Cranley's plan for pay raises could leave many city workers worse off than current contract

Spokeswoman says mayor's plan is a 'hard cap'
Cranley plan could leave many workers worse off
Posted at 9:07 AM, Aug 15, 2016
and last updated 2016-08-15 19:03:46-04

CINCINNATI -- A plan to give city employees a 5-percent raise for the next two years could leave many of them -- specifically, the lowest-paid and least-senior workers -- worse off than they'd be under their current union contract.

Mayor John Cranley is pushing a three-year plan as a way to make up for raises city workers never got during the Great Recession. His "5/5/4" plan would give city workers a 5-percent cost-of-living adjustment this year; a 5-percent cost-of-living adjustment next year; and a 4-percent cost-of-living adjustment the year after that.

But hundreds of city workers qualify for a second type of raise -- and Cranley says they wouldn't get both in their entirety if, combined, they'd be higher than a "hard cap" of 5 percent.

The cap wasn't made public until WCPO questioned the mayor's office about steep pay raises many workers could get if raises aren't capped. In fact, it's not mentioned anywhere in the mayor's legislation.

"That's the first I've heard of it," Vice Mayor David Mann told WCPO.

Councilman Wendell Young, who also didn't know about a cap, said Cranley's office was trying to backpedal.

"You realize now in no uncertain terms the holes you're opening in the budget," Young said.

Complicating the issue: Earlier this month, City Council approved a three-year contract with its largest union that would need to be reworked if the mayor's plan passes.

And it's questionable how many union members would vote in favor of a new plan giving many of them less money.

"I'm sorry, I don't think any of it makes sense," Mann said. "It's weird."

How city raises work

If raises aren't capped, many city workers could see far higher pay than they're currently getting. Not all city employees will see steep raises; about three-quarters of them won't.

But for the hundreds of unionized workers who will, they could see as much as a 26-percent boost in pay by 2019.

It's because of the several ways the city gives pay hikes to its workforce.

One -- a so-called "step increase" -- is what's familiar to most people in the private sector. City employees earn a step increase by excelling in their job and getting a "meets expectations" or "exceeds expectations" on their annual review; underperforming employees don't get this kind of raise. Step increases typically range from 3 percent to 4 percent every year, and the city can't refuse to give them out -- staff in the city's budget office have to plan for them each year.

Another type of raise -- and this is where Cranley stepped in -- is a cost-of-living adjustment. It's an across-the-board hike, so even underperforming employees see their wages go up. Cost-of-living adjustments are part of the package when the city negotiates with its unionized workers. Several unions -- particularly the city's police and fire unions -- went years without a cost-of-living adjustment during the Great Recession, so this is the "raise" they're talking about when they say they didn't get one.

Many employees would only see the second type of pay hike because they've gotten as many "step increases" as they can get. They've reached the top of their salary range, so they're maxed out. The only way they can get a raise is if their union negotiates a cost-of-living adjustment.

"Even when budgets were tight, these men and women came to work every day to keep our City moving forward, many of them prepared to risk their lives," a statement from Cranley said.

Why give higher raises?

City Manager Harry Black and his staff budgeted to give many unionized workers a 3 percent cost-of-living adjustment.

Cranley says they deserve more. His rationale is that, because city workers took a bath during the recession, they're owed catch-up pay now (even though many workers in the private sector saw their wages stagnate, too).

H. Lee Krapp, a compensation expert with HRC Consulting Services, said cost-of-living adjustments are typically tied to some type of index. The mayor reasons that the city's cost of living has increased nearly 10 percent since 2010 while city workers' pay hasn't. An increase, Cranley said, "is the right thing to do for people who provide the front line basic services we all depend on."

But governmental cost-of-living calculations typically include a "whole basket" of expenses that don't affect every person every year, Krapp said.

For example: "You and I don't refinance our house every year, so that should be tossed out (of the analysis)," he said.

And in most private-sector jobs, "Your pay is going to be based on your contribution to the organization" and what others are paid in similar roles at other companies, Krapp said. Pay too much and you'll go out of business; pay too little and you won't get good employees.

"The whole concept of a cost of living -- I understand their philosophy, but they should be saying, 'How should we pay our employees based on the marketplace?'" Krapp said.

And that can be very complicated.

"You have to do the survey and do the homework," Krapp said.

Some would see double-digit increases

Data show hundreds of its workers could be eligible for combined raises ranging from 7 percent to 9 percent each year under Cranley's plan as written -- meaning, at the end of the deal, a city worker's pay could be more than 26 percent higher than it is today.

When asked about those figures Wednesday, spokeswoman Holly Stutz Smith said the mayor intended his 5/5/4 plan to be an upper limit on raises. If that's the case, many workers in the American Federation of State, County and Municipal Employees union actually could be worse off under Cranley's plan than their contract City Council approved Aug. 3.

For example: A worker eligible for a 3-percent step increase and a contract-mandated 2.5 percent cost-of-living adjustment wouldn't get that full amount because it would be 5.5 percent -- higher than Cranley's "hard cap" on an employee's annual salary increase.

In fact, AFSCME's contract contains some step increases that are higher than 5 percent alone -- without factoring in the cost-of-living adjustment. And the contract makes it clear: Employees get their step increases "on an annual basis until the maximum is reached:

"A salary step-up, unless it is denied, shall become effective on the first day of the anniversary pay period of the employee's date of hire, date of promotion, or most recent step-up."

Pressed on whether Cranley actually meant an employee wouldn't see his or her salary increase more than 5 percent a year, Stutz Smith reiterated that was the intent -- though nothing in his legislation says so.

And asked how that might work -- Would an employee get a 4-percent step increase and only a 1-percent COLA? Could underperforming employees get a 5-percent raise, too? -- Stutz Smith declined to comment on a hypothetical scenario. Instead, she referred back to written statements and said Black's team would need to work out the details in union negotiations.

"We are simply proposing a policy to council and allocating funding to offer and cap raises at 5/5/4," she wrote. "Because this does not interfere with the (collective bargaining) process, it is left to the manager and unions to workout these details of how to achieve 5/5/4 inside the amount budgeted by city council. We believe this is made clear in the ordinance; however, we are happy to (clarify) further."

AFSCME president Tom West did not respond to multiple messages and requests for comment last week.

The Cincinnati Organized and Dedicated Employees union, or CODE, said in a statement through attorney Chris Jenkins that its leaders view Cranley's plan as a "baseline" for cost-of-living increases.

"This will facilitate bargaining with the administration over many issues, including how such raises will be allocated within each unit," the statement said.

When WCPO informed Sgt. Dan Hils, president of the Fraternal Order of Police Local 69, about the proposed cap, he said he'd ask the union's attorney to clarify.

"We collectively bargain, so we would have to assure that our people would still get their step-ups," Hils said.

Matt Alter, president of the International Association of Fire Fighters Local 48, said he didn't believe a cap on raises would harm his union's members. The IAFF has a new three-year contract mandating 3-percent cost-of-living adjustments over the next three years.

If all union workers got a 3-percent cost-of-living adjustment, the max would be about 20 percent for workers not at their top step.

For comparison, UC's Economics Center forecast roughly 12-percent growth in the city's income tax -- its largest revenue stream -- for the next three years combined.

City budget staff estimated Cranley's 5/5/4 plan would cost more than $41 million if only the union workforce got the increases. Toss in workers who aren't eligible to be represented by a union, and it goes up to more than $47 million. Neither figure considered a "hard cap" on raises, and neither includes the extra pension contributions the city would need to make because of the salary increases.

Operating under the assumption that raises wouldn't be capped, Black and his staff warned that Cranley's plan would throw the budget out of whack -- essentially, that the city's expenses would exceed its reliable and ongoing sources of revenue. The city manager also has worried that Cranley's more generous plan could hurt the city's long-term savings plan, something the major rating agencies review when giving the city its credit rating.

Cranley acknowledges he's taking from a one-time surplus this year but pledged to find revenue streams in the next two budgets.

'It's political quid pro quo'

Krapp said he sees another problem with the 5/5/4 plan: namely, that it exists in the first place. Simply put, he said it's pandering for votes.

"You don't want a politician down on City Council saying, 'I'm going to give everybody a 5-percent raise,'" Krapp said. "It becomes a political tit for tat, it's quid pro quo."

Under the city charter and state law, the city manager is empowered as the city's chief negotiator. Krapp thinks that's where the question of raises should stay.

"The question is, do they want to violate the city manager form of government?" Krapp said. "Who makes the determination of what to pay? Who makes the contract?"

Cranley has argued elected officials routinely set policy about employee compensation and benefits, as they did with parental leave and minimum wage; he's argued his cost-of-living plan is no different.

"Now that we have balanced the budget with surpluses," Cranley said in a statement, "it is only right to bring our front line workers up to the current cost of living. They have earned it and I make no apology to propose it for those who keep our city safe and help our city run."

Young said he wants to pay workers as much as possible. But, like Krapp, he argues politicians should stay out of the collective bargaining process, calling Cranley's move a bad precedent and "a full-frontal assault on the position of city manager."

RELATED: Complaints filed against FOP, Cranley

"Cincinnati has already had a history of corrupt government," Young said. "It is what gave the city and the United States the city manager form of government. It was created to clean up politics and get the bossism and cronyism and all the rest of the 'isms' out of city government."

He added: "I can see that this is a slippery slope back to where we started."

Which unions have the most to gain?

About 27 percent of the city's union workforce is eligible for a step increase on top of their cost-of-living adjustment.

The American Federation of State, County and Municipal Employees union stands to have the most workers benefit: Of its 1,792 members, 1,251 are at the top step -- meaning more than 500 are eligible for two kinds of pay raises. AFSCME workers are frontline staff you see collecting garbage, servicing the city's fleet of vehicles, and plowing snow in the winter, along with health inspectors, public health nurses and others.

The Cincinnati Organized and Dedicated Employees union -- think accountants, administrative assistants, graphic designers -- also has hundreds of workers eligible for a double raise: Only about half of its 812 members have maxed out their "step increases."

(Full disclosure: I was in CODE when I worked for the city and benefited from its cost-of-living negotiations, along with the step increases I received during my four-plus years there.)

In the Cincinnati Fire Department, only firefighters are eligible for what are essentially step increases (not captains, lieutenants, apparatus operators and the like). Of the city's 412 firefighters, 284 are at their top salary, meaning 128 could be eligible for the double pay raises (and that includes 40 fire recruits). All represented by the International Association of Fire Fighters Local 48.

The Fraternal Order of Police has 880 of its members at their top step; of the 158 who aren't, 50 are recruits who get a pay bump once they become full officers.

Cranley plan would re-do contracts

Two unions, AFSCME and IAFF, have already negotiated their members' cost-of-living adjustments for the next three years.

AFSCME members will get a 1.5 percent increase in the first year of their contract, and a 2.5 percent increase in the following two years; they'll also receive bonuses based on how long they've worked for the city.

In addition to their 3-percent cost-of-living adjustments, firefighters agreed to pay more for their health insurance over their three-year contract.

Cranley has suggested that all unions should benefit from his 5/5/4 plan, so the contracts with AFSCME and IAFF would be revised.

"Last week, we passed an ordinance based on an arms-length, good faith collective bargaining process, and we're going to throw that out to say, here, we're going to give you more money," Mann said.

Or, in some cases, less money.