Miami Offers Unions Cuts Up To 12
Written by Risa Polansky on May 13, 2010
By Risa Polansky
Facing a potential $95 million budget gap next fiscal year, the City of Miami is asking its union employees to take pay cuts up to 12% and suggesting a switch to a defined contribution pension plan, according to proposals still under negotiation.
Meanwhile, the city now faces a lawsuit after invoking the state’s "financial urgency" provision late last month, Commission Chair Marc Sarnoff said Tuesday evening.
The city has been meeting privately to talk collective bargaining proposals.
But documents reveal details of the pay cut and pension-reform proposals city leaders have called for as financial problems have taken center stage.
The proposals before all four of the city’s unions — police, fire, solid waste and general employees — call for tiered wage cuts, with the highest-paying employees on the line for the steepest hit.
Those making $120,000 and above would take a 12% salary cut under the proposals.
Staffers making $75,000 to $119,999.99 would be cut 9%.
Those earning $55,000 to $74,999.99 would take a 7% cut.
The next tier, $40,000 through $54,999.99, would be cut 5%.
Those earning under $40,000 would be exempt from pay reductions.
On top of the pay cuts, "there will be no wage increases during the duration of this contract," which last through 2013, the proposals say.
"I would prefer to do pay cuts than layoffs," Mr. Sarnoff said. "I think a tiered pay cut does not strike a person making $30,000, $40,000, $50,000 as substantially as an across-the-board pay cut."
And in the face of $892 million in unfunded pension liabilities, the city is also proposing freezing benefits under existing retirement funds, closing today’s retirement systems to new members and moving to a defined contribution retirement plan.
Employees would still be eligible to receive their accrued benefits under the old system.
"The city has got to change the way it finances its pension obligations," Mr. Sarnoff said. "Defined contribution is one of the ways."
The union proposals call for the city contributing a "base amount equal to 6% of each employee’s base pay" to the defined contribution plan for sanitation and general employees, with employees contributing 2% of base pay.
They’d have the option of contributing an added 4% of base pay, with the city offering to match the contribution dollar for dollar "for a maximum combined City and employee contribution of 16% of base pay," the proposals say.
Fire and police would see city contributions equal to 12% of base pay, with the option of contributing an added 6% of base pay for a dollar-for-dollar city match up to a total 26% combined contribution.
"Participating employees will be able to invest their Defined Contribution Retirement Plan a variety of investment options," the proposals say.
Today, the city is paying six times more for pensions than in 1999, Mr. Sarnoff said. "It’s an unsustainable, unworkable financial model that will be the death of every municipality, every city and every county in the US."
Other local governments have also been wrangling with labor costs.
At Miami-Dade County, unions rejected a move to cut base pay 5% and instead opted to start contributing the equivalent toward their health insurance.
It took so long to cement the collective bargaining agreements that the county — which had budgeted for the 5% cuts — ended up overspending $119.5 million on salaries this fiscal year with the contracts outstanding.
The city could also be in for a struggle.
After late last month invoking the state’s "financial urgency" provision to open contract negotiations with the fire union, whose contract had been extended a year, the city now faces a lawsuit, Mr. Sarnoff said.
The suit won’t halt the ongoing contract negotiations, he said, unless the court grants an injunction.
City leaders for months have stressed the importance of union concessions, many noting that labor costs account for about 80% of the city budget.
The city could face an up-to $95 million budget gap next year, Mr. Sarnoff said — a number $8 million higher than last predicted after the city factored in potential lawsuit payouts.
During the ongoing financial turmoil, top city administrators have already self-inflicted pay cuts.
New City Manager Carlos Migoya, a veteran banking executive, signed on to do the manager job for free, saving the city more than $300,000.
Mayor Tomás Regalado in taking office cut his own $150,000 salary down to $100,000.
Last month, both the city attorney and the city clerk agreed to double-digit pay cuts.
Attorney Julie O. Bru agreed to make 17% less, taking her salary to $228,238, and Clerk Priscilla A. Thompson took a 15% cut down to $192,270.
Manager Migoya did not return a call for comment on the union proposals Tuesday.