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Union tosses monkey wrench in mayor’s “Change to Grow” plan

June 14, 2013
By
Councilwoman Helen Holton preaches at the hearing

Councilwoman Helen Holton preaches at the hearing while Councilman Bill Cole ponders

With the help of Councilwoman Helen Holton (8th District), city union tossed a monkey wrench in Mayor Stephanie Rawlings-Blake’s 10 year “Change to Grow” fiscal plan Wednesday night by getting an amendment codifying raises for city workers into a bill that would demand greater employee contributions to their pensions.

“We really don’t have transparency in government in Baltimore City,” Holton (8th District) told the Taxation, Finance and Economic Development Committee at a work session for the mayor’s pension reform bill, “which is why I offered these amendments.”

The hard-fought change? Getting a promised two percent annual raise committed in writing.

The pension matter goes to the heart of Rawlings-Blake’s long-term plan for the city. She has called the defined benefit plans “unsustainable” and a big part of a projected $750 million cumulative budget shortfall over the next decade. Three years ago Rawlings-Blake unilaterally lowered the cost of living increases in the police and fire union pensions, a move that a federal judge ruled unconstitutional last fall. The city has appealed

The new bill, changing the terms of the Employees Retirement System that covers 4,000 city workers including public works, transportation and school employees, is cut from the same policy cloth.

“It’s part of the greater plan to attract 10,000 people to the city,” Finance Director Harry Black explained to the committee, flashing charts and graphs on the wall depicting dire deficits if no pension reform comes, and what he called comparable and “benchmark” pension benefits paid to workers in other counties. A typical Baltimore City employee retiring at a $40,000- salary will get benefits that are “higher than the regional average,” Black says.

But Black’s figures were challenged by council members and members of Maryland Public Employees, Local 44  in the audience. He said the average city salary is $42,000, but the average pay for a member of the union under discussion is $35,000.

The mayor’s proposal would eventually deduct five percent of employees’ wages for pension, ramping up by one percent a year over five years. To offset that expense the proposal would raise pay 2 percent per year for five years – maybe 10. It would also eliminate a “variable benefit” linked to fund performance. Like the problematic police retirement benefit, the variable benefit ratchets up pension payouts in good times but does not ratchet down when the economy crashes. The cost of living (cola) increase would be changed to a flat 1.5 percent annual increase or whatever cola the police and fire union members get.

Unchanged in the mayor’s plan is an obscure figure called the pay out formula: 1.6 percent of pay times years of service, so a person retiring with a $35,000 salary after 30 years would receive an annual pension of 35,000 x 1.6% x 30 years; $16,800 per year.

Union members filed in wearing green shirts and buttons that say 1.8. They want the payout formula increased to 1.8 percent.

Black knew it was coming, but he told the committee he had not seen the proposal: “I know I’m cc’d on it, but it hasn’t yet made it to my office.”

Still, Black says, any changes to the bill will result in financial ruin.

It “would cost the city $120 million over the life of the 10 year plan,” Black says, which would “wipe out the savings.” He calculated the mayor’s proposed pension changes’ savings at $113.5 million over the same ten year window.

The union says that’s nonsense—that Black’s calculation is based on a misunderstanding of the proposal. The 1.8 percent multiplier will only apply to years of service in the future. Black still opposes it.

The union wants the city to put the promise of two percent raises in writing, and link them to the employee contributions. No raises? No contributions.

At first glance, the raises appear integral.

“This plan includes a bold set of major reforms to fundamentally change the way the City does business. The costs of outdated benefits have crippled our ability to pay workers what they truly deserve in their paychecks,” Rawlings-Blake said in an April press release announcing the bill.

But while the mayor’s bill would give the five percent salary contribution the force of law, it would endow the two percent raises with the ephemeral nature of a campaign promise.

Council Vice President Edward Reisinger (10th District) asks where the guarantee is that the workers would get the promised raises. Black says there was none, and the council should not try to promise it: “We’d advise against legislating that because it would be seen negatively by the bond rating agencies.”

Councilman Warren Branch (13th District) reminds Black that he was a worker in that plan. “They’re the bulk of the city’s workforce,” he says. “You’re telling me there is no guarantee?”

In a lengthy speech that drew cheers and whistles from the union members, Holton then offered an amendment calling for the city’s raise offer to be committed to writing. That passed. A second amendment, tying the employee contributions to the raises, is held for Monday. “It will be introduced from the floor,” says Councilman Carl Stokes (12th District), the committee chair. Stay tuned