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IA-07-96
In the matter of Interest Arbitration between The City of Grants Pass and Grants Pass Police Association. IA-07-96
 
The City of Grants Pass (hereinafter "city" or "employer") and the Grants Pass Police Association (hereinafter "association") were parties to a collective bargaining agreement which expired December 31, 1995. The parties were unable to reach a settlement on the terms of a successor agreement. Therefore they submitted their dispute for resolution through the interest arbitration provisions of ORS 243.746 et seq. Amended in 1995. The interest arbitration was held April 22, 1997 before Arbitrator Katrina I. Boedecker at Grants Pass, Oregon. The record was closed upon receipt of final legal argument in briefs on May 12, 1997.
 
STATUTORY AUTHORITY
 
The criteria for interest arbitrators to follow when making their findings is outlined in ORS 243.746(4). The statute was subject to significant amendments in 1995. It states:
 
Where there is no agreement between the parties, or where there is an agreement but the parties have begun negotiations or discussions looking to a new agreement or amendment of the existing agreement, unresolved mandatory subjects submitted to the arbitrator in the parties' last best offer packages shall be decided by the arbitrator. *Arbitrators shall base their findings and opinions on these criteria giving first priority to paragraph (a) of this subsection* and secondary priority to subsections (a) to (h) of this subsection as follows:
 
*(a) The interest and welfare of the public.*
 
(b) The reasonable financial ability of the unit of government to meet the costs of the proposed contract giving due consideration and weight to the other services, provided by, and other priorities of, the unit of government as determined by the governing body. A reasonable operating reserve against future contingencies, which does not include funds in contemplation of settlement of the labor dispute, shall not be considered as available toward a settlement.
 
(c) The ability of the unit of government to attract and retain qualified personnel at the wage and benefit levels provided.
 
(d) The overall compensation presently received by the employees, including direct wage compensation, vacations, holidays and other paid excused time, pensions, insurance, benefits, and all other direct or indirect monetary benefits received.
 
(e) Comparison of the overall compensation of other employees performing similar services with the same or other employees in comparable communities. As used in this paragraph, 'comparable' is limited to communities of the same or nearest population range within Oregon. Notwithstanding the provisions of this paragraph, the following additional definitions of 'comparable' apply in the situations described as follows:
 
(A) For any city with a population of more than 325,000, 'comparable' includes comparison to out-of-state cities of the same or similar size;
 
(B) For counties with a population of more than 400,000, 'comparable' includes comparison to out-of-state counties of the same or similar size; and
 
(C) For the State of Oregon, 'comparable' includes comparison to other states.
 
(f) The CPI-All Cities index, commonly known as the cost of living.
 
(g) The stipulations of the parties.
 
(h) Such other factors, consistent with paragraphs (a) to (g) of this subsection as are traditionally taken into consideration in the determination of wages, hours and other terms and conditions of employment. However, the arbitrator shall not use such other factors, if in the judgment of the arbitrator, the factors in paragraphs (a) to (g) of this subsection provide sufficient evidence for an award. [Emphasis by bold supplied (here indicated by asterisks **).]
 
ISSUES
 
EMPLOYER'S LAST BEST OFFER
 
Compensation: January 1, 1996 2.5% increase. [Based on CPI-All cities index for September 1995.] January 1, 1997 3% increase. [Based on CPI-All cities index for September 1996.
 
Insurance: $350 per month. Split any premium increases 50/50.
 
PERS Retirement: Starting July 1, 1997, employees shall pay their individual required contribution of 6%. The city shall increase wage rates 6.46% to offset the employee contribution and mandated employee FICA contributions.
 
Residency: The city agrees with the union proposal to reside within five miles or 20 minute drive from their workplace.
 
Duration: Two years. January 1, 1996 through December 31, 1997.
 
UNION'S LAST BEST OFFER
 
Compensation: The wage rates for all classifications shall be increased by the CPI-West coast cities, September index with a minimum of 3% and a maximum of 5% on January 1, 1996, January 1, 1997 and January 1, 1998. If the city is unable to fund the January 1, 1998 increase at this level, the parties agree to reopen negotiations on wages only. The parties will limit to 30 days and will move directly to arbitration at any point that they mutually declare that they are at impasse.
 
Insurance: Increase insurance premium cap to $450 per month with the association members paying ten percent of any premium increase over that amount.
 
PERS Retirement: Maintain current contract language.
 
Residency: (The association does not have a residency proposal in its last best offer.
 
Duration: This agreement shall be affective [sic] upon ratification by the parties and accept as an [sic] amended or modified shall remain in full force and affect [sic] throughout the course of the negotiations for a successor agreement. This agreement shall be automatically renewed from year to year thereafter unless either the Association of the City desires to amend or renegotiate this agreement and so notifies the other party in writing by May 1, 1997.
 
BACKGROUND
 
Senate Bill 750
 
The state of Oregon has had interest arbitration for certain public safety bargaining units for approximately two decades through ORS 243.746 et seq. In 1995, the Oregon legislature amended the interest arbitration section of the statute by what is commonly called Senate Bill 750. The new legislation sets out specific revised criteria for interest arbitrators to use in fashioning awards.
 
The employer and the association submitted exhibits attempting to document the legislative history of this statute. The record establishes that both the Senate and the House passed different versions of the bill. After Conference Committee hearings, the bill was modified. Both parties agree that in the final hill which was signed into law, "the interest and welfare of the public" became the primary criteria with which interest arbitrators are to evaluate each party's last best offer.
 
In State of Oregon Corrections Employees and State of Oregon (Bethke, 1996), Arbitrator William P. Bethke looked at the plain of the language of the statute since the passage of Senate Bill 750. He wrote:
 
Turning, then to the pure language of the bill, the phrase "interest and welfare of the public" is almost wholly uninformative. The problem is not that: the concept of "interest and welfare to the public" is unimportant. To the contrary, it is vitally important. It is also extremely general and inherently debatable. [Footnote omitted.] Defining the "interest and welfare of the public" is much like defining the term "liberty"; reasonable people are bound to disagree about its meaning.
 
* * *
 
Given two proposals that are each within the broad range of what may be called reasonable, it is not clear that the "interest and welfare of the public" will typically yield any basis for picking one proposal over another.
 
* * *
 
The legislative history regarding the meaning of "the interest and welfare of the public" is meager.(1) The phrase had been part of the statutory criteria to guide interest arbitrators prior to the current amendments. Most interest arbitrators previously emphasized comparability and ability to pay, however. The amendments in Senate 750 now make "the interest and welfare of the public" the primary criteria by which to judge last best offers.
 
On the assumption that the drafters of the compromise bill could have been aware of prior decisions that discussed this criteria, the association submitted three interest arbitration awards where the interest and welfare of the public was discussed. In Multnomah County and Multnomah County Correction Officers Association, (Tongue, 1985) , the arbitrator awarded a wage increase writing:
 
It is also an opinion of this Arbitrator that "the interest and welfare of the public" will not be adversely affected by such an award. Indeed, the public interest is served by payment of fair and competitive wages to employees who serve the public. Moreover, the County has, by resolution, recognized corrections" as one of the several matters of "first priority".
 
Two years later, in City of Ontario and Ontario Police Union, (Lindauer, 1987), Arbitrator Eric B. Lindauer concluded:
 
The City does have the ability to respond to a wage increase for officers and dispatchers employed by the City of Ontario and it is in the best interest and welfare of the public that such an increase is comparable to the level of wages paid to officers and dispatchers in the five Eastern Oregon Cities.
 
Arbitrator Richard M. Stratton wrote in Multnomah County and Multnomah County Correction Officers Association, (Stratton, 1988), "The interest and welfare of the public is best served with competent, effective, and well-motivated officers operating the County detention facilities. In other words, the costs should be reasonable to the tax payer and fair to the employee." Along this same philosophy, Arbitrator George Lehleitner stated: "It is in the interest and welfare of the public to pay a competitive wage unless the districts finances are such that to do so would create an unreasonable financial obligation" in Winston-Dillard Fire District and IAFF (Lehleitner, 1995).
 
Of all the case citations submitted by the association for the "interest and welfare of the public", Arbitrator Stratton's balancing test of "reasonable to the taxpayer" and "fair to the employee" is the most erudite approach. The most neutral, balanced result would be achieved if the arbitrator could test each party's position on each individual issue. Given that the legislature has directed that the whole last best offers be considered, however, the packages will be submitted to the balancing test in their entirety.
 
Ballot Measure 47
 
On November 5, 1996, Oregon voters passed a property tax rollback contained in Ballot Measure 47.(2) An editorial in the April 6, 1997 Sunday Oregonian stated "Measure 47 is driving deep cuts in basic local government services, police, fire protection and youth programs." In an attempt to clarify the impact of Measure 47, the Oregon legislature is submitting Ballot Measure 50 for a statewide vote. The vote is scheduled for May 20, 1997, which is after the close of the evidentiary record in this instant case. Measure 50 still reduces property taxes consistent with the intent of the voters in Measure 47. The impact on Grants Pass is estimated to be a loss of from $600,000 to $1 million per year. In order to minimize the impact of Measure 47, the city has authorized a public safety levy for the May election. Again, the exact results are not known at the time the record closed this matter. At the time of the hearing, the city theorized that if the levy passed, at best the city would have a budget freeze for two years.
 
DISCUSSION
 
Wages
 
The difference between the city and the association wage proposals lies in the selection of the consumer Price index (CPI) . The city uses the CPI - All cities; the association uses the CPI - West coast cities. The employer offers 2.5% in the first year. It calculates the union's minimum/maxinium formula to generate 3.5% for the first year. The employer offers 3.0% for the second year. It calculates the union's minimum/maximum formula to generate 3.4% for the second year.
 
Before Senate Bill 750, parties would negotiation which consumer price index to use: Portland; west coast; all cities, etc. It appears that the legislature made a conscious decision to eliminate confusion in this area. The express language of ORS 243.746(4) states, "...Arbitrators shall base their findings and opinions on these criteria... (f) The CPI-All Cities Index, commonly known as the cost of living." The plain meaning of the statutory language supports -the index which the employer used. The association's argument that the phrase could include "CPI-All cities on the west coast" does not appear to match the legislative intent as clearly as the employer's formula.
 
Both proposals are merely incorporating a cost-of-living increase. The only difference is the index used. The association submitted comparability data at the hearing.(3) The comparability to be offered by the association to justify a higher wage increase. However, the association's wage proposal is specifically tied to a consumer price index which I find to be at odds with the criteria of the statute. I do not find the comparability data as compelling as I do the record regarding which consumer price index to use.
 
At one point in its legal argument, the association asserts that the city "has sufficient reserves and finances for the next fiscal year." ORS 243.746(4) specifies that the arbitrator consider:
 
(b) The reasonable financial ability of the unit of government to meet the costs of the proposed contract giving due consideration and weight to the other services, provided by, and other priorities of, the unit of government as determined by the governing body. A reasonable operating reserve against future contingencies, which does include funds in contemplation of settlement of the labor dispute, shall not be considered as available toward a settlement.
 
The record establishes that the city has a reasonable operating reserve, not an excessive one. This argument of the association is not persuasive.
 
Senate Bill 750 amended the interest arbitration sections of the statute at ORS 243.746(4)(c) to specifically require the arbitrator to consider the ability of the city to attract and retain personnel. The record establishes that when a recruitment for one position was conducted in July, 1996, the city received 80 applications. The previous recruitment, held in March 1996, resulted in 121 applications being filed for one position. Altogether in 1996, the city received 201 applications for two positions. The ability of the city to recruit and retain qualified applicants under its current wage and compensation program is clear.(4)
 
A reasonable wage is in the interest and welfare of the public; indeed, the overall compensation received by the bargaining unit members is one of the criteria an arbitrator is directed by the statute to consider. The employer's offer of a cost of living increase maintains a reasonable wage.
 
Insurance
 
The most recent collective bargaining agreement, which expired December 31, 1995, required the city to pay up to $350 per employee per month toward medical insurance premiums. The employee was responsible for any premium amounts over $350. The cost for full family coverage was under $350 for the life of the expired agreement.
 
The employer is proposing to continue its contribution up to $350, thereafte r the city and the employee would share the cost of any premium increase over the $350 equally (50/50). The association is proposing to increase the initial premium cap to $450 and then have employees pay 10% of any premiums in excess of the new cap.
 
Currently, the city's monthlv composite rate is $350 for medical, prescription, vision and dental premiums through Blue Cross of Oregon. Full family coverage is provided for each employee and all eligible dependents at that rate. Employees may select either a traditional plan or an HMO. The record establishes that full family insurance premiums will not exceed $350 through December 31, 1997.
 
Due to the uncertainty of the city finances because of Measure 47, and considering that $350 covers the full family premium, it is unreasonable to increase the insurance cap by $100 per month as association proposes. The parties may well be able to bargain the use of some or all of that money in another term of employment instead of having the employer save it for some future liability.
 
The association argues that it has always had fully paid medical insurance and that most of its comparables provide fully paid medical insurance at substantially higher rates than those paid by the city. The city should not be punished for obtaining an economical premium rate. The association should be interested in the level of coverage, as well as any insurance costs to the employees. There is no contention that the employer is providing a lower benefit level. For the duration of this collective bargaining agreement, the employees will continue to have fully paid medical insurance through the employer's proposal.
 
More and more public employees are sharing in the cost of insurance coverage these days. The employer's position is not a ground breaking proposal. The emoloyer's proposal to split any future increases 50/50 is not the gentlest phase in of cost sharing. Technically, however, it is an improvement over the current contract language which requires any and all addition premium costs to be born by the employee. The record is silent as to why the association agreed to that language previously. I am not uneasy with the employer's proposal, though, since the insurance section of the collective bargaining agreement can he subject to negotiations in the future when exact data regarding increases, if any, is available.
 
Retirement
 
Ballot Measure 8, passed by Oregon voters in November, 1994, amended Article IX of the Oregon Constitution to require public employees to contribute 6% of their salary to a retirement system. It further prohibited pubic employers from either paying the employee contribution or providing a salary increase for the purpose of offsetting the employee contribution. The Oregon Supreme Court has held that Measure 8 is unconstitutional. Between the passage of Measure 8 and the Supreme Court's ruling, public sector employers and bargaining representatives agreed to various approaches to retirement plans; no one design dominated.
 
The city has negotiated agreements and struck understandings with all of its employees regarding the Measure 8 requirements, except those in the police bargaining unit. The city has proposed here that on July, 1, 1997, it discontinue its direct 6% payment to which is the employees' required contribution. In order to offset the 6% negative impact to employees, the city offers to increase wages for this bargaining unit by 6.46%. This amount is designed to offset the employees, additional contribution for FICA mandated contributions and to make the retirement payment cost-neutral to the police employees.
 
The Grants Pass Firefighters Association and the Teamsters, representing general employees, agreed to a series of wage adjustments designed to offset the 6% portion of the employee's pickup. Currently, all Grants Pass employees, except for the police bargaining unit members, pay their own 6% directly to PERS in return for the city offsetting it with a 6% increase in the compensation packages.
 
The association contends that the employer's offer is unconstitutional. It asserts that requiring employees to involuntarily pay 6%, post taxes, toward their retirement violates the holding of the Oregon Supreme Court in OSPOA v. State of Oregon, 323 Or 356 (1996). In OSPOA, the Court discussed the 6% employee "pick-up":
 
Once offered and accepted, a pension promise made by the state is not a mirage (something seen in the distance that disappears before the employee reaches retirement). Nullification of an express term of plaintiffs' PERS
 
contract with the state is an impairment for purposes of contract clause analysis. Allied Structural Steel Co. v. Spannaus, 438 US 234, 247, 98 S Ct 2716, 57 L Ed 2d 727 (1978). Section 10 expressly and substantially changes the state's contractual promise to plaintiffs with respect to the cost of their participation in the PERS retirement plan and the benefits that they will receive on retirement. Under section 10, the cost of participation to the employee increases while the benefits that the employee ultimately will receive on retirement decrease. Unquestionably, section 10 impairs the obligation of plaintiffs' PERS contract.
 
The association interprets this decision as holding that an at-will employee has rights to a retirement plan that cannot be changed once the employee accepts employment with a promise of such a plan. The association extrapolates that if an at-will employee cannot be forced to accept a change in the employee's retirement plan, then it should go without saying that members of a labor organization cannot be forced into "negotiating" an involuntary change of that plan through the interest arbitration process. I am not certain it is that axiomatic. A labor organization can negotiate conditions for its bargaining unit members that would not apply to non-bargaining unit employees. For example, bargaining teams might agree to limit the choice of forums to which unit members would have access in pursuing claimed violations of law or contract.
 
The association cites a recent interest arbitration award where the arbitrator awarded the union's last best offer based on the arbitrator's own interpretation that the employer's proposal on retirement was unconstitutional. City of Springfield and Springfield Police Association, (Runkel, 1997). However, that award is currently under challenge in the court system by the city on the basis that the arbitrator exceeded his authority when making the ruling on the constitutionality of the proposal.
 
The association does not rest its entire presentation on the retirement element of the package on the premise that the employer's proposal violates the United States Constitution as interpreted by the Oregon Supreme Court. It also points to facts in the parties' history of bargaining which it appears to claim call for the award of the association's proposal due to equity considerations. The association submits that in the beginning of 1996 the city began to make involuntary deductions from employees' wages for retirement purposes. The association filed a lawsuit in February, 1996, based on certain court decisions regarding the constitutionality of Measure 8, as well as prior bargaining by this unit to obtain the employer-paid "pick-up". Thereafter, the city agreed to abide by the Supreme Court's ruling and the association dismissed its lawsuit. The city reimbursed its employees for the monies it withheld where the Measure 8 litigation was pending. At the same time, the city entered into above mentioned agreements with its two other bargaining units, with the employees picking up the PERS contribution with pre-tax dollars. The association contends that such agreements provide the other city employees with a significant cost savings which will not be realized by the association bargaining unit members. I cannot rush to dole out equity on the facts submitted. The record is silent about what the scope of bargaining was in the other units; what was the exact give-and- take of negotiations that prompted the settlement? Each bargaining unit develops its own bargaining goals. Obviously, the other bargaining units believed the settlement was good enough to ratify. Although the association asserts that the design of the city's offer to the other units contains more cost savings to those employees than the offer to the association's members, it does not comment on the additional .46% of the employer's wage offer. The association did not disprove, or even refute, that the .46%, which the employer offered in addition to the 6%, addresses the difference between pre-tax and post-tax dollars.
 
The association advances that an award of the city proposal will result in litigation over the constitutionality of the award and that consideration alone should make the associations package more in the interest and welfare of the public. I agree with the association that it is not in the best interest of the public to issue an award that will lead to litigation. With the issues before us, either package seems to be fraught with threats of court action: The association would challenge the employer's retirement proposal; the employer does not believe the association's consumer price index is the one that the statute directs to be used. Litigation is unfortunate, but an interest arbitration cannot be held hostage by the threat of litigation.
 
Finally, as the City of Springfield case above indicates, it is unclear whether an interest arbitrator should be making rulings on the constitutionality of proposals.
 
Residency
 
The association does not have a proposal on residency in its last best offer. The residency language changes were initiated by the association during bargaining. In its last best offer, the city agreed to certain language. In its brief, the association argued that the proposal "should be five (5) air miles, not simply five (5) miles. Since I am awarding the employer's package, however, the "air miles" definition will not be part of the collective bargaining agreement
 
Duration
 
The city contends that a two year agreement is the most reasonable since the economic uncertainties brought on by Measure 47 make it difficult for the city to budget beyond 1997. It argues that it must retain its options to analyze its future revenues in relationship to the level of service it provides. The city indicates that if it loses $1 million dollars in taxes in 1997 and 1998, it cannot guarantee wage arid insurance increases.
 
The association proposes a three year agreement with automatic extensions. It asserts that since contract negotiations have been "drawn out" for over two years, and that since Senate Bill 750 allows an employer to make some unilateral changes at the expiration of a contract, protection of bargaining rights is critical.
 
The association acknowledges that Measure 47 may have an impact on the city. It asserts that Measure 47 is facing court challenges and legislative alterations. These assertions are made to support an argument that Measure 47 will not have a significant impact on this arbitration award. Contrarily, I find the uncertainty about the effects of the future of Measure 47 very significant when considering each party's duration proposals.
 
The associations limited reopener on wages does not allow the City enough latitude to propose other ways of dealing with the impact of Measure 47. Although bargaining for this replacement agreement was over a two year period, only seven meetings were held. The number of meetings does not appear to be extraordinary.
 
It is frustrating for all to return the parties immediately to the bargaining table. I have awarded longer durations in the past to allow some time for some labor peace to settle in before sending the parties back into negotiations. However, in this case, the economic uncertainty is so great, it is in the best interest and welfare of the public to get the wages and terms of employment settled for 1996 and 1997 and then let the parties evaluate their real world bargaining environment for 1998 and beyond.
 
CONCLUSION
 
Although sometimes in whole package interest arbitration, both package seem reasonably balanced and attractive to the arbitrator, that is not the case here. I am not thrilled with either package. I do not like the element of the 50/50 split for insurance premium increases in the future in the employer's package. I am mollified, however, by knowing that the insurance data for 1997 shows that there will be no increase for this year. Thus, it will not effect employees during the life of this award. Beyond that, insurance provisions could be subject to future bargaining.
 
There are more elements in the association's package with which I am disturbed. The association's wage proposal ignores the plain language of the statute in its choice of consumer price indexes. It justifies its retirement proposal by conclusions that I am not convinced are accurate. Finally, its duration proposal ignores the uncertainty of the present.
 
Under the current interest arbitration criteria, the first priority must be given to the interest and welfare of the public. In this case, that would he achieved by the award of the city's last best offer. The city's package allows for the continuance of police services; a full cost-of-living adjustment for employees; participation in PERS in a cost neutral manner for the bargaining unit members; and fully paid medical insurance during the term of the agreement.
 
Employing the balancing test of what is "reasonable to the tax payer" with what is "fair to the employee", I find that the employer's last, best offer is in the interest and welfare of the public while the association's last, best offer is not.
 
OPINION
 
Following the dictates Of ORS 243.746(4), it is my opinion that the employer's last best offer is in the interest and welfare of the public and must be awarded the parties to resolve their collective bargaining impasse.
 
Issued at Olympia, Washington, this day of ___ June, 1997.
 
Katrina I. Boedecker, Interest Arbitrator
 
Footnotes:
 
1. In State of Oregon, (supra), Arbitrator Bethke considered the legislative history with caution, as representing at best, views which may have informed the vote in the Senate, but not necessarily views of the House or the Governor. I agree to the point of considering the legislative history with extreme caution since the exhibits submitted show that the original intent of the Republican sponsors of the bill was subject to changes through negotiations to enable the bill to be signed by the Democratic Governor. Colloquies from the sponsors of the bill do not reflect the debate involved in the full course of this bill's passage.
 
2. At this same election, voters rejected Ballot Measure 43 which would have basically repealed Senate Bill 750. Measure 43 had been created and supported by public safety unions.
 
3. The employer was surprised at this and indicated that throughout negotiations, comparability had not been raised as an issue. It contended that the sole focus of the wag discussion was which consumer price index should be used to predicate a cost of living adjustment. The association countered that comparability was one of the statutory criteria. The employer was allowed additional time after the hearing to submit its comparability data.
 
4. As for the remaining criteria of ORS 243.746(4), there were no stipulations of the parties submitted for the arbitrator to consider and I find the evidence regarding criteria (a) through is sufficient enough to allow me to make my award.