Welcome to Monday Morning Quarterback, a deep-dive into prominent issues facing Philadelphia and the Commonwealth. As always, this newsletter is a work in progress and your feedback is appreciated, particularly as we work to find our groove.
For the next few weeks, MMQB will be dedicated to the City Budget in anticipation of Mayor Kenneyâs expected budget address on April 15th. Last week, we covered the sources of City revenue and the pandemicâs impact on City coffers. Today weâll tackle how the City spends money and how an obscure state law handcuffs any attempts to defund the Police.
đłïž City Council Recap: April 1, 2021
City Council did not meet last week because of the Easter holiday. Councilâs next session will be held on Thursday, April 8, 2021.
đžÂ Budget Breakdown đș Part II: Obligations
Last weekâs MMQB discussed the Cityâs big revenue sources and how theyâve been impacted by Covid. This week weâll tackle the spending side of the City budget and learn how an obscure state law handcuffs the Cityâs ability to meaningfully control its own police budget.
The Cityâs Biggest Cost Drivers - Public Safety, Debt and Benefits
Philadelphiaâs operating budget is around $5 billion annually. This doesnât necessarily mean that the city spends $5 billion providing city services - a lot of that spending goes to cover debt and employee benefits and ongoing obligations for services previously rendered by now retired workers.
Hereâs a snapshot of the most costly categories from last yearâs budget proposal.
$760 million - Pension Fund
$746 million - Police Department
$671 million - Other Employee Benefits
$307 million - Fire Department
$283 million - Sinking Fund
$253 million - Prisons
$237 million - Other Criminal Justice (District Attorney, Courts, Sheriffâs Office, Defenderâs Association, etc.)
Public safety spending, debt service and employee benefit obligations makeup over 60% of the City budget. The Police Department budget in particular has drawn significant attention as the âDefund the Policeâ movement has swept across the country. Justice system reformers continue to call for significant cuts to municipal police budgets and the shifting of those resources to mental health and social service providers.
Last June, Mayor Kenney and City Council were under significant public pressure to make cuts to the Police Department budget and many reform advocates were left disappointed when the Police budget was left largely intact.
The current Police contract extension expires at the end of June 2021. Once again, City Council and the Mayor will be under tremendous pressure to significantly reduce funding to the Philadelphia Police Department. However, a fifty-year old state law almost guarantees that the Police budget will remain intact with little additional transparency or public scrutiny before its adoption.
How the Police Budget Gets Negotiated
There are four major labor unions representing most of the City of Philadelphia employee workforce - DC 33 (blue collar), DC 47 (white collar), IAFF 22 (Fire / EMS) and FOP #5 (Police / Sheriff). Every four years or so, the Administration renegotiates contracts with each of the unions. These contracts cover things such as wages, residency requirements, work rules, health and retirement benefits and employee disciplinary processes. Non-uniformed employees have the right to strike as part of their collective bargaining process. The Police and Fire unions gave up their right to strike in favor of protections granted by an obscure state law known as Act 111 of 1968, which governs the collective bargaining process for uniformed officers.
In exchange for the right to strike, Act 111 provides for binding arbitration when a city and its uniformed officers canât reach an agreement on a labor contract. It applies to municipalities throughout the Commonwealth, not just Philly.
What is binding arbitration? Arbitration is a dispute resolution system in which one or more âarbitratorsâ are selected by the parties or a court to rule on a dispute between the parties. The binding part means the parties agree in advance to accept the decision of the arbitrators. And by binding, Act 111 means binding. Under the state law, there are no appeals allowed to any court. The parties are stuck with whatever the arbitrators decide.
So who are these arbitrators? Under Act 111, there are three. One chosen by the union, one chosen by the city and one mutually agreed upon. If they can't agree, there's a process to pick and appoint a third, "neutral" arbitrator who chairs the panel.
So what exactly are they arbitrating? Pretty much everything you can think of. Act 111 provides that arbitration shall cover:
the terms and conditions of their employment, including compensation, hours, working conditions, retirement, pensions and other benefits, and shall have the right to an adjustment or settlement of their grievances or disputes in accordance with the terms of this act.
The Room Where it Happens
The arbitration process is like a mini-trial, with both sides calling witnesses and putting on evidence to support their demands. Arbitrators can "compel the attendance of witnesses and physical evidence by subpoena."
However unlike a trial or legislative hearing these proceedings are not open to the public. Evidence is presented, witnesses called and arguments made - all behind closed doors. After both sides are finished presenting their cases, the arbitrators must make a ruling. Under the Act, the determination of the majority of arbitrators âshall be final on the issues in dispute and shall be binding upon the public employer and the policemen or firemen involved."
And here's another big transparency issue, while the ruling has to be in writing, the arbitrators are not required to set forth the rationale they used in reaching their conclusions. So to summarize, this decision which has no public scrutiny and for which arbitrators don't have to provide any rationale, is not appealable to any court. In fact, not only is the decision final- it is considered a legal mandate to the municipality that it provide the necessary funding to comply with the arbitratorâs award. The Act provides:
Such determination shall constitute a mandateâŠto the lawmaking body with respect to matters which require legislative action, to take the action necessary to carry out the determination of the board of arbitration.
And this is where the rubber meets the road when it comes to public calls to reduce or reform the Police Department budget - the Mayor and Council are legally obligated to implement the ruling of the arbitration panel through administrative or legislative action.
This means that a trio of arbitrators can legally obligate the city to $700+ million in spending based on a non-public hearing process, for which no written or publicly articulated rationale is required to justify the spending. This lack of transparency and accountability is central to the growing criticisms of this state law.
Attempts to Reform Act 111
There are have been a number of efforts to reform Act 111 or at least shine some light on one of the least transparent parts of the City budget process. Councilwoman Katherine Gilmore-Richardson sponsored a bill which requires a public hearing prior to the execution of a labor agreement with the Fraternal Order of Police. While this bill canât alter what is in the labor agreement, it does provide City Council and the public with advance notice as to the substance of the proposal. Typically, the public and Council learn about the agreement through a press release from the parties after it has already been executed.
Other efforts are underway at the state level to reform Act 111, with legislators pointing the lack of transparency and the ease with which officers fired for misconduct get their jobs back.
With the Police contract expiring at the end of June, public attention will once again be focused on the second most expensive line item in the City budget, the PPD. However, without state legislators amending Act 111, it is unlikely that the Mayor or City Council will have the necessary authority to execute the meaningful shift in resources out of policing that many reformers have been demanding.
This Weekâs Poll - Budget Priorities:
What should be the City's top budget priority for this upcoming year?
Last Weekâs Poll Results:
What do you think about Philly's long term plan to gradually reduce wage and business taxes to try to attract jobs?
đâ Question of the week: What is the Sinking Fund?
Contrary to the nameâs suggestion, it has nothing to do the cityâs pothole filling budget, which lives as a line item in the Streets Department budget book.
The Sinking Fund Commission is responsible for administering the Cityâs debt service. The City regularly issues debt to raise money for capital projects. The Sinking Fund is responsible for the budgeting, payment and administration of the Cityâs debt service and debt-related payments.