But let's remember that the snoozing Council's budget and regressive sales tax started this.

Oh, did I mention DROP?

Uh, I said the Chamber is as appalled by Plan C as anyone . . .

Not Council. I'm in no way excusing Council's legislative malpractice in getting us to this spot. Nevertheless, or perhaps, especially given their horrible track record to date, they have the responsibility for getting us out of this mess, or at least trying.

Stan you said yourself they can't pass a second budget

July 1 is it. PICA is good law and more than that its the Governor's baby - personally. So you want Council to buck established state law regarding the July 1 deadline, the home Rule Charter, the Mayor, the Governor, the authority of both the Democratic State House and the Republican State Senate and PICA to illegally jack up a Gross Reciepts Tax that no business will pay because every other legal entity in the state of PA will say its illegal to do in the current budget year. Awesome plan, Stan. I'm sure those contested Gross Reciept payments will just come pouring in by the bucketload.

See I realize you have worked an idea of how you would like to set up taxation in Philly and not every part of that plan is all bad but its plainly illegal for FY '09-10 and people (and especially out-of-state corporations) don't pay illegal taxes.

City Council basically forced the City into the possibility of Plan C by a combination of not being willing to deal with the political work of making property taxes fair (of for that matter your favorite, biz taxes). Or for that matter a few simple acts of painless political contrition that could have provided enough cover to avoid heavy-handed "pension reform" from the State Senate.

See thats the problem with everybody's scheme here. Everybody - the State Senate, John Dougherty and friends, Stan Shapiro, the Philly Republican Party (hell bent on sticking it to both Council and Nutter no matter what), the greater PA Repbulican PArty (hell bent on sticking it to Rendell and Obama no matter what), and East Chestnut AKA Mayfair Meat's "lets go bankrupt" plan - are all so excited to trigger some cockamanie scheme they keep pushing for edging up the crisis not reducing it. And in the end the plans just come off as irrationally complicated. Nutter, not because he's particularly talented but because he's sane and careful, might well ultimately prevail simply because he's pushing for a moderate path in a recession. Some cuts, some reasonable reigning in of pension costs, some refinancing, some new tax revenue. A balanced approach.

People want stability, the sanest sounding plan. If the bad news is the city is in fiscal crisis for banking on tax revenue that needed complicated political approvals a popular groundswell isn't going to gather behind a plan that calls for banking on litigating against every single government authority in the state. Won't happen.

If you want city workers to retain some degree of legitimate flexibility in negotiating their benefits the best course of action is to work in concert with municipal unions around the state to defang as best as possible the State Senate pension bill in the House and work something out (hopefully quickly to beat Plan C) in legislative conference. AFSCME at a national level should be sending some of their best legal minds to PA to help the House leadership piece together that deal. Hopefully through a combination of political pressure state wide on key Senators and smart maneuvering they hammer a deal before Sept. 18 when Plan C layoffs actually take effect.

If you really want chaos for a hope against hope battle between a notoriously cowardly City Council and the entire rest of city and state government then I guess you pick something else.

The State Senate provisions are heavy-handed and strip away local authority for flexibility and self-governance in a plainly awful way. That said if they end up a third as extreme as they are as currently laid out its not an awful result for Philly and not exctly cruel to city workers in a time when lots of people would take those jobs, although I obviously would prefer the more locallly sensitive hands of the Mayor not distant State Senators cutting the deal.

I think municipal unions best play happily is not far from the best play for the city citizens generally - use the House to mitigate the State Senate plans as best they can and wait their turn to take comeupance on the State Senate Republican Caucus which plainly does not mind throwing them under a bus. Quick lawsuits that pick apart some of the more totally overreaching aspects of the State Senate provisions could do a lot to strengthen their case to eliminate what comes out of legislative conference between the House and the Senate.

Bankruptcy is not an option. Council defying PICA and the governor and state courts and the mayor and risking losing all state reimbursements for good is not a realistic option. Plan C is a unfortunately still a very real possibility that should be avoided at all costs. Defanging the State Senate provisions in a timely fashion is a partial option and its the one that preserves the greatest flexibility for the unions to set their own terms going into the future. Council streengthens the Houses hand by starting on the less painful reforms in the State Senate "amendments" on their own - like a completely painles one - eliminating DROP for electeds.

I especially wish everybody would just chill with the mad-scientist "I'll redirect the sun to make a giant heat ray" style secnarios for a second. The way out of a standoff is real negotiation and real negotiation means everybody gives a little so noone is expected to give everything.

Also Stan I know your bad guy has been "Philadelphia big biz" for so long its hard to swing a partial refocus but understand Pileggi's and the State Senate's stance is about a misguided ideological calculation, not because of evil corporate America pulling their strings marionette style in a scheme to chisel Philadelphia garbage collectors out of their pensions. They are betting on standing their ground to lame duck Rendell on "no new taxes" just like some of the national GOP is betting on turning health care reform into "Obama's Waterloo". The motivation is in both the state and city budget is symbollic and as hard as it is for you to understand their alien view point, they honestly think it will help them win elections in the future. What's significant about Pileggi's actions is rather than "the dirty Republican that Philly Dems can work with" -i.e. Perzel the II (only in the Senate) he's decided in every way possible this year to stage a showdown. Maybe he's decided this is the year he lives up to that ridiculous "Cool Hand Dom" moniker. This year the GOP is the party of "No" to point of becoming nothing but sabateurs. Its a bad strategy but it will take a while for the blow back to hit them.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Look, corporate America is basically evil

and I don't shrink from saying so. But, without having the energy to answer each of your multiple paragraphs, I'll just get back to the heart of what I said. I'm not discouraging a cooperative effort to compromise differences between House and Senate versions of this bill. But we don't know if that's possible or if anyone is even interested in it. So we may have nothing for awhile, during which time, Plan C will continue toward implementation. In that context we have to try something else. I think considering a replacement tax for the sales tax is not clearly illegal and is worthy of being put up there for discussion, along with a wage tax increase. But Council should do something, rather than sit around and collect paychecks for having put us in this embarrassing and degrading position as the only First Class City in the State. Now we're the only first class laughingstock.

Uggh

Wage tax is held up the combination of the July 1 deadline and state gaming law. If state gaming law was that easy to move, I think Casino Free Philly would have packed up their bags and retired a long time ago. Great for next year but a no go for this year. New taxes for this year are bare minimum so legally complicated (and admit it illegal as currently construed) as to require court cases that drag on for months and months - months during which the city will not being getting the revenue anyway. You may score an unlikely win just as FY'09 rolls to a conclusion. The layoffs are effective Sept. 18 - period.

The House has to act fast to defang the Senate provisions but pass something non-devastating to worker's rights and local government's autonomy before Sept. 18. We would be a lot safer if the House were to get something as non-oppressive as possible done by Sept. 1 when Plan C goes to PICA for final approval. Council could volluntarily remove DROP for electeds going into the future tomorrow to strengthen the House's case for reasonableness while still handing that bastard Pileggi something to call "victory" - literally tomorrow. Your plan involves first a level of financial expertise and independence and resourcefulness Council has not shown yet, then enough votes to override a mayoral veto and enough political fortitude to sustain legal attacks from every level of state government while most layoffs happened anyway. If you think you can "make" City Council do that you have some crazy political juju, Stan. Why didn't you just make them pay down the pension fund over the last couple of decades if you have that kind of power to make Council do whatever you think is best? Or simply make property taxes both fair and less regressive? Either could have saved a whole lot of political headaches right up front, certainly.

In terms of the innate evilness of corporations, thats an expression of religious faith clearly and far be it for me to get between a man and his religion.

For my part, I think corporations are irrational bureaucratic entities that often are driven by confused and self-contradictory motivations - sort of like governments. You need a system with lots of checks and ballances in place to keep either type of institution in check. In America we tend to fall dramatically short on the checks and ballances on self-serving corporations. In some other countries its been a historic failure of democracy to keep checks and ballances on self-serving government. Both problems suck - a lot.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

These are extraordinary times if you haven't noticed

and there usually are no simple, clean paths toward happiness in such times. Of course it would be best if the House would revise the Senate amendments, make the bill fair to labor and get the Senate to adopt them. And do all this very quickly. Nothing I'm suggesting would detract from House members pursuing that track. But, in the lingo of the day, we need a plan B to forestall the possibility of Plan C. Plan B is for Council to come back, find a competent budget writer, and get to work. If they pass new revenue measures, they are the law until someone successfully goes to court to enjoin them. I would say that in this political environment, and the Courts are nothing if not political, Council could win that battle. There is a legal opinion circulating in Council that it does have the power -- right now -- to raise the wage tax. Not having seen the memo, it's also my opinion that other taxes could be raised, at least to replace the budgeted sales tax revenue that hasn't been authorized by the state but that was assumed to be available to back expenditures in the existing budget.

Bottom line: Plan B is by no means a sure winner. But putting it together beats the hell out of sitting around and waiting for the Legislature to snatch our chestnuts out of the roaring flame.

Oh, and on big business, see this, slightly dated that it is: http://www.corporatecrimereporter.com/twenty061207.htm

So far, only Two options

There's Evil Plan C and Evil Plan R

Nobody wants to admit this, but Plan R is the softest landing we can get before mid September and it paves the way for a tax increase the City needs to keep up its obligations.

Plan B blows the deadline and generates tons of new business for every law firm in town, so that's a non starter.

Plan R retains jobs and keeps taxpayers from bearing the brunt of service cutbacks. Plan C makes those cutbacks very immediate, probably to the point where Philadelphians start unloading their trash on to Dilworth Plaza in protest.

No the softest landing is a much less drastic Plan R

facilitated in part by the House negotiating hard in conference and in part by Council volluntarily getting rid of DROP for electeds - which literally costs them nothing personally or politically except simple pride. And they can always say "well now that I enrolled I legally can't back out" a la DiCicco - which is a simply amazing testament to Council's tone deafness and collective incompetence as a unit.

It a rare, rare group that can in face of budget catastrophe this severe can manage to both hike their own budget and also flatly refuse to even touch DROP for electeds going into the future because it might make their current enrollment look slightly askance in the rear view mirror. And rare in this instance is not a characteristic engendering a lot of political confidence.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Have to admit

I'm saving Stan's "Corporate America is basically evil" for our next argument over whether he's anti-job.

The 6th largest U.S. city doesn't need jobs from large corporations as well as small businesses?

Sheesh.

Just because they're evil doesn't mean we don't need them

But let's face it, global warming, the financial crisis, the health care crisis, air and water pollution, indirect support for gay bashing through support of right wing Republicans, nukes, the military-industrial complex, degraded food supplies, corrupt politicians, union bashing, and the pervasive commercialization of everything, are just a few of the things that come to mind when I think of the great contributions to mankind of major corporations. And sadly, yes, we still need them as employers, but we should do everything we can think of to move in the direction of a much more locally based economy. Any and all extra resources we have to devote to economic development should be used to support sustainable, responsible businesses. And to the extent tax policy can be used for purposes of economic development, it should be similarly oriented. But no, we are not, sadly, in a position to abolish the multinational robber-baron corporation at this time.

They are crazy complicated entities with mixed agendas

Most of the evil things they do are because the internal motivaitonal structure that guides their decision making process can tend to put sustainable human advancement at the bottom of the list.

Framing your world view on punishing them for the actions they do because of their crazy, out-of-whack incentive structure sort of misses the point of reframing their incentive structure to reward them for doing the right thing.

If anything the recent economic catastrophe shows its a red herring to assume corporations are evil, omnipotent master minds. Shift the incentive structure to reward them for figuring out more effective ways to serve humanity - and most of all be realistic about pitching your approach appropriately to what can be achieved at a national as opposed city level.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Tell me more about how to shift their incentive structure

and who's going to impose that on them? I'd really like to know. And btw, just because their actions sometimes are in their own worst interest -- i.e., everything leading up to the recent financial crash -- doesn't mean that their basic influence isn't malevolent. They try to maximize their profits no matter what, but they're not impotent or all knowing. They get into a feeding frenzy, driven by competition, and sometimes can't stop themselves while barreling toward that cliff. But as the bailout shows, they're also fully capable of developing opportunity -- for themselves -- out of every disaster.

But again, let me know about that alternative incentive structure, because the fate of the world, literally, may well depend on getting it going.

OK its not all that simple

but it hasn't been that simple since industrialization began - and we have made over that last 1.5 - 2 centuries systematic progress in most of the world in improving living conditions. And pretty obviously the places where there has been well regulated competition tied to a strong social net has generally turned out better than either the places where there has been no economic competition at all or no regulation at all.

At the risk of setting off a conversation-with-a-3-year-old style chain of questions where the question "why?" is replaced with the question "how?" - I would say you work on ways where you harness the engine of greed to work on saving the planet and building up a healthy population of consumers. You can't continue to sell as many things if you systematically impoverish your consumer base out of existence or make their planet unlivable.

This is pretty far afield from why its bad policy for Philly to have State Senators impose from above, instead of the local mayor and the local union negotiating, what constitutes a fair retirement benefit. Maybe we should turn this conversation a little away from the quite-so esoteric.

The main point is economies have almost never been actually efectively run on strictly moral grounds (punish those "bad" greedy people) - even if historically there have been a few very repressive regimes that mouthed lip service to that idea - usually to justify ever more blood-thirsty means to eliminate threats to their political power. In general people are better off in places and periods where there really is something that resembles that old hokey cliché called "the marketplace of ideas".
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

This debate is sooo twentieth century.

I’m finding this debate a lot too twentieth century for my taste. I see no point in arguing at this level of generality any more.

Let me explain what I mean by giving a health care example.

Unregulated health insurance companies driven by profits are clearly bad for everyone's health. Their business model is to deny coverage or charge far higher premiusm to anyone who might reallly \health care....which leads to the crisis we are in now where people who have pre-existing medical conditions, who are older, or who are women of child bearing years either are charged more or can't get insurance at all. You also get huge administrative costs which are used to design individual plans and rates for each group. The smallest of the Blues in PA, Capitol Blue Cross, has 43,000 separate insurance plans.

But regulate insurance companies so that they have to give everyone the same comprehensive insurance package at the same rates, and their business model changes drastically. Now they have an incentive to insure as many people as possible to spread the risks, which takes us back to the original idea of insurance. To keep people in their pool, insurance companies have to provide better service which means not getting in the way of doctor / patient relationships quite as starkly as they do now. And if they keep people in their pools, then insurance companies have an incentive to figure out ways to keep them healthier which leads to restructuring payments systems so that they encourage preventive care, coordinated care, and attention to chronic disease management.

So, if we design regulations right, we put private interest at the service of public interest. If not, not.

That does mean we have to generate the political power to regulate well. I'm a lot more concerned about the political power of private businesses than anything else do as economic enterprises.

Whether we are socialists or capitalists, we are not going to eliminate self-interest from our economy as long as we have a free labor market. And we can’t have freedom in general, or economic efficiency, without a free labor market.

So, while I share Stan’s general sense that unregulated private enterprise is far less useful a tool than is usually assumed in our political culture, I think it is long past time to stop assuming that either private enterprise or public enterprise or communal (workers or consumer coops) enterprise is ideal. In a political economy with regulations over many things—regulations that are absolutely necessary—there is no purely private enterprise. In a political economy with a free labor market and in which politics is somewhat bureaucratic—there is no public enterprise that escapes from the motive of self-interest.

We need to drill down and think about different regulatory regimes and forms of ownership as tools that we use to attain our goals. There is no reason to think that any one set of tools will work best in every circumstance.

If you look at health care across the world, there are an enormous variety of systems that provide universal coverage from Canada’s public single-payer system to the Dutch heavily regulated private system. There are trade-offs of many kinds. And none of them is best everywhere. What we should seek n a particular case depends on both our political situation, they system we have inherited, and our own politico-economic and cultural traditions.

And, just to put my cards fully the table, this is why I am so sick of talking to advocates of single payer advocates who “know” without ever giving any good reason for thinking it, that a wholly public system is the only or even best way to do health care reform in the US.

It's not and it isn't. And they are all so twentieth century, too.

Pileggi's closest friends in the business community

are from what I've seen on a cursory examination - Harrah's, investment firms based in Swarthmore / Media, unions of the building trades variety, lots of DelCo construction companies and law firms not based in Philly. Bob Brady and Pileggi both have district offices in the same old hotel where he keeps the Chester GOP & the Chester Parking Authority - and a Federally funded homeless shelter. Make of that what you will.

Clearly a lot of the power brokers that support Philly politicians support Pileggi but they are often construction industry, often labor. Check yourself.
http://www.campaignfinance.state.pa.us/CommitteeSearchResults.aspx?Reque...
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Plan C is worse than a 25% Pension cut

What's better... slicing everybody's pension, or firing a ton of City workers who will then have an incentive to flee the jurisdiction?

Cutting into the pension keeps the union population alive. Plan C culls their ranks.

I linked in the other thread

but a more informative link about what all is contained in State Senator Browne's 80 pages of pension fund "amendments" to the Philly budget approvals is below. Its a page and a half summary in Word of the wide ranging provisions that Pileggi and Browne just tacked on, courtesy of the fine folks at Philly Clout.

http://media.philly.com/documents/HB1828AmendmentSummary-8-24-09.doc

I think you will find the wider provisions just as astounding as the one's specific to Philly.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Will this be what it takes to get our unions to tell the GOP

Senate where to get off?

Over the last few weeks, I proposed to a few of my friends in labor that they come together with Democratic fund raisers to create a PAC that would raise a million dollars (to start) to take out the five GOP state senators running for reelection in SEPA.

That threat alone, I thought, was the best way to divide the GOP Senate caucus and create some movement on the budget. And if it lead to a real campaign that actually took back a few of those seats, so much the better.

The response was not suprising. Everyone I talked to said it was a great idea but.....

This union had a good relationship with that Senator and didn't want to jeopardize it. Another union had a good relationship with a different Senator and couldn't join a collective effort.

The Republican controlled Pennsylvania State Senate just shot an arrow into the heart of collective bargaining in Pennsylvania. Maybe its time for our public sector unions to stand up and say they have gone too far.

Either that, or labor and progressives in this state are going to get shat upon for the forseeable future by Senator Pileggi and his friends.

"We have a good working relationship"

Yes indeed one where Pileggi systematically stalls progress on legislation to the exact moment when he can use it to steal every municipal worker in PA's right to negotiate their own retirement benefit. Its a working relationship alright. But lately its one where more and more it looks like Pileggi and the State Senate Republicans tell municipal unions to "Get to Work!" and the state municipal unions say "Yes'm, master". ;)

I mean I read this stuff but I have to say does AFSCME? I feel like the locals got so focused on the rituals of preparing for sitting across the table from the mayor (this year its Nutter but its basically always the same whoever's in that chair) that they were completely sideswiped by State Senate Republicans. Correct me if I'm wrong on that.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

It's highly unusual

to see Harrisburg directly interject itself into Philly union drama, except (correct me if I'm wrong) the teachers union.

Considering that this measure also throws water on Allegheny County and western PA Democrats who have similar issues with muni unions; you may be right to think that this budget assistance offering is nothing more than a ploy to put Plan C into effect and cull the ranks of Philadelphia's muni unions and enact a dramatic teardown of services to Phila taxpayers in hopes city residents direct their anger at City Hall, and not Harrisburg.

The real travesty is that Plan C doesn't really address the pension funding issue, because the present outlays stay the same and the contribution pool gets reduced since the City's immediate payroll contribution requirements go down, but there's still the same number of retirees drawing out on the fund and nothing changes for new benefit participants. The City incorrectly assumes that tax income will remain the same under Plan C but it doesn't account for the exodus of people that will leave the City due to unemployment and dramatically reduced services, starving the City of Philadelphia of Wage Tax income.

The Senate proposal directly forces the City to redefine the benefits and restructure them so they can actually do something that at least half-way looks like it's fiscally sustainable.

My fear about forcing Plan C

are not so much about a grand conspiracy as a fear that

1.) the Senate Republicans are simply not that adept and even though they intended to relinquish the death grip on the city budget at the last possible minute, they might have already blown a limited window of time. Pileggi does not I think care so much about pension fund issues that he has to deal with them now in this way. If he really cared he would have started on it earlier to achieve real results. He held onto the city approvals this long just to game the state budget standoff and he switched to pension funds as symbollic "victory" to claim for relinquishing it as a possible ransom item. The business of pension reform is only immediately pressing for political not substantive reasons but Pileggi could easily botch the timing and screw us by overplaying that "pension fund reform card" too late in the game. The evidence is fairly alarming that he doesn't really care all that much if he blows it.

2.) local Republicans, state Repbulicans, you, Stan Shapiro, John Dougherty and friends and players on City Council all have such mixed political motivations, each urging us towards more, not less fiscal chaos, so that the possibility of things getting screwed up along the way are multiplied exponentially. That's not good.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

I'm not a budget-Martha Stewart

that's for certain. You already know my desire to see the City forced into Municipal Bankruptcy as the only possible solution to complete a total teardown of the political structure of Philadelphia and reorganize it for the 21st Century; since I'm never a fan of one-party politics, the myriad of fiefdoms in our county, nor the fact that most of our elections are decided in primary races, obviating a need to turn up to vote at the General save for the ballot questions--which I think is rather embarrassing it's gone on this long.

Plan C might accomplish that same goal, especially when Philadelphians get socked with 2x a month trash pickup, which will really tick off the local populace, nevermind the 1,000 City workers who will be given the axe.

I think we saw a glimpse of that in 2007 when intense fear of urban violence contributed to a political rout which put Michael Nutter in office against foes like The Union Mayor (Brady), The Business Acumen Mayor (Knox), and The Welfare Mayor (Fattah).

The pill may be worse than we thought

http://www.philly.com/philly/blogs/our-money/State_Senate_hands_Nutter_a...

The reforms impact both current and future workers. Pension benefits for employees currently enrolled in the system would be frozen. Right now, pension payments are partially calculated based on the length of service. The legislation would not allow workers factor any additional years of service into pension paymentes. This part of the reform is particularly hard on younger workers, who haven't been in the system long enough to accrue a significant amount of money in their retirement accounts.

This is so outrageous I'm having trouble believing that it is true. How can we freeze a pension for somone who has worked five years at that level when he or she may work another twenty years for the city?

Or rather, how can we expect anyone young workers who has any options at all to stay in a city job.

If this is true, we cannot accept it as a condition of the sales tax increase. It would be better to try to pass new taxes and take our chances with the courts.

Not to be like that, but yeah

that's what I just said. Thats why I personally may not oppose ending up getting to similar results in terms of reduced costs for the the system as a whole eventually, I strongly object to the unfair way its being shoved down from above and the abruptness of overriding existing worker's earned benefits.

Basically it cheats people already working for the city out of a contractually obligated compensation, no matter how long they work for the city.

If you have a legal argument that passes the smell test for a mid-fiscal year redo, though, it hasn't been articulated here so far. But fire away. You need to convince PICA and the courts for it not cause an immediate cut off of state reimbursements.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Sorry, Sean, I missed what you wrote but it may be wrong

I put this on Facebook and John Hawkins said that Ben misread the bill.

But if Ben is right, this is truly unbelievably awful.

And if the labor movement were what it once was, we would have a general strike.

I'm confused by a lot of the numbers

we need the actual 80 pages of legislation. My post was based in part on Ben's analysis anyway.

25% reduction in overall costs of the system in one year is a lot more than a 20% cut in what the city puts in for new hires, if it all comes out of new hires. We won't be hiring much, other than to replace retiring workers with slightly numerically less new hires for years to come. So a 25% reduction of overall cost in one year has to mean a virtual elimination of employer contributions for new hires at all - even if they move new hires entirely to a defined benefit 401(k) plan. The numbers don't make sense to me if they aren't also stiffing people already employed on their current contractual obligations from what I can tell.

On the other hand a freeze on existing benefits is just that - a freeze. It implies you are still working for the system but not earning anything "extra" for putting in more time on the job - which is implicitly unfair, defined benefit or no.

Its crazy that they are voting on this at all without several different groups running the numbers. Just from a governance angle its extremely irresponsible to be doing this kind of sweeping change as quickie tack-on. Obviously everyone voting for it has not seen a careful breakdown of how many people state wide are being impacted by this.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

i thought it was a freeze on existing benefits ,meaning

a freeze on defined benefits with all new contributions from a worker going into a 401k defined contribution plan.at retirement a worker who worked 5 years under the old system would get a pension based on 5 years and a lump sum based on how well the next x years of contributions performed in whatever the worker chose to invest in.whats wrong with that ?

Can someone post the bill?

I've heard four different versions including that one Ian. But no one I know who has read the bill has seen tha tin it.

I'm sure it's bad.

But we ought to know what we are hating.

Google Search House Bill 1828, printer's number 2609

A google search of House Bill 1828, printer's number 2609 will lead directly to the bill, so that any determined reader here can "know what we are hating."

I will let somebody more patient and more skilled than I produce a direct link.

Can you tell us what's in it, Mark?

I won't have time to read it till the weekend.

Thats an ugly document

As legislative-ese about insurance and actuarials tend to be. But then you compound it by whole pages of the original House Bill included with all the type crossed out and all amendment text (in legalese) included in all caps.

Again it looks like for towns and cities in most of the state pension funds are set into 4 classes of distress, with increasingly dire levels of intervention into what the city can and can't do. The 4th, basically below 50% in the fund for projected payouts the fund gets taken over by the state. Actually the formula is more complicated in terms of debt load in terms of money borrowed against the fund, etc, but basically thats the gist. In level III the state mandates switching all new hires over to 401(k) defined benefit plans. Level II requires specific changes in the percentage of the retirement contribution the city pays, requiring a larger chunk to be withheld from worker's paychecks. Level I demands cities spend more on catching up.

I would love to get, BTW, a statistical breakdown of how many cities other than Philly fall into II, III, IV. It might be very interesting, for example, to map those cities to State Senate and House districts.

"Cities of the First Class" - i.e. Philly - are in their own class in terms of the rules (though I gather we would be at Level III). Because we are borrowing from the pension fund this year we have special rules.

Ben Waxman is correct. Those rules do seem to include a freeze on existing workers acquiring any future expanded benefits proportional to the time they work for the city. And yes absolutely, if you got hired recently - tough luck. New hires have to go in part on a defined benefit plan. If the city fails to appeal any act of arbitration that runs counter to the new state rules then the city will not receive any sales tax revenue.

The legislation has extremely broad language about how worker's unions are not allowed to hire anyone to advocate or lobby - at all - on the plan's administration. On the one hand I understand you don't want either union heads or corrupt politicians steering the financial investment contracts to connected cronies but this language seems to go beyond that and basically take away the unions seat at the table in terms of watching that their own retirement benefit is well run. Like workers can't print up an analysis say "the guys the mayor and/or state hired to invest our retirement appear to be getting returns that suck compared to the performance of the market as a whole". Please correct me if I am wrong but to my untrained eye this wording seems to go beyond stopping the unions from saying "hire my cousin Vinnie to be the portfolio manager" to saying the union can't criticize how well their own retirement benefit is managed - period. This strikes me as quite possibly a violation of the First Amendment.

(a) Prohibition.--A person or an affiliated entity that intends to enter or that enters into a professional services contract may not directly or indirectly hire, engage, utilize, retain or compensate any third party intermediary, agent or lobbyist to directly or indirectly communicate with a municipal pension system official or employee or a municipal official or
employee in connection with any transaction or investment
involving the contractor and the municipal pension system. The
prohibition shall include the solicitation of an investment or
investment management services from a municipal pension system
or influencing or attempting to influence the outcome of an
investment or other financial decision by the system. The
prohibition shall not apply to an officer or employee of the
investment firm who is acting within the scope of the firm's
standard professional duties on behalf of the firm, including
the actual provision of legal, accounting, engineering, real
estate or other professional advice, services or assistance
pursuant to a professional services contract with the municipal
pension system.

Another part would seem to prohibit, for example, Philadelphia unions from making a campaign contribution to the Controller who at least in Philly is the swing vote on the pension fund's board or from the Pension board or the Controller from hiring or "doing business with" a number cruncher who ever worked for the union and vice versa.

I honestly can't digest it all now but this is quite complex legislation again with implications not just for Philadelphia but every town, township and city in the state. A link for those who can't google who just want to see what it looks like.

Again over at Philly Clout put out the synopsis from the State Senate itself. An updated synopsis is available as a pdf here.

-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Have any Councilmembers commented on this legislation?

One would think they might have an opinion.

Back on topic - a legislative question

From skimming the legislation and the synopsis I am confident that it does freeze current Philly workers from earning additional benefit for more time worked (which is innately unfair even if you think the city can't afford current benefit levels). What I have heard different takes on is the time frame of this legislation.

Its been suggested to me that this whole bill times out when the city pays back its "loan" from pension fund and "catches up" on its underfunding in 4 years. Skimming the legislation, I didn't see that but I will completely admit I could have missed it. To my read it provides proscriptions however dire that will move cities in categories I through III back to full funding. In other words, the state-imposed rules "time-out" when they get back to a state of full funding. I didn't see that for the city. I see very exact timelines for when the city pays back the loan and for when the sales tax increase times out - but I did not see a date or "trigger" in terms of pension fund health when the provisions end. The freeze on accruing additional benefits for current workers and rules for new hires would seem to stretch into eternity for Philadelphia.

If I missed a trigger for the State Senate's new pension fund rules to expire please anybody holler - but I did not see an "end" articulated for the rules for Philly in this mess. Which is huge.

-Sean
MrLuigi, my cat, actually only types half as badly as I do.

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