The anatomy of the contract dispute between the City of San Antonio and San Antonio Police Officers Association
The current contract and collective bargaining agreement between the City of San Antonio and the San Antonio Police Officers’ Association expired in 2014. A component in the contract termed the “evergreen clause” allows for the current terms and conditions of the 2014 contract to remain in effect for ten years (2024) or until a new contract can be finalized.
According to both parties the central point of conflict rests with the “evergreen clause.” The “evergreen clause” is not exclusive to the San Antonio Police Department and their contract. The San Antonio Fire Department’s contract contains an “evergreen clause” and many other cities use the “evergreen clause” to prevent a complete breakdown in the event negotiations cannot be finalized before the current contract expires. Many cities do not place an expiration date on the evergreen clause.
City Manager Sheryl Scully and Jeff Coyle, Director of Intergovernmental Relations have expressed the idea that “the current benefits package especially providing 100 percent health benefits for the police officers and their families will bankrupt the City of San Antonio.
Scully maintains that the Affordable Care Act’s Cadillac Tax will cause the City of San Antonio to pay enormous fees to the Federal Government because of the insurance plan offered the police and fire departments in 2018.
However, she fails to consider that in December of 2015 Congress and the President signed a two-year delay on the 40 percent excise tax on high-cost employer sponsored health plans known as the “Cadillac Tax”.
So if the “Cadillac Tax” even comes to fruition it will not be until 2020. The City of San Antonio could have signed a new four year agreement and never been impacted by the Tax.
To be exact the provisions of the Cadillac Tax include:
The tax is 40% of the cost of health coverage that exceeds predetermined threshold amounts.
Cost of coverage includes the total contributions paid by both the employer and employees, but not cost-sharing amounts such as deductibles, coinsurance and copays when care is received.
For planning purposes, the thresholds for high-cost plans are currently $10,200 for individual coverage, and $27,500 for family coverage.
These thresholds will be updated before the tax takes effect in 2020 and indexed for inflation in future years.
The thresholds will also be increased:
If the majority of covered employees are engaged in specified high-risk professions such as law enforcement and construction, and
For group demographics including age and gender.
For pre-65 retirees and individuals in high-risk professions, the threshold amounts are currently $11,850 for individual coverage and $30,950 for family coverage. These amounts will also be indexed before the tax takes effect.
In a self-funded plan the employers calculate and the “person who administers the plan benefits” pays.
The following will be used to determine the health plan’s cost:
The tax is based on the total cost of each employee’s coverage above the threshold amount.
The cost includes contributions toward the cost of coverage made by employers and employees.
The statute states that costs of coverage will be calculated under rules similar to the rules for calculating COBRA premium.
The following coverages are considered taxable:
Insured and self-insured group health plans (including behavioral, and prescription drug coverage)
Wellness programs that are group health plans (most wellness programs)
Health Flexible Spending Accounts (FSAs)
Health Savings Accounts (HSAs), employer and employee pre-tax contributions*
Health Reimbursement Accounts (HRAs)*
Archer Medical Savings Accounts (MSAs), all pre-tax contributions*
On-site medical clinics providing more than de minimis care*
Executive Physical Programs*
Pre-tax coverage for a specified disease or illness
Hospital indemnity or other fixed indemnity insurance
Federal/State/Local government-sponsored plans for its employees
Multi-employer (Taft-Hartley) plans.
The following are considered exempt types of coverage:
U.S.-issued expatriate plans for most categories of expatriates
Coverage for accident only, or disability income insurance, or any combination thereof
Supplemental liability insurance
Liability insurance, including general liability insurance and automobile liability insurance
Worker’s compensation or similar insurance
Automobile medical payment insurance
Other insurance coverage as specified in regulations under which benefits for medical care are secondary or incidental to other insurance benefits:
Long Term Care
Standalone dental and vision*
Coverage for the military sponsored by federal, state or local governments*
Employee Assistance Programs*
Employee After-Tax Contributions to HSAs and MSAs*
Coverage for a specified disease or illness and hospital indemnity or other fixed indemnity insurance if payment is not excluded from gross income.
So the City is a self-insured insurance provider meaning that the City of San Antonio provides funds throughout the year to an account. A third party accepts the paperwork and processes the claims for payment. Currently the third party charges the City of San Antonio $30 per person covered by insurance.
According to the City another issue is that the civilian employees of the City pay a premium for their insurance coverage and the police and fire fighters do not. However the Police Officers’ Association argues, officers elected to receive less pay so that their insurance would be provided without a premium.
To better understand this process. Currently the City of San Antonio provides the insurance coverage much like Blue Cross and Blue Shield or State Farm. The City pays the employee and then would deduct a premium from the paycheck and then place that money in the insurance fund. So instead of asking for higher wages to then turn and contribute a premium, the Association asked that the insurance be provided without premium. Simply keeping the City from paying money out of the payroll fund to deduct the money and then place it in the “insurance fund”.
When the Association asked why a premium was necessary, they were told “Everyone pays a premium.”
The City of San Antonio has not responded to an open records request asking the current amount spent per employee and family on insurance.
If the City of San Antonio currently spends less than $11,850 for an individual officer and less than $30,950 for the family the “Cadillac tax” would not apply when using the current threshold.
Also this threshold amount will be adjusted for inflation and other costs in 2020 to establish the new limits.
Contract negotiations began before the current contract expired in 2014. However, neither side could reach a decision.
In 2014 the City of San Antonio decided to file a lawsuit against the San Antonio Police Officers’ Association and a separate lawsuit against the Fire Department’s Association to ask that the District Court strike down the “evergreen clause” allowing the City of San Antonio to abolish all the components of the current contract.
In December of 2015, the trial court judge ruled against the City of San Antonio and on the 6th of January 2016 the City of San Antonio filed an appeal with the Fourth Court of Appeals in San Antonio.
According to Coyle, “The City of San Antonio has no desire to pursue this lawsuit. We have done nothing to move it forward, we are just letting it sit out there.”
However, the suit was decided in the lower court. The City did not accept the ruling and pushed for an appeal. Currently the City of San Antonio asked the Court on March 31 to consolidate the two lawsuits into one. On April 25 the Court issued an order denying the City’s request.
On April 21 the City filed a motion to request the Court to send the case to mediation. The only issue before the mediator is the “evergreen clause” and not the full contract between the Association and the City of San Antonio. However, the City requests that the appellate deadlines not be suspended in this appeal. The City requests the Court maintain the current deadline of April 27, 2016 to file the City’s brief, and otherwise maintain future briefing deadlines for the parties.
In a press release issued by the City late in the evening on April 27 the City reported the Court of Appeals had granted their motion.
Currently, the City of San Antonio has spent $188,347.67 in legal fees for the litigation of the lawsuit. The City has spent $1,211,311.56 from January 2014 until April 6 in legal fees to attempt to negotiate a new contract between the Police Officers and the City of San Antonio. These amounts do not include what has been spent on negations regarding the Fire Department’s contract.
Officials with the San Antonio Police Officers’ Association and one of the lead negotiators for the City agree the health care costs for police officers have actually flat lined over the last five years. Flat lining means they have experienced no growth. However, the City insists on focusing on the spikes rather than the trends in calculating health care costs.
City Manager Scully argues the Police and Fire Departments consume 66.5 percent of the general fund budget. However, this number is not calculated as a total cost to the budget. In a recent press release issued by the City Government and Public Affairs Office the City of San Antonio spends $124,668 on a police officer. The San Antonio Police Officers’ Association used $125,000 to calculate the costs per officer for the budget process. I used $126,000 to calculate the budget process. This amount includes wages, overtime, longevity pay, allowances, and insurance for the officer and his family members. The total spent for officer contribution at $126,000 for the 2385 authorized positions would total $300,510,000. Currently the Police Department is short 176 officers saving the City $22,176,000.
However when you calculate at the full $300, 510,000 of a $2.5 billion dollar budget it is actually only 12 percent of the total budget. If you accept the City’s figures of $730,000,000 as the total cost of police and fire in relation to the total budget, it is less than a percent. Mathematically it works out to .00292 percent.
When comparing the cost to the General Fund Budget, the $300,510,000 is only 27.3 percent.
The approved budget documents released from the City list positive growth for the next five years for increased revenue into the City budget.
The City of San Antonio claims that in September of 2015 the Police Officers’ Association was offered a pay raise, no insurance premiums for officers or their families and the Union would not accept the proposal and broke off all negotiations.
The Police Officers’ Association told the City of San Antonio they would accept the proposed contract if the City would drop the lawsuit. After thirty minutes and a consultation with the City Manger, the City refused to drop the lawsuit leaving the contract process at an impasse.
*As indicated by IRS notice issued on February 23, 2015 and subject to future regulatory clarification.
(This is a continuation of series of articles examining the San Antonio Police Department)