6/19/12 - a nation of wusses

In today's excerpt - in 1992, newly-elected Philadelphia Mayor Ed Rendell faced perhaps the greatest financial crisis of any city in that era -- and pulled off what the New York Times called "one of the most stunning turnarounds in recent municipal history." The city was nearly bankrupt, and his predecessors had raised taxes nineteen times in the previous eleven years. Rendell, with the superb assistance of chief of staff David L. Cohen, effectively attacked operational costs and waste, but their biggest challenge was renegotiating the union contracts:

"As we prepared for our union negotiations, David asked for a memorandum summarizing all the silly and unproductive work rules and practices that tied the hands of city managers. Joe Torsella, our brilliant deputy mayor for policy and planning, oversaw this project and prepared an amazing seventy-five-page memorandum. It was enough to make your head spin. Somehow the memorandum was leaked to the media, generating a number of stories, including one in the Wall Street Journal with the famous headline 'How Many Workers Does It Take to Change a Lightbulb at Philadelphia International Airport?' (The answer, by the way, was four: an electrician to screw in the lightbulb, a laborer to carry the ladder and sweep up after the change, a carpenter to climb the ladder and unscrew the lightbulb, and a supervisor, who was required for every work crew of three or more employees.) ...

"We were paying 56 cents in benefits for every $1 in salary (many prior mayors had given away the store). No private business could do that without going bankrupt (the private sector average in 1992 was 24 cents per $1 of salary), and we were hurtling toward bankruptcy.

"Some of the benefits were simply absurd. In addition to negotiated vacation time, our workforce received fourteen paid holidays. This was extremely expensive, not only in lost productivity but also because those city workers who had to work on holidays (police, fire, EMTs, prison guards) received double-time pay. So each holiday cost us $7 million per year. I talked about this everywhere I went -- 'So for the emotional trauma of being away from their families on Flag Day, our workers get paid double time' -- and in the end the new contract we negotiated reduced the holidays from fourteen to ten. Bingo: a yearly savings of $28 million. ...

"The biggest monetary issue in the contract negotiations, however, related to employee health care. Each of the city's municipal unions ran its own health care plan, and the city ran a fifth plan, for nonunionized employees. In 1992 the city was paying a staggering $475 per employee per month for the unionized workforce (rates ranged as high as $561), which was 50 percent higher than the private-sector average and 25 percent higher than the city administered plan, at $382. If the city was going to balance its budget, I knew that we had to bring down the cost of health care to a more affordable level -- but I had no interest in depriving our city workers of terrific medical coverage.

"We decided to issue an RFP seeking bids to provide comprehensive medical, dental, and prescription coverage for employees and their families, with a very modest copay by the employees. The result of a robust bidding process was a low bid from US Healthcare for $194 per employee per month, which was 60 percent lower than what we were currently paying for our municipal workforce. ...

"While it was the most contentious issue in the negotiations, we were ultimately able to convince separate police and fire arbitrators, and then the blue-and white-collar unions, to accept a reduction in reimbursement that averaged nearly $100 less per employee per month, generating savings of almost $100 million a year. Our nonunion municipal workers, however, retained terrific health care plans that were the envy of their counterparts in the private sector.

"As important as these benefit changes were, just as costly were a series of ludicrous work rules that previous contracts had given the workforce. Mayors always concentrated on the direct cost items -- wages and benefits -- and ignored work rules, giving in to whatever the unions asked for. We didn't. Again we talked about the most absurd ones all across the city. And in the end, we were able to wipe out most of the efficiency-crippling work rules and all other inefficient past practices from the new contracts. ...

"The unions fought back. Everywhere I went was picketed. Every press conference I held I was drowned out by union hecklers. My car was bumped and jostled. There were demonstrations and rallies against us. ... There was a strike, it lasted seventeen hours, the union folded, and we negotiated and signed the most concessionary contract in city history. The contract, won through the collective bargaining process, was the key to wiping out our deficit in eighteen months, which led to six straight years of economic growth and surpluses. It helped produce what the New York Times called 'one of the most stunning turnarounds in recent municipal history.' "


Ed Rendell


A Nation of Wusses: How American's Leaders Lost the Guts to Make us Great


John Wiley & SOns, Inc


Copyright 2012 by Ed Rendell


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