Wednesday, June 18, 2014

Memphis City Council Cuts Employee Benefits In Budget Vote

Posted By on Wed, Jun 18, 2014 at 10:59 AM

Memphis City Council members passed a nearly $600 million budget for the city Tuesday night that made deep cuts to employee benefits, changes some said were necessary to begin to right the city’s financially struggling pension and health benefits systems.

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The approved changes took away some major health care subsidies from retirees over age 65 and will replace them with Medigap coverage or another plan. The changes will also cut the spouses of city employees from the city’s health insurance plan if they are eligible to get insurance rom their employer. The changes will also levy a higher monthly charge of $120 for smokers on the city insurance plan.

Council members compromised with Memphis Mayor A C Wharton’s administration to cut an employee health insurance premium rate hike of 57 percent to 24 percent and to make that change in October instead of July 1, the beginning of the city’s 2015 fiscal year. It was the biggest council-made change to Wharton’s original health benefits overhaul. Though the percentage was basically cut in half, city finance director Brian Collins assured council members the change would not have a big effect on the budget.

All of the changes angered city employees and the unions that represent them. The council chambers were packed up until the budget passed just after 8 p.m. Tuesday. Council members heard from public speakers on the budget for nearly three hours before the vote.

Many of them were angered because they believed the city promised retirees and current employees a slate of benefits when they were hired and was now breaking that promise. Some union leaders shamed Wharton and the council from the public podium. An attorney from the Association of City Retired Employees threatened a lawsuit against council members if they passed the health benefit changes. City council attorney Allan Wade told council members he believed the changes were legal.

Most of the cuts were predicated on the need to start making higher annual payments to the city's pension system and to another struggling fund that covers employee benefits.

One thing that didn't change was the city tax rate. Council members agreed to keep it at $3.40, though they changed its distribution slightly to raise the funds for daily operations and lower payments to capital projects.

Another big issue faces the council when they meet again in two weeks that could ignite another round of employee ire. Council members are scheduled to take a final vote on changes to the city’s pension benefits. Those changes would move unvested employees to a plan that works more like a typical 501(k) plan.

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