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Posted on Sun, Sep 25, 2011 : 5:59 a.m.

Ann Arbor is making big strides with cost-savings in public employee benefits

By Tony Dearing

Given the continuing budget challenges that Ann Arbor faces in the coming year, the recent contract agreements with police and other employees are particularly significant developments for the city and its residents.

A new contract with the police officers union, approved by City Council last week, includes concessions on health care costs that the city has been trying to secure from all its employee groups. In late August, the city reached agreement with its largest union, AFSCME Local 369, on a contract that includes similar concessions on health care.

These concessions require the kinds of sacrifice on the part of employees that the city needs right now in order to come to terms with its ongoing fiscal challenges. Recent budgets have been balanced by cutting jobs - particularly in public safety - and that can’t continue. Instead, the city must focus on reducing its structural costs in ways that create true, long-term savings without ever-deepening losses of jobs or services. That’s exactly what these new contracts represent.

Stephen_Rapundalo_Feb_2010_3.jpg

Ann Arbor City Council Member Stephen Rapundalo, chairman of the council's labor committee, says concessions in the new contract with police officers could save the city $400,000 or more in the first year.

Ryan J. Stanton | AnnArbor.com

It’s been clear for some time that the cost of health-care benefits being received by the city’s largest employee groups were out of line with what’s become the norm in the private sector. An AnnArbor.com analysis found that across our area, the average worker picked up 41 percent of his or her health-care costs in 2009, while the average Ann Arbor city employee paid only 6 percent. Our analysis suggested that the city paid $5.8 million more for health-care coverage that year than it would have if its benefit plans were in line with the rest of the marketplace.

Over time, the city had succeeded in moving a fraction its employees to benefit plans that carry a more reasonable cost. But the bulk of its workers are represented by the police and firefighter unions and AFSCME. Getting new agreements with two of those three bargaining units is a huge step forward for the city.

Granted, the city might not have achieved those concessions without the specter of a new state law that limits the amount that local government can pay toward the health insurance costs of its employees. Here and across the state, the law is giving public employee unions a strong incentive to negotiate concessions on their own rather than have even steeper concessions forced upon them via this legislative action.

While the state law has changed the negotiating environment, we still prefer to see concessions achieved locally through a cooperative approach and good-faith negotiations between public employers and their workers. Such agreements can be a big win for taxpayers even when they don’t extract every ounce of savings that the state law would impose.

In this case, city officials have said the new police contract will result in annual savings of $400,000 to $450,000 and the AFSCME agreement represents another $660,000 in annual savings. Meanwhile, Ann Arbor continues to explore the consolidation of central dispatch services with Washtenaw County, a move that could save an estimated $400,000 in the first year and $550,000 in the second year.

These kinds of actions, taken together, would represent something in the range of $1.5 million in long-term savings for the city. That represents real, meaningful progress in bringing costs under control in a way that the city has been unable to in the past.

The next step is to come to an agreement with firefighters, the last major employee group that has yet to bring itself in line with the more reasonable sharing of health-care costs that other employees will now be working under. The city’s most recent contract with firefighters expired June 30, 2010, and the parties are now in arbitration.

Now that other bargaining units have done their part to help bring overly generous health care benefits under control, we hope that provides both the climate and the framework for the city and firefighters to reach a similar accord through the arbitration process. Painful as these sacrifices can be, they are necessary in these difficult times, and the fairest thing is for all employees to share in them.

(This editorial was published in today's newspaper and represents the opinion of the Editorial Board at AnnArbor.com.)

Comments

Doug

Sun, Sep 25, 2011 : 6:50 p.m.

With these newfound savings, maybe they can now get rid of the panhandlers.

Russ Miller

Sun, Sep 25, 2011 : 6:34 p.m.

Tony, Please take a look at the following sentence and see if you can spot two big errors: &quot;An AnnArbor.com analysis found that across our area, the average worker picked up 41 percent of his or her health-care costs in 2009, while the average Ann Arbor city employee paid only 6 percent.&quot; I'll help: First, AnnArbor.com didn't conduct an analysis! The numbers were plucked, verbatim, from page 10 of the presentation provided by the city's employee group benefits brokerage firm, McGraw Wentworth. Second, Looking past the potential bias in the source, those numbers didn't claim to represent average employee contributions of either city or area wide employees - they only pertain to a hypothetical group of unisex 40-44 year olds using PPO plans. (How many unisex employees does AA employ?) Why did McGraw Wentworth choose this particular metric? Page 9 of the same pdf shows that 2009 SE Michigan employee contributions to HMO and PPO plans (of the self selected sample that responded to the McGraw Wentworth survey) ranged from 20 to 26 percent, not 41. Choosing non-representative values on this inflammatory subject doesn't help us understand the issue. <a href="http://www.annarbor.com/022510%20AA%20Benchmarking%20from%202009%20Muni%20Final%20presentation%20%28Ryan%29.pdf">http://www.annarbor.com/022510%20AA%20Benchmarking%20from%202009%20Muni%20Final%20presentation%20%28Ryan%29.pdf</a> Ryan did make an apples to oranges comparison in that article between AA city FTE salaries and Ann Arbor per capita income that somehow slipped through editing that's been quite popular with a number of commenters. If you don't the problem with that comparison, ask a toddler or part time city employee:) Take a look again at page 10 of that presentation. Here's a question that you could investigate: Why the heck is McGraw Wentworth offering PPO plans to the city that cost $981 a month if the median cost is only $532? Are they paid a percentage? What is the city getting for that money?

alternativeview99

Sun, Sep 25, 2011 : 5:45 p.m.

Why do we buy into the comparison to the &quot;private&quot; sector? This is just a ploy on the part of the elite to pit non-union workers against union workers. While we argue about what is a fair distribution between these two groups about an ever decreasing amount of pie, no one is checking to see why the pie is decreasing. If we did, we would discover that over the past 10 years the wealth of this nation has been funneled to the very wealthiest of this nation in ever increasing proportions. How did it happen? We can argue a long time about that and lose our focus on what matters. My guess is tax laws and other government subsidies that support this type of allocation. The point is, if you agree with this allocation, then that is your right. It is also my right, (and others), to disagree and vote to stop it. I like to live in a country run by a strong, involved, and intelligent middle class. I am willing to put up with some inefficiencies and problems to support that. I do NOT enjoy living in a country run by an elite class of people who use our laws to funnel the wealth of this nation to themselves on the backs of the middle class and poor. That is simply how I feel. This isn't a Republican vs Democrat or conservative vs liberal issue. I find members of all these groups compromising and tearing away at the middle class and the type of society I enjoy being part of.. And, it has nothing to do with evil vs good. A lot of people tearing away at the middle class sincerely believe they are doing what is best for our world. Bottom line, this &quot;negotiation&quot; to reduce health care benefits for those who do such meaningful work in our society is just another way to reduce the standard of living for yet more middle class workers. And, this does not build the kind of society I want to live in or have my childrenn live in. It seems pretty clear to me what is going on and the justifications advanced to support this action now border on being

alternativeview99

Sun, Sep 25, 2011 : 5:46 p.m.

meant to say &quot;border on being insulting&quot;.

nowayjose

Sun, Sep 25, 2011 : 5:42 p.m.

Wow did Rapundalo ghost write that for you or are you running for counsel? I think it's wrong to blame the union for the financial problems when the counsel continues wasteful spending on their pet projects.

Michael Christie

Sun, Sep 25, 2011 : 4:52 p.m.

$5.8 million in coverage would result in several more police and fire jobs with a little left over for art. No wonder the city's needs don't equal the resources with people still only paying 6% of their medical costs. Seems like the negotiations should start with more jobs, but paying more health care costs as a good starting point.

Sparty

Sun, Sep 25, 2011 : 3:39 p.m.

Yes, $1.5 million in savings .... and $1.5 million spent on ART PROJECTS = unbelievable, unmitigated disaster spending taking place on OUR city council.

stunhsif

Sun, Sep 25, 2011 : 2:45 p.m.

ToddGack said: &quot;I mean everyone is comparing private to public, so maybe the public should receive bonuses like the private sector is?&quot; Let's get real here Todd. 99% of private sector workers get no bonus so you union folks need to quit throwing this out as if it were fact. The bottom line is even with these concessions, the unions still will be paying a pitance( 18%) compared to private sector workers and on top of that, they have pensions and healthcare after they retire. Very few private sector workers have pensions anymore and they certainly don't have healthcare if they are ever able to retire.

alternativeview99

Sun, Sep 25, 2011 : 5:27 p.m.

I would agree. But, however you shake out all the payment schemes, the bottom line is that the wealthiest people in this country have over the last 20 years accumulated more and more of this nation's wealth at the expense of the middle class who share less and less each year. I am tired of using private sector workers who started losing their wealth to the rich elite of this country long before union workers as the standard to use in deciding what is fair. Instead of pointing fingers at people who should suffer more and receive less, we need to ask why there isn't more on the table to be shared in the first place. We need to ask if we like where the wealth of this nation is going. You can call Warren Buffet senile. I call him a patriot and an American I admire for his courage to tell it like it is.

Edward R Murrow's Ghost

Sun, Sep 25, 2011 : 4:07 p.m.

Stun, We've missed ya!! Where have ya been?? Another vacation to Mexcio? Up in East Lansing watching 'lil brother? I'm afraid you've missed Todd's point. The logic of cuts to public employees' pay and benefits is that people in the private sector are taking pay cuts. In other words, whatever happens at the bottom of the private sector pay ought happen to the public sector. Todd is simply suggesting a different sequence of events, that what is happening at the top of the private sector ought happen throughout the private sector and the public sector. Never understood why you and others who have suffered in this economy while the robber barons got uber rich take out their anger on others in the middle class who have managed to hang on to their pay and benefits. But, then, anger often is illogical. Good Night and Good Luck

ToddGack

Sun, Sep 25, 2011 : 2:18 p.m.

Now why doesn't the City of Ann Arbor give their employee's bonuses or cost sharing like the private sector Big 3 will? I mean everyone is comparing private to public, so maybe the public should receive bonuses like the private sector is?

Basic Bob

Sun, Sep 25, 2011 : 11:44 p.m.

Did city union employees agree to a 40% pay cut on their last contract and enormous reductions in the workforce? If they did, they would have taken the first step toward getting those bonuses.

snoopdog

Sun, Sep 25, 2011 : 1:58 p.m.

&quot; Our analysis suggested that the city paid $5.8 million more for health-care coverage that year than it would have if its benefit plans were in line with the rest of the marketplace.&quot; &quot;In this case, city officials have said the new police contract will result in annual savings of $400,000 to $450,000 and the AFSCME agreement represents another $660,000 in annual savings.&quot; Gee, let's pat these unions on the back and thank them , why ? The savings of 450 G plus 600 G = 1.05 million . Take 1.05 million as a percentage of 5.80 million and it equals 18 percent. So if a private sector worker pays 5 grand a year out of pocket for health insurance the union workers will now pay around 900 per year. So much for shared sacrifice. Good Day

DonBee

Sun, Sep 25, 2011 : 8:59 p.m.

Mr ToddGack - Sure, the last time I saw a bonus or pay raise was back in 2004. In 2009, I took a 50% pay cut. They are welcome to the same bonuses, I get!

ToddGack

Sun, Sep 25, 2011 : 2:24 p.m.

And they should get the same bonuses that private sector gets. Fair is fair right snoop?

aataxpayer

Sun, Sep 25, 2011 : 1:56 p.m.

Why did the city cave? Letting the provisions of the state law kick in would have saved much more money.

Mr. Ed

Sun, Sep 25, 2011 : 1:56 p.m.

What we need is socialism. Everyone is paid the same with the same healthcare, vacation time off. This is the answer to all our problems. Then maybe everyone will stop complaining about government workers.

Basic Bob

Sun, Sep 25, 2011 : 11:39 p.m.

The government workers historically have received less in pay in exchange for better benefits and job protection. If government workers are to give up their benefits and job protection, market conditions will ensure that their pay will rise or less qualified candidates will take the positions. At least then we will have a fair comparison of dollars to dollars as we make career choices.

Townie

Sun, Sep 25, 2011 : 1:25 p.m.

Tony - how about always publishing the list of the Editorial Board members so we know who is behind the editorial (unless it's just you and they are just 'advisory')?

Tony Dearing

Sun, Sep 25, 2011 : 11:03 p.m.

Our Editorial Board includes three members of our staff and four community members who serve on a rotating basis. In addition to me, the staff members are Matt Kraner, our president and CEO, and Laurel Champion, our executive vice president. The current community members on the board are: Marsha Chamberlin, president of the Ann Arbor Art Center; Mary Kerr, president of the Ann Arbor Area Convention and Visitors Bureau; Kyle Poplin, publisher of The Ann magazine; and David Lampe, director of research communications in the office of the vice president for research at the University of Michigan.

hut hut

Sun, Sep 25, 2011 : 1:24 p.m.

Rising health care costs are not working people's fault. So why blame them?

gild

Sun, Sep 25, 2011 : 7:44 p.m.

Who's blaming anybody? We just can't afford it anymore. Sorry, but sometimes life isn't fair.

joe.blow

Sun, Sep 25, 2011 : 12:23 p.m.

How about this. Give public employees the same deal the rest of us get. No to limited contribution to a 401k, you pay $200-$500/month for mediocre health care, and a full 4 weeks vacation a year with 10 sick days. Guess what they'd be doing if they were treated like us normal people, going on strike!!!!! Public unions, what a joke, bunch of non-business elected people handing out our money like candy.

Edward R Murrow's Ghost

Sun, Sep 25, 2011 : 2:40 p.m.

@Joe: If police and firefighters are so overpaid and have such easy jobs, I urge you to apply immeidately. I hear Detroit is hiring. GN&amp;GL

2020

Sun, Sep 25, 2011 : 1:59 p.m.

Joe Blow you choose your life, now live with it.

joe.blow

Sun, Sep 25, 2011 : 1:52 p.m.

Yes, the disability and death rates are much higher for cops and figherfighters than most employees, wait, that's not true? Hmm. Also, the top government anything should get paid like the private sector. Bottom and top need to make less!

Edward R Murrow's Ghost

Sun, Sep 25, 2011 : 1:46 p.m.

Yes, I'm certain that that is the road to prosperity. If the guy at MacDonald's takes cut in pay and benefits, so does everyone else. That is, except for the top 5%. They keep acting like 19th century robber barons. Good Night and Good Luck

Waterdipper

Sun, Sep 25, 2011 : 1:43 p.m.

Among the category &quot;public employees&quot;, police and firefighters are not the same as &quot;the rest of us,&quot; but are lumped into that category when the topic is debated. I'd suggest they only be included in the comparison with &quot;the rest of us&quot; when &quot;the rest of us&quot; are required to put our lives on the line to earn a pay check and benefits.

Cash

Sun, Sep 25, 2011 : 12:57 p.m.

Ah yes, it's all the bottom of the totem pole at fault. That's playing right into the City's hands. While you buy into the anti-worker mantra....they hand out bonuses and raise to those at the top and laugh all the away to the bank.

joe.blow

Sun, Sep 25, 2011 : 12:51 p.m.

*No to unlimited contributions ......

Elaine F. Owsley

Sun, Sep 25, 2011 : 12:16 p.m.

Perhaps the city can't afford bad art, either. That huge amount for the &quot;art&quot; in front of the police building might better have been spent on a few more police or firefighters.

hut hut

Sun, Sep 25, 2011 : noon

Cost savings at the bottom, Cost overruns at the top. $10,000 bonus to Tom Crawford for doing his job, serving the public because he chose public service. Sweeping up or signing the checks, it all pays the same.

Basic Bob

Sun, Sep 25, 2011 : 11:31 p.m.

If Mr. Crawford expected to paid extra to fill in temporarily, he should have declined the assignment. If the mayor and council led him to believe there would be a bonus for him, they should be removed from office.

Cash

Sun, Sep 25, 2011 : 11:49 a.m.

All of this while they hand over bonuses to a top administrator for &quot;doing two jobs&quot; for a few months while workers struggle to do 2 jobs every single day. Who knows what else they do for each other, while expecting the workers to do more with less? In short, balderdash.

DonBee

Sun, Sep 25, 2011 : 11:43 a.m.

Let's see... The headline says &quot;Ann Arbor is making big strides with cost-savings in public employee benefits&quot; ... which when I read it said &quot;Ann Arbor is reducing the overall cost of benefits&quot; Instead what it means is Ann Arbor is doing a cost shift of benefits to the employees. No, they are not more efficient, more effective, or finding lower cost programs. They are cost shifting. As to cost shifting the article says if the city was at the same level of cost sharing the private industry is, that the cost saving should be $5.8 million and they got roughly $1 million in savings. So they got less than 20 percent of the way on health care costs. Only in the government could getting less than 20 percent of average be considered &quot;great strides&quot;. In the private sector, someone in administration would have lost their job.

DonBee

Sun, Sep 25, 2011 : 12:56 p.m.

hut hut - No it is not, but the article headline is misleading.

hut hut

Sun, Sep 25, 2011 : 12:09 p.m.

it's not the workers fault that health care costs are rising.

Nephilim

Sun, Sep 25, 2011 : 11:08 a.m.

And they will still lay people off next year and they will still continue to keep their fat paychecks, perks and bonuses at the admin level all while they continue to ask for the people who are really doing the work who make half what they do to keep cutting. Did the new city administrator keep all of his 30k for moving costs? Did the CFO give back his 10k thanks for doing two jobs when everyone at the bottom is doing three now. Never changes.