Binding Arbitration Sprouts in Green Tree

Act 111-the law that governs collective bargaining and contract resolution for police and firefighters-is coming into play in the South Hills suburb of Green Tree. Police and fire personnel (along with prison guards and people necessary to the functioning of courts) are prohibited from going on strike in Pennsylvania, so contract disputes are subject to a binding arbitration process spelled out in the law, which has been on the books since 1968.

Just because it has stood the test of time does not mean Act 111 does not need to be reformed. That’s what can be seen in the community in question where police wages account for 21% of the borough’s $7 million budget. Officers are making wages comparable to neighboring communities and have full health care benefits. But they are asking for raises in excess of what other bargaining units have received, prompting the manager to opine "we just don’t think the raise they’re asking for is reasonable in these economic times. It’s not in line with the raises we’ve given other employees".

The Act 111 process does not mandate that the arbitrators on the matter look at what the town can afford, what comparable professions make, or any fact-finding process at all. This is in stark contrast to other states. And if the arbitration panel rules in favor of the wage rates preferred by the police it is considered a mandate to the borough to pay it. On top of that Green Tree has to pay for its arbitrator and the third neutral panel member along with all the associated stenographic costs.

Act 111 has not been systematically evaluated by the state since the late 1970s, and the only "trump card" is for a municipality to enter into Act 47 which prevents bargaining agreements executed after the adoption of a recovery plan from violating its provisions.

Act 111 in Need of Overhaul

In regards to a recent spate of incidents involving City police and fire personnel ranging from allegations ofroad rage, drunk driving, and assault the Mayor wants the departments to "clean up their act" while mentioning that there is another act that definitely needs to be cleaned up-the Police and Fire Collective Bargaining Act, better known as Act 111 of 1968.

"We’ve disciplined officers. We’ve disciplined firefighters. We’ve fired them, terminated them. Only to find that they’ve won their jobs back in arbitration" was what the Mayor said today.

Act 111 has been pointed to as a primary reason as to why municipal budgets have been stretched to the breaking point. Any impasse in a collective bargaining session is submitted to a panel of arbitrators who do not have to consider the financial ability of the municipality in making their decision. Only by entering into Act 47-which says that any contract negotiated after distressed status is declared-can a municipality thwart the possibility of an arbitration award that is too rich.

Now we see what Act 111 can do for management powers as well. The City needs to reduce its workforce so that it can begin to deal with its legacy costs, and Act 111 is doing the City no favors. So one of the action items that needs to be on the agenda of the coalition that is headed to Harrisburg seeking new revenues for the City is reform of the statute.

What Happens in a Chapter 9 Bankruptcy?

In a previous Policy Brief (Volume 9, Number 51) we raised the question of whether Pittsburgh’s legacy costs could force the City to seek relief under Chapter 9 of the U.S. Bankruptcy Code. Under Chapter 9 a judge would oversee a readjustment of debts.  Pennsylvania’s Act 47 permits a municipality in financial distress to pursue a Chapter 9 filing if one of the following conditions is present:

 

  • The Act 47 coordinator recommends filing
  • There is imminent action by a creditor that would threaten the ability of the municipality to provide services
  • A creditor has rejected the Act 47 plan and the rejection cannot be resolved
  • A condition causing financial distress could be solved by filing
  • The governing body has failed to adopt an Act 47 plan or carry out the recommendations of the coordinator

 

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Irony of Ironies: A Union Leader as Industry Reviver

President Obama’s car czar, Ron Bloom, has recently been given the additional responsibility of helping figure out ways to revive American manufacturing. Before becoming the car czar Mr. Bloom was a special assistant to the president of the United Steelworkers where his responsibilities included the union’s collective bargaining program. Prior to that he worked as an investment banker and was involved with transactions on behalf of the Steelworkers, United Auto Workers, and the Teamsters among other unions.

Sounds like the least qualified person to revive American manufacturing jobs, especially auto industry jobs where collective bargaining agreements resulted in such high compensation and legacy costs brought the employers to bankruptcy and are now owned largely by the government and the unions.

Wonder what recommendations he will bring to the table? Likely he will want more takeovers of struggling American enterprises hamstrung by regulations and collective bargaining agreements. How will U.S. companies not owned by the government compete with publicly owned enterprises that do not have to worry about profits or return on investment? Is this the way we engage in global competition? Taxpayers as investors with Bloom as investment manager. That is surely the road to the poor house for all of us.

A City Run for the Benefit of its Union Employees

Pittsburgh is in serious financial difficulties because of a long history of signing generous contracts with its employees. And now City Council wants to abandon what little progress that had been made under Act 47 over the last five years. Council just voted to amend the Act 47 coordinator’s latest plan by restoring pay raises and a 5th week of vacation for long time employees-a week that was removed under the original Act 47 plan. Final approval awaits and faces objections by the Mayor.

From news accounts it appears labor leaders have been lobbying Council members for labor friendly changes in the coordinator’s plan before it goes to a final vote. And right on cue, Council has decided to go along. After all, in Pittsburgh maintaining labor peace with City unions is job one.

How to pay for the new found generosity while still trying to figure out how to cover previously incurred legacy costs? Impose $26 million in fees on all-day parkers, hospital admissions and university students. And hire a delinquent tax collector to see if he can wring $13 million from tax scofflaws over the next five years.

Rather than facing up to the real need to reduce employee costs-which are nearly 60 percent of total expenditures-and the further buildup of legacy costs, the City Council apparently believes that it can spend more, tax more, and hope state and federal generosity will be there when the inevitable crunch comes. Evidently Council members are admirers of the philosopher Alfred E. Neuman who in times like these would say, "What, me worry?"

One of America’s great cities indeed.

Is there Wiggle Room for the City’s Unions?

If the City does not adopt the Amended Act 47 plan by June 30th, one City Council member foresees a major problem: the City’s public safety unions will begin contract negotiations (under Act 111) in what would best be described as a state of flux. The City would be fiscally distressed, but it would not have a plan to guide its upcoming years. Therefore, the Council member feels that "The police and fire unions will go into arbitration and the arbitrator will probably provide them with an award that we cannot afford".

Could this happen? We know that under Act 47, Section 252 a collective bargaining agreement "executed after the adoption of a plan shall not in any manner violate, expand, or diminish its provisions". Now the City is in Act 47 and has been since 2004, so it would be a stretch to think that an arbitrator could infer that the police and fire union could be awarded contract provisions that could deviate from the requirements of Act 47 because the amendment has not been adopted.

Note that the language says "after the adoption of a plan"; reason would point to the plan adopted in 2004, no matter how many times it gets amended in the future. DCED data shows that several municipalities across the state (Aliquippa, Johnstown, and West Hazelton) are operating under amended plans. Section 249 of the statute notes that an amendment can be "initiated by the coordinator, the chief executive officer or the governing body". The official DCED order of July, 2008 states that "it is ordered that the distress status for the City of Pittsburgh…shall be continued". That grew out of City Council’s request to have Act 47 lifted and, failing that, to have a blueprint provided by the state to guide the City out of troubled financial waters. That’s what the City got: elected officials and public sector unions just don’t like it.

Facts from the Act 47 Plan

Which personnel group has seen its ranks thinned the most under Act 47?

Since Act 47 gives the employer leverage over collective bargaining for new contracts (existing agreements cannot be touched) it is easy to see why public sector unions don’t like the law and, in the case of Pittsburgh, likely helped push the City to petition the state in 2007 to have distressed status lifted. Labor agreements cannot make the overall Plan divert from its stated goal, which is to right the distressed municipality.

The amended Plan shows that overall headcount has fallen 10% since 2004 from 3,657 employees to 3,294 employees. On a per 1,000 person basis that translates into a fall from 11 to 10 employees (based on 323k population in 2004 and 311k population in 2009). The City could still go lower to be in line with better performing cities.

The bargaining groups taking the biggest losses (whether by layoffs or attrition and not filling the positions) were (on a percentage basis) white collar supervisors (-32%), school crossing guards (-25%), and firefighters (-22%). Two categories-non-represented executive and management employees and recreation employees-actually saw their numbers increase during Act 47.

The upcoming months will be critical ones for labor negotiations as contracts for police, fire, blue-collar supervisors, white collar workers, school crossing guards and recreation employees expire at the year’s end. The Act 47 team has made it evident that the City can’t grant better benefits either to current employees or retirees and should not limit its ability to determine the best ways to provide services and active employees have to pay more towards health care. There could be a battle with the firefighters over eliminating overtime from pension benefit calculations and the possibility of new, less expensive pension plans. Contentious times ahead for sure.