Cover Story
City’s quest for health care reform stokes tensions with labor unions
PALO I ALTO’S PAINFUL DILEMMA
n 2009, Palo Alto’s elected leaders and top management responded to the financial walloping of the Great Recession by embarking on
a path toward benefit reform. Despite a worker protest in front of City Hall, a one-day strike by the city’s largest union and a brief legal skirmish, the city succeeded in imposing a new contract on the Service Employees International Union (SEIU), 521, which represents about half the city’s workforce. Under the new conditions, union members were forced to chip in for their pensions and health care costs — expenses for which the city had traditionally picked up the tab. Over the next three years, the city negotiated similar concessions with all other labor groups, with the police union last year becoming the latest to adopt a cost-sharing contract. Palo Alto’s economic fortunes have flipped since then, with vacancies in downtown buildings now below 2 percent and sales-tax revenues rising steadily. But the city’s effort to further curb benefits continues. Pension and health care costs are rising at an alarming rate all around the state, recently pushing cities such
by Gennady Sheyner
(continued on page 22)
City of Palo Alto health care expense (medical, dental & vision) $40M
$30M
$27.4 $1.7
$25M
$23.7
$22.9 $21.6 $4.7
$20M
$15.4
$15M
$10M
$5M
$0M
$14.1 $10.0 $1.9
$11.5 $2.4
$12.5
$3.2
$3.6
$16.4
$4.9
$13.2
$3.5
$6.5
$8.2
$10.8
$10.9
$17.3 $15.9 $14.9
$8.1
$9.1
2002Actual
2003Actual
2004Actual
$12.0
$4.2
$2.8
$9.7
$2.3
$2.1
$24.1 $1.6
$2.7 $5.4
$29.0 $1.7 $1.9
$31.8 $1.8
$34.8 $2.0
$10.9
$11.8
$12.2
$13.3
$13.5
$13.7
2005Actual
2006Actual
2007Actual
2008Actual
2009Actual
2010Actual
ACTIVE EMPLOYEES
RETIREE MEDICAL
RETIREE LIABILITY
$14.3
2011Actual
2012Budget
$14.5
201520132014Budget Projected Projected
EMPLOYEE CONTRIBUTION
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