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IA-13-03
In the Matter of the Interest Arbitration Between State of Oregon, Department of Corrections and Association of Oregon Corrections Employees (AOCE). IA-13-03.
I. PROCEEDINGS
This dispute, between the State of Oregon, Department of Corrections (the State or Employer) and the Association of Corrections Employees (AOCE or the Association) concerns certain terms of a labor agreement to take effect on July 1, 2003, and to expire on June 30, 2005, between the Employer and a bargaining unit of corrections employees. The bargaining unit comprises 510 Correction Officers and 130 non-correctional employees. After negotiations and mediation, the parties reached and remained at impasse over a number of issues that they submitted to interest arbitration before the undersigned Arbitrator. The Arbitrator's task is to evaluate the parties' last best offers according to the criteria set forth in ORS 243.746, in order to determine which final package shall be included in the parties' Collective Bargaining Agreement.
II. RELEVANT STATUTORY LANGUAGE
Pertinent provisions of the Oregon Public Employees Collective Bargaining Act, ORS 243.746 et seq. state (italicized emphasis added):
243.746 Selection of arbitrator; arbitration procedure; last best offers; bases for findings and opinions; sharing arbitration costs.
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(3) The arbitrator shall establish dates and places of hearings. Upon the request of either party or the arbitrator, the board shall issue subpoenas. Not less than 14 calendar days prior to the date of the hearing, each party shall submit to the other party a written last best offer package on all unresolved mandatory subjects, and neither party may change the last best offer package unless pursuant to stipulation of the parties or as otherwise provided in this subsection. The date set for the hearing may thereafter be changed only for compelling reasons or by mutual consent of the parties. If either party provides notice of a change in its position within 24 hours of the 14-day deadline, the other party will be allowed an additional 24 hours to modify its position. The arbitrator may administer oaths and shall afford all parties full opportunity to examine and cross-examine all witnesses and to present any evidence pertinent to the dispute.
(4) 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 (b) 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.
(5) Not more than 30 days after the conclusion of the hearings or such further additional periods to which the parties may agree, the arbitrator shall select only one of the last best offer packages submitted by the parties and shall promulgate written findings along with an opinion and order. The opinion and order shall be served on the parties and the board. Service may be personal or by registered or certified mail. The findings, opinions and order shall be based on the criteria prescribed in subsection (4) of this section.
(6) The cost of arbitration shall be borne equally by the parties involved in the dispute.
243.752 Arbitration decision final; enforcement; effective date of compensation increases; modifying award. (1) A majority decision of the arbitration panel, under ORS 243.706 and 243.726 and 243.736 to 243.746, if supported by competent, material and substantial evidence on the whole record, based upon the factors set forth in ORS 243.746 (4), shall be final and binding upon the parties. Refusal or failure to comply with any provision of a final and binding arbitration award is an unfair labor practice. Any order issued by the board pursuant to this section may be enforced at the instance of either party or the board in the circuit court for the county in which the dispute arose.
(2) The arbitration panel may award increases retroactively to the first day after the expiration of the immediately preceding collective bargaining agreement. At any time the parties, by stipulation, may amend or modify an award of arbitration.
243.756 Employment conditions during arbitration. During the pendency of arbitration proceedings that occur after the expiration of a previous collective bargaining agreement, all wages and benefits shall remain frozen at the level last in effect before the agreement expired, except that no public employer shall be required to increase contributions for insurance premiums unless the expiring collective bargaining agreement provides otherwise. Merit step and longevity step pay increases shall be part of the status quo unless the expiring collective bargaining agreement expressly provides otherwise.
ORS 243.650 provides relevant definitions, as follows:
As used in ORS 243.650 to 243.782, unless the context requires otherwise:
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(11) "Final offer" means the proposed contract language and cost summary submitted to the mediator within seven days of the declaration of impasse.
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(14) "Last best offer package" means the offer exchanged by parties not less than 14 days prior to the date scheduled for an interest arbitration hearing.
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III. The Parties' Last Best Offers
Both parties have agreed to a wage freeze that will last the duration of the contract. The parties also agreed in principle to a step freeze. The Association's proposal, however, would have the step freeze expire with the Collective Bargaining Agreement, while the State's proposal would begin the step freeze with the effective date of this award, and extend it for 24 months. Thus, the step freeze the State proposes would effectively extend nine to ten months into the period that would ordinarily be covered by the parties' next Collective Bargaining Agreement.(1)
The Association's proposal would, at the expiration of the freeze, allow the employee to advance to the step he or she would have occupied had there been no freeze. The State's proposal would not.
The parties also proposed changes to other topics in their expired Collective Bargaining Agreement. Ultimately in dispute were five changes proposed by the State and approximately 20 changes proposed by the Association.
On the list below, and in a later discussion, I have not included proposals about which the other party has not objected, or proposals that are very much the same and although not formally agreed upon, have not been disputed.
I also note that the State's package includes a one-time payment of $350 (or optional time in lieu of payment) to every employee as a "workload adjustment." Although the Association presumably has no per se objection to this payment, it argues that this payment is not adequate to compensate bargaining unit members for the extended step freeze proposed by the State.
The State proposed the following contract language changes, to which the Association objects:
Article 4, Section 1Would change language giving Association "authority" to investigate grievances, etc. to language giving the Association "reasonable release time." Also, current language allows investigation and "processing of" grievances without loss of compensation to language allowing investigation and "discussions with management towards the resolution of" grievances without losing compensation.
Article 12, Section 6Proposes language allowing the State to make overtime assignments for weekend duty in the laundry and for perimeter checks from the "overtime list" two days in advance of an overtime opportunity, instead of the current 12-hour cutoff.
Article 12, Section 6Would allow mandatory overtime from a rotating list in reverse seniority order. Except for declared emergencies, overtime will not be mandated on employees' "Fridays" or scheduled days off that are followed by a scheduled vacation day.
Article 36, Section 4Would eliminate annual 40-hour DPSST-certifiable training mandate in favor of language stating 40 hours is Employer's "intent," in order to give Employer more flexibility.
Article 19, Section 1Both parties would continue the status quo of the State providing fully paid health insurance through the end of 2004. For the remaining term of the contract (January 1 - June 30, 2005), the State would cap its contribution at $41.47 over the State composite per employee rate of $665 monthly. The State believes, but cannot guarantee, that this amount will be sufficient to provide 100% employee coverage for the remaining months of the contract. The Association proposes to retain the status quo of 100% coverage for the entire contract period.
The proposals of the Association to which the State has objected are on the following topics:
Article 4, Section 4Proposal to allow grievants to investigate and attend grievance meetings without loss of pay.
Article 4, Section 4Would allow AOCE officers to provide representational services to Oregon Correctional Enterprise; AOCE reimburses DOC for time.
Article 4, Section 4Would require Employer to concurrently notify Association President of reprimands issued to bargaining unit members.
Article 4. Section 5Expands release time privileges available to Association President and its representatives to include such things as meetings with management of other state agencies, to proceedings of the courts or any administrative body involving the Association. Relieves the Association President of all corrections duties, without loss of status. Association will reimburse the Employer for these costs.
Article 4, Section 6Would memorialize current practice on use of Employer's fax machines, e-mail connections, etc. for PECBA-related purposes; adds provision prohibiting charge for production of materials require by PECBA.
Article 4, Section 9Would require the State Labor Relations Division and the DOC to keep the Association up to date monthly on changes of address or employment status of bargaining unit members and to provide it at least with the same information as provided to other unions.
Article 12, Section 6Would clarify that all overtime opportunities will be offered to employees.
Article 12, Section 6Would memorializes the current practice regarding the order in which overtime is offered.
Article 12, Section 6New language, reflecting current practice, on circumstances under which overtime cannot be mandated; contains exception for staffing needs and emergencies.
Article 13Proposal to delete the requirement that bilingual assignments be in writing in order to receive the 4% incentive. (This would eliminate the problem of three ineligible employees that are currently on the list for bilingual pay).
Article 13Proposal to include hostage negotiations in the 2% TERT incentive.
Article 13Proposal to provide for a 2% haz-mat response incentive.
Article 13Would make employees on vacation relief or flexible shifts eligible for the 5% shift differential.
Article 13Proposal to establish a dedicated service pay (eff. 1/1/05) as a retention incentive to senior employees.
Article 22Would add aunts and uncles to the definition of immediate family member.
Article 22Would require State to reimburse employee on worker's compensation to pay the difference between the time-loss payments and the employees full salary for the first 2080 hours of the employee's absence; employee would not have to use sick leave.
Article 28Would allow some non-correctional officers to work a 4/10 schedule.
Article 28Proposes to change bidding practices for Special Housing Units by requiring the Employer to list employees who are not qualified to work these units prior to bidding.
Article 28Would reopen vacancies for re-bid.
Article 36Would create a "seniority wall" against transfers from the AFSMCE unit.
Appendix AWould increase the Boiler Operators pay range 16 to pay range 17 so that they would be paid at the Corrections Maintenance level.
IV. Arguments of the Parties, Summarized
A. Position of the State - The State's Last Best Offer (LBO) is the most appropriate one for the following reasons:
1. The interest and welfare of the public favors the State's LBO.
a. Public policy dictates that a party should not gain more through interest arbitration than could be gained in negotiations or through the strike process.
b. The vast majority of the State's workforce, both strike-permitted and strike prohibited bargaining units, have accepted packages equivalent to the State's LBO.
c. If the Association's LBO were to be awarded, the negative impact on morale of other state workers would be contrary to the public interest.
d. Even with the salary freezes, the State's LBO offers a competitive wage package; since 1993, salary raises have outpaced cost-of-living increases.
e. The Association has not proven that there is a recruitment problem in the Department of Corrections.
2. The State's relative inability to pay favors the State's LBO.
a. In determining the State's ability to pay, Oregon law requires giving due consideration and weight to other services and priorities, including a reasonable operating reserve.
b. No relative dollars are available in the State's budget to fund the Association's proposal.
1) In January 2003, a revenue shortfall of $2 billion was forecast, causing Governor Kulongoski and the legislature to take drastic steps to balance the budget. This resulted in layoffs, cutbacks to the Oregon Health Plan, reduced services to the growing public, and many more negative effects.
2) Education and children have been given the highest priority.
3) PERS represents an enormous unfunded liability ($9-$17 billion).
4) Even though a 4% (or $460 million) operating reserve is a minimum reasonable number, Oregon's "kicker" law effectively prevents the State from retaining more than 2% of projected general fund revenues.
5) There are NO projected adequate operating reserves. The passage of Measure 30 had the effect of replacing an operative reserve with an $85 million shortfall.
6) Future funds also are problematic.
c. No relative dollars are available in the Department of Corrections' budget to fund the Association's proposal.
1) Prison populations are forecasted to soar, while funds allocated to the DOC by the Legislature for 2003-05 were slashed by about 25%.
2) Because of Measure 30, an additional $9 million from the General Fund that was slated for DOC is no longer available.
3. Overall compensation in comparable states favors the State's LBO.
a. States with corrections departments comparable to Oregon's are: Arizona, Kansas, Kentucky, New Mexico, North Carolina, Ohio, and Texas. The criteria used to choose these comparables (the Nationwide group) were: (1) average wage per worker; (2) total tax revenue per capita; (3) unemployment rate (4) population; (5) prison population per capita; (6) corrections spending per capita, and (7) economic diversity.
b. More traditional comparable groups were examined, including the eight states most similar to Oregon in population (four above and four below), and the contiguous states of Idaho, Washington, Nevada, and California.
c. Compensation for bargaining unit members is substantially above average no matter which group is used for comparison.
1) Compared to the Nationwide group, the State's overall compensation package exceeds the jurisdictions by 32% based on intermediate DPSST certification pay and 36% based on advanced DPSST certification pay, before factoring in out-of-pocket insurance costs in these comparables.
2) Every jurisdiction other than Oregon requires employees to contribute to health insurance costs. These out-of-pocket costs average between $277 and $531 per month.
3) Oregon's compensation package exceeds that of the Population group by 31% and 34% (intermediate and advanced certification pay, respectively).
4) Oregon's compensation package exceeds that of the Contiguous States group by 8% and 11%, respectively.
d. There is no statutory authority authorizing the use of Oregon counties as comparators. Even if the Association could make such comparisons, it would need to show where the State attracts its employees from and where they go. It made no such showing.
e. Retention data shows that there is virtually no exchange between the State and counties identified as the Association's local comparators.
f. The Association failed to include in its comparisons several key components of the total compensation equation: fully paid health insurance and a generous retirement package. Oregon law requires consideration of such non-liquid benefits, and most arbitrators have used them in comparisons.
4. Cost-of-living factors favor the State's LBO. Wage increases for bargaining unit members will outpace the cost of living (CPI all-cities index) through the end of the 2003-05 biennium, even with the wage freeze.
5. The Association has not shown that the State's LBO will cause recruitment or retention problems.
The Association's proposed changes to contract provisions are neither justified by compelling need nor narrowly tailored to meet compelling needs. Moreover, several of the proposed language changes are either permissive or prohibited subjects of bargaining and cannot be awarded by the Arbitrator.
B. Position of the Association - The Association's proposal is in the best interest of the public. The proposal enhances recruitment and retention and is in line with the appropriate comparable jurisdictions.
1. The State's proposal to freeze salary steps for 24 months is a significant departure from the status quo. The State has the burden of proving a compelling need for the departure.
a. The freeze would be applied to the salary schedule previously agreed to by the parties and would extend beyond the length of the contract.
b. The State's proposal would not return the monies to the employees; this penalizes poemployees for their length of service.
c. The State has not shown a compelling need for permanently confiscating monies or extending the freeze into the 2005-07 budget cycle.
1) The State inexplicably offered to pay each employee $350 during the middle of its budget crisis, yet used that same crisis to justify a change in the status quo.
2) Current projections for the 2005-07 biennium show more than a billion dollar gain; the Association's proposal amounts to less than .01% of this.
a. The State has not offered a quid pro quo for permanently confiscating monies.
b. Any need of the State to extend a freeze into the next biennium is a self-created hardship; because the State refused to restore lost wages to employees at the conclusion of the financial crisis, it had been compelled to delay its step freezes and continue paying steps.
c. The State's argument that other bargaining units of its employees had agreed to step freezes is not sufficient justification for changing the status quo.
3. The State engaged in bad-faith take-it-or-leave-it bargaining (it has not budged from its initial position), a practice that is not in the best interest of the public.
4. The step freeze extending into the next contract term is a permissive subject of bargaining and therefore cannot be awarded by the Arbitrator.
5. The Association's proposal is less expensive than the State's and is well within the State's ability to pay.
a. Contrary to the State's assertions, the Association's proposal would cost approximately $44,000 less than the State's LBO. The Association's figures did not factor in the costs of items, such as insurance, where the costs were identical in both proposals.
b. The State's projected costs for Article 4 as proposed by the Association are based on wild assumptions and are not realistic. The State produced no evidence to support these numbers.
c. Even if the Arbitrator were to accept the State's numbers for Article 4, the Association's proposal would still be only $70,000 more than the State's LBO.
6. It is inappropriate to speculate on the State's ability to pay in the next biennium because that will involve a new Legislature and a new contract. Such speculation cannot be backed up by evidence at this time.
7. The Association's proposal will better attract and retain qualified personnel.
a. Corrections officers walk the toughest beat in the state, given the violent and aggressive nature of inmates at the State Penitentiary, yet are not given the respect they deserve.
b. At present, there is an insufficient pool of qualified applicants in the Salem area.
c. The pay of a State corrections officer is between 16% and 25% behind the average of the various Willamette Valley counties.
d. An analysis of the data in Exh. S-43 indicates a 26% failure rate for new hires doing trial employment, significantly higher than what is considered acceptable.
8. Comparison to appropriate comparable jurisdictions indicates that bargaining unit members are currently underpaid.
a. Local labor market comparators are appropriate: Both State and local corrections employees require the same training and certifications. State corrections officers deal with more violent offenders than their county counterparts and therefore have more difficult jobs, yet they are paid less than county employees.
b. Arbitrators presiding over four prior interest arbitrations involving this Association have chosen comparables within the context of the Portland Metro area labor market.
c. The State's lists of comparables are inappropriate.
1) Although the State's comparators show adequate compensation for this bargaining unit, the wide variation from a labor market analysis shows the inadequacy of the State's selected comparators.
2) The State's comparables are based on employer costs rather than compensation received by employees. Employer-cost methodology was specifically rejected in Senate Bill 750.
3) Arbitrators have consistently chosen comparables based on employee compensation rather than employer costs.
4) The State's comparables did not use benchmarks, so one cannot tell whether a 15-year employee is compared to a 5-year employee, for example.
5) No arbitrator has ever used the "National" comparables provided by the State in an interest arbitration.
6) The State has never used the same set of comparables twice.
7) The State generated its comparables lists in preparation for arbitration; its comparables were never discussed at the table.
8) Examination of the State's "National group" of comparables does not show that Oregon corrections officers are well compensated. It shows only that southern states still do not pay living wages.
d. The Association's list of comparable contiguous states (plus Alaska) shows that the bargaining unit is slightly above the average. However, salary increases are under consideration in several of the comparator jurisdictions, and if implemented, the bargaining unit will fall to 3.53% below the average.
e. Comparator jurisdictions will benefit from step increases. Freezing this bargaining unit's pay steps without returning those monies to employees will cause the bargaining unit to fall between 3.8% and 6.73% below the comparables' average.
9. The Association's proposal makes more sense in light of the CPI; the proposal will prevent the erosion of employees' purchasing power, while the State's LBO would allow such erosion.
10. It is inappropriate for the Arbitrator to consider other factors such as internal comparisons to non-similar employees. There is sufficient evidence without resorting to such comparisons.
11. The Association's additional language proposals strengthen its overall package.
V. DISCUSSION AND ANALYSIS
A. Preliminary Legal Issues
1. Weighting of Statutory Criteria
a. 'Interest and Welfare' Standing Alone
The State argues that the first statutory criterion, "interest and welfare of the public" should be the determinative one in this case, and that the Arbitrator does not need to consider the other statutory criteria.
ORS 243.746 states that arbitrators must give first priority to the "interest and welfare" consideration, and secondary priority to remaining subsections. But, the ambiguity of the phrase "interest and welfare of the public," lends itself to a subjective interpretation if considered outside of the context of the other statutory criteria. What one reasonable person deems to be best for the 'interest and welfare of the public' could be considerably different from another reasonable person's view. Thus, a more objective interpretation will utilize the contextual framework of the remaining six (or seven, if appropriate) statutory criteria. Other arbitrators have articulated essentially this view. E.g., Klamath County and Klamath County Police Officers Association, IA-07-97 (Torosian, 1998) ("The undersigned in the instant case like most before him agree that the interest and welfare of the public is hard to define and in most cases, including here, secondary criteria have to be applied."); City of Cornelius and AFSCME, IA-01-99, page 6 (Brown, 1999) ("The term is nebulous and hard to define. However, it is clear that the interest and welfare of the public is not the determining factor standing alone, but rather should be given first priority in conjunction with the secondary criteria.")
Regarding the six subsequently listed factors, it does not appear that they were listed in any particular order of importance. It is only the eighth criterion ("Such other factors ….") that is expressly subordinate to the preceding seven. ("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.")
b) Subordinate 'Other Factors'
Both parties contend that the subordinate last criterion ("other factors") should not be applied to this dispute. Both parties' assertions have largely strategic motives. As stated above, the State would have me confine my entire analysis to "interest and welfare of the public," but I have rejected that argument. Presumably it takes this position because a key element of its case, "internal equity," is not one of the specifically enumerated statutory criterion. As an "other factor," it could be ignored or discounted by an arbitrator. The Association, of course, would prefer such an analysis. My conclusion, as explained next, is that "other factors" are important and necessary considerations in this case.
(1) Internal Equity
As stated, the Association believes that there are no "other factors" brought out in this case that can appropriately be considered. In particular, it contends that other arbitrators have rejected the "internal comparability" argument (which it asserts the State is making). I disagree. The State's desire to treat all of its employees equally in this time of fiscal crisis is commonly denominated an "internal equity" argument. The cases cited by the Association relate to "internal comparability," a consideration that attempts to evaluate the pay rates of a single employer across classification lines. The argument (that has been rejected by arbitrators) is that one classification's pay should reflect a different classification's pay (e.g., fire fighters and police officers); or alternatively, their benefit structure should be identical. Arbitrator Lankford noted, in the context of "internal comparability," that "in the real world of collective bargaining … many disputes are driven by one unit's desire to 'get up with' or 'stay ahead of' another unit." Yamhill County and Teamsters Local 670, IA-04-96, at 17, fn 7, (Lankford, 1997). Arbitrator Wollett, in City of McMinnville and McMinnville Police Officers Association, IA-20-99, at 8 (Wollett, 2000) observed, in the context of an employer seeking police officer insurance co-pay identical to its fire fighters':
But, these inequities are inherent in the system and are not, standing alone an adequate basis for a major change in the status quo of one of the bargaining units.
The situations addressed by these arbitrators are different from what the State seeks. The State seeks the equitable treatment of all employees in response to the current fiscal crisis. It argues that because of its current budgetary crisis, which beyond question requires sacrifices (in programs, services, jobs, as well as compensation), the necessary sacrifices will have the best reception from both employee groups and the public if they are imposed evenly and fairly. I note that the Association, by agreeing to a wage freeze and a partial step freeze, has essentially yielded to this argument. To its credit, it has resisted the temptation to argue that because the bargaining unit is underpaid, relative to its choice of comparators, this bargaining unit should have wage and step increases, even though virtually all other State employee groups are having their wages and merit/longevity increases frozen. Thus, despite its rhetoric to the contrary, the Association implicitly recognizes the value of the "internal equity" consideration in the context of the present unfortunate state of affairs. It is am important consideration, and one that should not be ignored by an arbitrator.
(2) Proposed 'Language' Changes
The numerous language changes at issue in this dispute, changes unrelated to basic wages, can be characterized as an "other consideration" that I find necessary to make in this case. I will elaborate on the significance of this consideration later in this opinion.
2.Statutory Direction on Selection of Comparable Jurisdictions
The State contends that under ORS 243.746, when selecting comparators for the State of Oregon, only other states can be utilized. The State acknowledged that ORS 243.746(4)(e)'s opening requirement is for comparison with "comparable communities" which is "limited to communities having the same or nearest population range within Oregon." The statute goes on to list exceptions to the "within Oregon" requirement, by stating that, "Notwithstanding the provisions of this paragraph, …" The three exceptions approve the use of non-Oregon comparators for counties and cities with large populations, and for the State of Oregon. The provision applicable to the State reads: "For the State of Oregon, "comparable" includes comparison to other states." ORS 243. 746(4)(e) (emphasis added). The State contends that the "notwithstanding" language to wholly remove the State from the statute's within-Oregon requirement, even though the third exception, applicable to the State, uses the word "includes." (2)
I cannot agree with the State's position. The statute does not so restrict the comparator selection. Rather, ORS 243.746(4)(e)(C) states that (emphasis added): "For the State of Oregon, 'comparable' includes comparison to other states." Had the Legislature sought the result that the State asserts, it could have stated, to the effect, that comparators "are limited to" other states. Moreover, if the State's interpretation were to prevail, the same logic should extend to the large cities and counties described in ORS 243.746(4)(e)(B) and (C). That would mean, for example, that Multnomah County could not be compared with Washington County, a result that surely the Legislature did not intend. As the Association pointed out in its closing brief, the State's argument was rejected by a number of post-SB 750 arbitrators. See, State of Oregon and Association of Oregon Corrections Employees, AI-18-01 at 6 (Miller, 2002); State of Oregon and Oregon State Police Officer's Association, IA-18-99, at 7 (Lankford, 2000); State of Oregon and International Firefighters Association, Local 1660, IA-16-99 (Levak, 2000); State of Oregon and Association of Oregon Corrections Employees, AI-13-95 at 12 (Bethke, 1995). Despite being repeatedly rebuffed and apparently lacking any plausible legal basis for its argument, the State persists in taking this position.
3. Methodology of Selection of Appropriate Comparable Jurisdictions for Oregon Corrections
a)State's Comparator Group
The State went to great lengths to rationalize a set of comparators comprised solely of other states in the U.S., none of them contiguous to Oregon. Its rationale was indeed impressive; nevertheless, it was deficient when it comes to the reality of discerning a competitive wage. Its own State Employment Economist (Oregon Employment Department), Arthur Ayre, who devised the State's screening criteria, admitted on cross-examination that if he were a local (Marion County) employer trying to recruit new employees from a local labor market, he would set his recruiting wage by "going to the [Oregon] employment department" for wage "data on related occupations within the region." He also conceded that an employee's decision to work for the State of Oregon as a Corrections Officer is not going to be based on what corrections officers are paid in the distant states on the State's list of "National" comparators. Ayres agreed, he stated on cross-examination, that the whole idea of determining appropriate compensation for any given job is to "pay the least amount that you need to in order to attract and keep people," so as to allow an employer to "compete effectively." The Association also identified some flaws in the State's selection techniques. For example, Ayres did not know whether estimates of corrections spending included parole or probation functions. (Some states include these things as a corrections function, some states do not). Some states incarcerate a larger proportion than others in county or city jails. Arbitrator Helm (State of Oregon and AFSCME Council 75, IA-11-03 (2003)) identified certain other flaws in the State's technique. I do not, however, encourage the State to refine its methodology and attempt to present it to the next arbitrator as new and improved. Ultimately, it will not pass the test of economic reality, as was so conspicuously conceded by Ayres. (3)
The State's "National" list of comparators was also rejected by Arbitrator Helm, who echoed Arbitrator Miller's observation that "the potential for alternative comparable groups is limited only by the degree of creativity" of the proponent. State of Oregon and Association of Oregon Corrections Employees, AI-18-01 (Miller, 2002).
b) Association's Comparator Groups
The Association would prefer to utilize a local labor market for the selection of comparators, but is willing to utilize the four contiguous states as comparators (Washington, Idaho, California and Nevada); it also wants to include Alaska. Although the four-state contiguous grouping can be criticized as not being demonstrative of the local labor market, some arbitrators have endorsed this approach.
Bear in mind that for any given jurisdiction, there rarely is a perfect set of comparators. One can always identify reasons why a proposed comparable jurisdiction should pay more or less than the subject jurisdiction. Nevertheless, a comparator analysis is a useful - and statutorily required - tool, if used properly and not applied slavishly. For example, it is not always appropriate for a subject jurisdiction to compensate at the average of the selected comparators. An appropriate pay may be simply within a reasonable range or the average or one that maintains its historical standing.
In my view, the four contiguous states have the advantage of historical usage. (4)
As Arbitrator Lankford stated in State of Oregon and Oregon Police Officers Association, IA-18-99, at 6 (Lankford, 2000):
It is important to the Interest Arbitration process to have an amount of consistency in the use of labor market comparables. Consistency enhances predictability, which in turn facilitates the relationship between the parties.@
The other justification for the four-state average is that the State uses what amounts to a state-wide pay schedule. Although AOCE does not have a presence outside of the Willamette Valley - institutions in those areas are represented by AFSCME - the State tries to maintain wage parity among all of its corrections bargaining units. Thus, when there is effectively a state-wide presence of employees in the same classification, there is some justification for using the four contiguous states as something approximating labor market comparators. I note that in the recent award for AFSCME-represented corrections personnel, Arbitrator Helm used the four contiguous states as comparators. State of Oregon and AFSCME Council 75, IA-11-03 (Helm, 2003).
I will not include Alaska. It is not contiguous, has a far different economy; there was no proffered justification for using Alaska, and it has not been used in the past.
The Association also proposes a set of comparators that comprise the Willamette Valley counties within reasonable recruiting distance of the institutions that it represents. County corrections employees require the same training and certifications as bargaining unit corrections personnel. The biggest difference between the county and State job is that State corrections officers deal with more violent offenders than their county counterparts. Thus, county corrections employees meet the statutory requirement for the comparison to be with "employees performing similar services with the same or other employees in comparable communities."
The Association has additionally refined those comparators to present an analysis weighted according to the counties in which its bargaining unit members live. See Exh. A 10-8 through Exh. A-10-10. Although there is a certain appeal to this methodology, it gives considerable weight to a single comparator, because approximately 70% of the bargaining unit employees live in Marion County. The county with the next largest representation of employees is Polk, closely followed by Linn, with about 9% and 7% of bargaining unit employees. Arbitrators generally frown on having too few comparators, preferring at least three or four, and usually several more. Most often, the comparators are evenly weighted. (5)
Weighting the comparators effectively reduces the number of comparable jurisdictions to one, Marion County. Accordingly, I believe that an analysis based on counties within recruiting distance of the AOCE bargaining unit's local is preferable. (6)
One might quibble over the actual counties selected for this local labor market. The Association has selected the counties of: Benton, Clackamas, Lane, Linn, Marion, Multnomah, Polk, Washington, and Yamhill. Whatever reasonable configuration is utilized, the total compensation lag of this bargaining unit will be substantial; (7)
therefore, I will not endeavor to identify the most appropriate counties to use as comparators.
Given the merits of the four-state contiguous group, and the local labor market group (i.e., the counties within recruiting distance), I find that both sets of comparators are appropriate and should be considered.
4. Inclusion of Employer Costs
The Association asserts that the Employer improperly used the employer's costs when performing its comparator analysis of total compensation. The State accuses the Association of basing its compensation analysis only on liquid wages, and ignoring such substantial items as health care and pension contributions.
ORS 243.746(4)(e) requires the "Comparison of the overall compensation" in comparable jurisdictions. Therefore, benefits must be considered. But, since benefit packages may vary, some method must be used to appropriately account for those variances. The Association has used a common and accepted method in its comparator analysis, which is to make an adjustment based on the employees' out-of-pocket costs. For example, with health care, there are no employee contributions to premium for this bargaining unit. Many comparator jurisdictions require a contribution to premium. Thus, in order to make an appropriate comparison, the Association has made an adjustment based on employee out-of-pocket costs. The Association also presented evidence that there is not a lot of difference among the health care benefit packages as a whole, but only in the amount that employees are required to contribute. I find the Association's methodology to be generally appropriate in this case. (8)

4. Permissive Proposal
The step freeze the Association proposes will expire with the Collective Bargaining Agreement. The State's proposal will expire 24 months from the date of this award. The Association contends that the State's proposal is a permissive subject of bargaining because it would specifically bind the parties beyond the agreed expiration of the Collective Bargaining Agreement, and thus it is something that the Arbitrator cannot lawfully consider. (9)
It is true that ORS 243.746(3) and (4) specify the submission of "unresolved mandatory subjects" to an interest arbitrator. In Springfield Police Association v. City of Springfield, Case Nos. UP-17/20-97 (1997), the Board stated:
[A]n interest arbitrator may only issue a final and binding award concerning mandatory subjects of bargaining. This means that if a party pursues a prohibited or permissive subject of bargaining, and an arbitrator includes the offending proposal in his or her award, the award will not be enforced by this Board. We will likely order the parties back to the arbitrator.
The Board vacated the award and ordered the parties to return to the interest arbitrator for reconsideration of the dispute without the permissive proposal.
Accordingly, if this award includes a permissive subject of bargaining, it is a matter that must be taken up with the Board.Accord, State of Oregon and AFSCME Council 75, IA-11-03 (Helm, 2003). For whatever it is worth, however, my final award will specify how I would rule without the inclusion of the State's proposal over the alleged permissive bargaining subject.
B. Wages and Other Economic Items, Analysis of Statutory Factors
1. Comparator Analysis (10)

Despite using different methodologies, both the State's and the Association's analysis of the four contiguous states shows that currently, corrections employees wages are slightly ahead of the average. The exact amount varies according to longevity and certification level.
The local county comparators selected by the Association, however, show a much larger gap. The Association's analysis shows that the bargaining unit's pay lag is from 14.8% to 20.3%, with an overall average lag of 17.4%. Exh. A-10-8a.
Thus, although the historical four-state comparison shows bargaining unit pay to be adequate, when one focuses on the local labor market of this bargaining unit, and accepts the Association's figures, there is a substantial lag. Perhaps a different configuration of county comparators would produce a different result. As stated above, I did not closely examine the selection made by the Association because any reasonable configuration would produce a lag, and because the State did not challenge the particular configuration selected by the Association, but instead objected to the use of any counties as comparators. Nor did I find it necessary, given the nature of the key issues in this case, to scrutinize the Association's raw data or minutiae of its computations.
2.Turnover
The evidence on "the ability of the unit of government to attract and retain qualified personnel at the wage and benefit levels provided" does not show an immediately serious problem with turnover. The evidence, however, suggests a possible (but not certain) concern. Being a effective correction officer requires a certain personal skill set; the job is not necessarily suitable for any person meeting the minimum qualifications. The hiring of a marginally qualified individual increases the chances that the person will fail or "wash out" early in his or her career. Because of the extensive training costs during the first year of employment (as well as recruiting costs), the early resignation or termination of an employee can cost the State a great deal.
Gary Kilmer, Recruitment Manager for the Department of Corrections, testified that the State needed to focus more specifically on obtaining qualified applicants in the Salem area and that he competes with county recruiting efforts in the Willamette valley. He stated on cross-examination that in his 6 ½ years in the job, the DOC has not had to focus its recruiting efforts on the Salem area to the extent the agency is doing at the present time. He admitted that he is not comfortable with the size of the current applicant pool. The evidence showed a recent failure rate of new hires that exceeds 20%, a high figure that suggests that the applicant pool is not of the highest quality.
The evidence did not show a serious problem with turnover from more experienced employees, however. This could be due to those employees' perception that their pay is adequate (as the Employer contends). On the other hand, it may be that experienced employees are reluctant to give up their seniority benefits in order to start at the bottom elsewhere, or perhaps competing counties prefer to hire in at the lowest levels of the pay scale.
3. Overall compensation
ORS 243.746(4)(d) requires the Arbitrator to consider: "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." I have considered all of these items of compensation, and I note the State's particular generosity with respect to health care. The enumerated items of compensation are a necessary and integral part of any comparability analysis, and have been so utilized.
4. The CPI-All Cities Index
Obviously, a wage freeze will not allow a bargaining unit employee's take-home pay to remain current with the changes in the cost of living over the life of the Collective Bargaining Agreement at issue here. Fortunately for bargaining unit members, the CPI increases thus far into the contract term have been at near-historical lows, hovering at around the 2% figure. I note also that the State's willingness to pick up increases in health insurance premiums is a benefit, which when calculated in percent of base wage, approximates the current CPI increases. (For a 10-year Corrections Officer, the premium increase for 2004 is about 1.9% of base wage). This mitigates the erosion of employees' buying power caused by the wage freeze.
With respect to historical cost of living considerations, the State presented evidence that bargaining unit wage increases have outpaced the CPI over the ten-year period between 1993 and 2003.
5. The Stipulations of the Parties.
The parties presented no stipulations.
6. The Reasonable Financial Ability of the Employer
To reiterate, ORS 243.746(4)(b) requires the Arbitrator to consider:
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.
Significantly, the statute does away with the "ability to pay" language that existed before SB 750. Prior to the 1995 passage of SB 750, ORS 243.746(4), required the arbitrator to consider "the financial ability of the unit of government to meet those costs." The problem with that language is that when read literally, governmental units always could meet the costs of a proposed compensation increase, although doing so might require them to reduce services elsewhere or cut into a reserve fund. ORS 243.746, as amended by SB 750, requires an interest arbitrator to give consideration to other services provided by the governmental unit, and its other priorities. It also requires the arbitrator to disregard a reasonable reserve or contingency fund.
Here, there is no dispute that the State has gone through a budgetary crisis, driven in large part by a significant reduction in revenues due to the latest recession in the economy. Oregon has been particularly hard hurt by that recession and has the unfortunate distinction of currently having the third highest unemployment rate in the nation; at one point, it was the highest. In addition, (particularly with Measures 28 and 30, and the defeat of nine consecutive sales tax measures), the voters have shown that they will not accept a tax increase that directly affects their own pocketbooks, making it very difficult for the Legislature to find any significant new or enhanced sources of revenue. The State has had to make cuts to many programs and institute large layoffs in order to balance its budget (there was a $2 billion shortfall at the start of 2003), as well as impose or negotiate a wage and step freeze on or with other employee groups.
As to when, and how much things will improve, this is difficult to project with certainty. State economists anticipate the revenue flow improving over the remainder of the biennium and beyond. Nevertheless, the evidence suggests that the State will continue to struggle financially for at least several more years. Moreover, as elaborated upon in the State's post-hearing brief, Oregon's system of state revenues (largely income-tax dependent) is highly volatile and a recipe for disaster. Political mechanisms allow the voters to mandate spending in certain areas (e.g., Measure 11 on the mandatory sentencing of felons, and Measure 5, which shifted the burden of educational funding from the property tax to the State's income tax revenues), but essentially withhold adequate funding. The "kicker" law (that requires the return to taxpayers of amounts that exceed the forecast by 2%) effectively prevents the State from accruing an adequate reserve (it should be at about 4%) or saving for a rainy day.
Although the Association contends that its proposal will cost less than the State's during the term of the Collective Bargaining Agreement under consideration, this contention is problematic in my opinion. First, the Association disregards the impact of the State's proposal beyond the expiration of the Agreement. Obviously, a step freeze that extends beyond the expiration of the Collective Bargaining Agreement will cost the State less than one that expires on June 30, 2005. In addition, although there may have been unreasonably high estimates in the State's costing, I found that overall it was more persuasive than the Association's cost analysis. I realize however, as did Arbitrator Helm in State of Oregon and AFSCME Council 75, IA-11-03 (Helm, 2003), the cost of the Association's proposal would nevertheless amount to a very small percent of the State's or the DOC's total budget.
7. Other Factors
I find it is necessary to consider the lowest priority item, "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." ORS 243.746(h). A consideration of the preceding enumerated criteria is not sufficient for the resolution of this dispute. Instead, those considerations show that the relative merits of the parties' respective last best offer packages are fairly evenly balanced.
a) Internal Equity
A very significant consideration is the State's desire to treat all employees alike with respect to pay increases. Thus, its objective during the current fiscal crisis to withhold pay and step increases for one 24-month period. This consideration is commonly referred to as "internal equity."
The vast majority of the State's bargaining units have agreed to a freeze on pay and step increases for 24 months. Thus, over 20,000 employees in 23 strike-permitted bargaining units and three strike-prohibited bargaining units have agreed to these terms. The terms have also been applied to nonrepresented employees, who don't have a choice. Addressing the AFSCME corrections bargaining unit, Arbitrator Helm, the first interest arbitrator to address the issue, selected the State's last best offer primarily because of this consideration. See, State of Oregon and AFSCME Council 75, IA-11-03 (Helm, 2003)
Internal equity is indeed an important consideration because it creates an appearance of fairness. When sacrifice is required, it goes down much better when all employees are affected equally, rather than having certain employees having to bear the brunt of the sacrifice. This in turn lessens the damage to morale that occurs when there is a wage and step freeze. It also is an important consideration to the public, who no doubt wants the State to make its difficult fiscal decisions in a rational and even-handed manner. It is this consideration that primarily tips the scales in the State's favor.
b) Proposed Language Changes - Excluding Salary and Step Freeze
The Association proposed approximately 21 substantive changes (some closely related to one another) to the 2003-05 Collective Bargaining Agreement affecting ten articles and the Appendix. Many of its proposed amendments would have a direct cost impact on the State, as well as an operating impact. (Obviously, as a percentage of the Department of Corrections budget, the cost impact would be small).
By comparison the State proposed five language changes to which the Association has specifically objected in its brief.
It has long been my policy to impose a heavy burden of proof on the party proposing these kinds of changes, which I believe are better left to the give and take of the negotiation process. This is particularly true when one subscribes to the view that interest arbitration must approximate the parties' probable resolution under strike conditions. As Arbitrator Helm stated, in State of Oregon and AFSCME Council 75, IA-11-03 (Helm, 2003):
[I]t could be reasonably expected that each party prior to a strike or lockout would have set forth that proposal which would be the least it was willing to accept short of economic warfare. The party that would ultimately prevail in such a setting would be the one advocating the offer that was ultimately viewed by the parties as being in their best interests to accept. Interest arbitration as the substitute for a strike or lockout, therefore, is not intended to be a vehicle whereby either party can obtain a windfall but rather obtain the result which it could be reasonably expected would have resulted had there been recourse to economic action.
In other words, the interest arbitrator should not favor proposals over which employees would unlikely strike. Thus, it follows that under a last best offer statutory scheme, a party should not be encouraged to piggyback its wish list of contract changes onto its proposal on wages and key benefits. Accordingly, I view proposals unrelated to wages and significant benefits favorably only under certain conditions, as follows: The proponent must show that: 1) the proposal addresses a legitimate, current problem; 2) that the language is narrowly drafted to correct the problem; 3) that it will not have ramifications in other areas. On proposals for premium pay, I believe it is preferable for the parties' themselves to negotiate those special pay matters. Bear in mind that in analyzing wages, premium pay is an item of total compensation, particularly when it is available across-the-board (longevity pay), or is something the employee can strive to achieve (education premium). Therefore, if premium pay is awarded, then the wage award should be adjusted accordingly. It is not something to tack onto a wage award in order to elevate total compensation above the intended target.
ORS 243.746 contains no express criterion relating to non-economic language changes (premium pay proposals, of course, can be evaluated under the enumerated criteria). In my view non-economic language proposals can properly be considered under the last, subordinate category, "other factors," if the arbitrator deems the "other factors" consideration to be necessary. I find it necessary and appropriate to give consideration to the non-salary/step proposals included in the parties' last best offer packages, if only because of the sheer number of them.
(1) Association Proposals
Although I do not think it is necessary to address each of the Association's proposals, suffice it to say I was not convinced of the need for most of them. The only one with clear merit was the "boiler operator classification change" (needed to achieve parity with the same position in the AFSCME unit). The seniority wall is an unfortunate item, but probably necessary because of AFSCME's refusal to eliminate its own seniority wall. If I had the ability to pick and choose among language proposals, I would award the Association's proposals on those two subjects. The Association also made a good case for the hostage negotiator premium, but I don't know whether I would award it (if I could), as a stand-alone item. The remaining proposals either would impose more than a de minimis cost burden on the State, would only reinforce existing language (making the new language unnecessary), did not address a substantial existing problem, and/or would have other adverse effects on the ability of the Department of Corrections to conduct its mission. In sum, I found nothing in the State's proposals to tip the scales against it; to the contrary, the number of proposals of questionable merit contained in its last best offer package works to the State's favor.
(2) State's Proposals
Although thus far, I am inclined towards the State's last best offer, I will briefly review its remaining contract proposals to see if there is anything that would cause me to reverse course.
(a) Release Time
Current Article 4, Section 1 language which gives the Association the "authority" to investigate grievances and other matters within the Association's mandate. The State proposed to delete the word "authority" and insert in its place the phrase, "reasonable release time."
The Association opposes the State's proposals primarily because it has proposed changes that grant it broader rights. But, that is not relevant to the discussion as to whether the State's proposal contains any fatal flaw. The Association also opposes the language allowing "reasonable" release time because the term "reasonable" is too ambiguous; it will allow the State's supervisors to arbitrarily define the term and exacerbate the historical difficulty that the Association maintains it has with DOC managers and supervisors applying the contract.
I agree that the word "reasonable" is ambiguous. Nevertheless, it is term that has earned a time-honored position in contract usage because it recognizes a party's right or privilege, so long as that right or privilege is not abused. No matter what the contractual context or subject matter, parties have abandoned efforts to define the specific parameters of a designated right or privilege, and instead used the word "reasonable." That does not mean that the term is always preferable to more specific language, but it is something that the parties themselves should negotiate. Otherwise, it should be adjudicated on a case-by-case basis. The substitute of the phrase "reasonable release time" for the word "authority" cedes to the Association something it did not have previously in writing. Therefore, it is of net benefit to the Association and is a small point in favor of the State's overall last best offer package.
(b) Overtime - Filling Known Overtime Assignments in Advance
The State proposed amending Article 12, Section 6, to enable it to make overtime assignments from the "overtime list" for weekend laundry and perimeter checks two days in advance of an overtime opportunity. Currently, the DOC cannot fill known overtime positions until 12 hours before the start of the shift. The Association prefers the status quo, which allows employees to leave their options open longer, something the current 12-hour cut-off allows them to do. The State's proposal was narrowly written with no apparent ramifications beyond the State's objective. Although the State's evidence was convincing that the status quo causes planning and workload balancing problems, it also is an inconvenience that it has lived with, apparently, for some time. Although I would not award the State's proposal if I could pick and choose proposals to award, I also find that the State's proposal is a reasonable one that does not detract from the merits of its last best offer package.
(c) Overtime - Mandatory Assignments
Regarding mandatory overtime, both parties proposed language that protects employees from mandatory overtime under certain circumstances. Both parties would protect employees' "Fridays," as well as the day prior to a vacation day. The State, however, would not protect employees' days off, or the "5% flex" employee. The Association's language would remove these protections in emergencies or when necessitated by staffing levels. The Association presented a persuasive argument as to why its proposal on mandatory overtime is the better one. The State did not defend its proposal in its brief. Accordingly, I find the Association's proposal on mandatory overtime to be the more reasonable one. The consequences of the State's language becoming part of the contract, however, will not be so adverse to employees so as to cause me to question the relative merit of the State's overall last best offer package.
(d) Medical Premium Cap
Health care benefits are, of course, a substantial element of an employee's total compensation package. However, I am including the topic in this section because the parties have no disagreement, except over one relatively minor matter. Both parties agree that the State will pay 100% of the premium until January 1, 2005. The Association proposes that the State pay 100% until June 30, 2005. The State proposes to cap its contribution at $41.47 over the State monthly composite per employee rate of $665 from January 1 to June 30, 2005. The State's projections are that this amount is adequate to cover the entire premium; hence, the matter is not a significant issue for this contract term. With more and more bargaining units (including comparator bargaining units) engaging in a form of premium sharing, I find the Employer's proposal to be a conceptually reasonable one. It does not detract from its overall last best offer package.
(e) Training/Education
The State's proposed change to Article 36, Section 4 would eliminate the rigid requirement for 40 hours per year of DPSST training for eligible unit members to language which states that "it is the intent of the Employer, within funding and staffing resources," to provide a minimum of 40 hours of training per year.
The State presented evidence as to the occasional difficulty that this language has posed. (It also lost a grievance arbitration on the subject). I agree with the State that an inflexible training minimum is ill-advised. (11) How does one justify, without considering all of the circumstances, 40 hours of training annually, as opposed to 50 or 30? While ongoing training is generally a good thing, one can envision circumstances when it is desirable to provide more or less training than is the usual case. Therefore, I find the State's proposal to be a reasonable one and one that I might well favor under a statutory scheme that would allow me to pick and choose.
(3) Conclusion on Language Issues
I agree with the assertion of the State in its brief, at 25, that;
Unlike most interest arbitrations, the language proposals presented by the Association in this interest arbitration cast a considerable weight which should be factored in the outcome of this proceeding. The Association has presented numerous language proposals which seek to obtain gratuitous windfalls by piggybacking onto primary issue concerning merit step freezes.
The State's proposals discussed above are reasonable and will not unreasonably burden the Association's rights and privileges brought forward under the expired contract. Therefore, unlike the Association's proposals, I do not find the State's proposals to be a negative factor in its last best offer package.
8. Interest and Welfare of the Public
I return now to the priority consideration, the interest and welfare of the public. This factor, when fleshed out with the considerations discussed above, allows me to better determine the relative merits of each party's proposals.
As I stated, implicit in the Association's position (as well as, of course, the State's) is a recognition of the extraordinarily difficult economic circumstances the State faces. Thus, the parties' wage proposals differ in only a few respects. The step freeze the Association proposes will expire with the Collective Bargaining Agreement, and employees will advance to the step they would have occupied without the freeze. The State's proposal will expire 24 months from the date of this award. It contains no language as to employees' step advancement at the expiration of the freeze. (12)
As partial compensation for having no pay increase, the State has offered a one-time payment of $350 for each employee.
Ultimately, the question on wages is an exceedingly close one. The Association has in its favor the evidence that bargaining unit wages are lower than any reasonable set of comparators. There is some evidence that wages may be starting to affect the State's ability to recruit and retain suitably qualified Corrections Officers in the Salem area. It is certainly in the public's interest and welfare to have corrections personnel adequately paid. The public, through Ballot Measure 11, has voiced a strong preference for longer prison sentences, which has required the State to vastly increase the size of its corrections facilities. Clearly, the State is spending a great deal more of its budget on corrections, even through the current recession. Low wages will almost certainly tear down morale over the long run, which must have a negative effect on the State's mission. Moreover, a wage that is not wholly competitive can adversely affect labor stability, an important consideration relative to the interest and welfare of the public. The longer the freeze, the greater the potential for future conflict over demands by employees for "catch-up" increases.
In the State's favor is its truly dire financial situation, which is not one that will be resolved in the short term. The State has slashed its services and has frozen wages and pay steps. The State has a number of high priority needs, which include corrections (since it must meet the mandate of Ballot measure 11), as well as education, health care and some other areas. It is strongly within the interest and welfare of the public for an interest arbitrator to keep this "big picture" in mind.
In addition, I find that under these particular strenuous circumstances, the State's desire, in the interest of fairness, to maintain internal equity is something that is a significant consideration in the public's interest and welfare. While I am disturbed about the State's step freeze proposal extending beyond the agreed-upon expiration date of the new Collective Bargaining Agreement, I understand that this is needed for reasons of fairness. Thus, while it may be in a better position to grant a step increase in mid-2005 (the start date of a successor agreement), if bargaining unit employees were to have a step increase on that date, they would fare better than the great majority of other State employees, whose step increases have been frozen for 24 months. Moreover, as recently stated by Arbitrator Helm:
If a small minority of employees were to continue to receive merit increases during the two-year moratorium affecting all other employees throughout state government, the adverse impact upon morale and consequently upon performance of duties while incapable of precise calculation must be deemed to be severe and not in the public interest. The agreement by the overwhelming majority of bargaining units supplies the necessary "compelling need and changed circumstances" to justify the substantial disruption to the status quo encompassed in the Employer's last best offer package. …
This decision appears to reflect their collective judgment that a strike would not result in a more favorable settlement, and that delay in settlement would not enhance the terms of their contracts.
Finally, I consider the large number of Association language proposals (unrelated to bargaining unit-wide wages) to be a significant reason to deny its proposed package. It is not in the interest and welfare of the public to have collective bargaining agreements encumbered by language that increases employer costs, decreases management flexibility, could lead to dispute and grievances in new areas, and/or does not solve significant workplace issues. This is not to suggest that all of the Association's proposals were unreasonable - in fact, most of them fell within the range of reason. But with the two identified exceptions, they were not compelling. It is not in the interest and welfare of the public to allow a party to successfully piggy-back such a large number of proposals onto its package addressing wages and key benefits.
In conclusion, after weighing the parties' proposals against the statutory criteria, I conclude that the State's last best offer best serves the interest and welfare of the public, and that it is the preferable one under the facts and circumstances of this case.
Since I have selected the State's last best offer, despite its step freeze that extends beyond the expiration date of the 2003-05 agreement, it follows that I would also select the State's last best offer if ERB or the courts ordered it amended to expire on June 30, 2005.
VI. ORDER
Pursuant to ORS 243.746, the undersigned impartial Arbitrator selects last best offer package of the State of Oregon Department of Administrative Services on behalf of the Department of Corrections. The Arbitrator orders the State's package to be included as part of the parties' 2003-05 Collective Bargaining Agreement.
Date: April 2, 2004
Jane R. Wilkinson, Labor Arbitrator
Representatives:
For the Employer: Herbert L. Harry, Assistant Attorney General, Department of Justice, Labor & Employment Section and Kenneth E. Bemis, Attorney at Law, Bullard Smith Jernstedt Wilson
For the Union: Daryl Garrettson, Attorney at Law, Garrettson Goldberg Fenrich & Makler
1. 0 ORS 243.746 states: "Merit step and longevity step pay increases shall be part of the status quo unless the expiring collective bargaining agreement expressly provides otherwise." Thus, it is my understanding that because the contract issues were unresolved at the time of eligible employees' step increases, eligible employees have received whatever step increase was due between July 1, 2003 and the date of this award. Under the State's proposal, employees' steps would be frozen at the step they are in for 24 months. Under the Association's proposal, the step freeze would expire on June 29, 2005.
2.
0 The State's brief, at 20-21, asserts:
Indeed, arbitrators have found that it is inappropriate to consider total compensation comparisons between the State and counties, recognizing that the statute expressly regulates the consideration to "other states", …. Although a few arbitrators have considered local county comparisons under a labor market theory, they have only done so under the "umbrella" criterion of ORS 243.746(4)(h).
Its brief, at 26, reiterates:
It is also quite clear, and most arbitrators have concluded, that it is not appropriate to look at other counties, which are not comparable communities, and have entirely different funding sources.
The State cited no arbitration awards in support of this statement, and I am not aware of any awards that directly or inferentially support the State's assertion.

3.
0 The Economist, "Economics Focus/Signifying Nothing?" (Jan. 31, 2004), pg. 76, noted that during the Middle Ages, the Dutch observed a correlation between the number of children born within a home and the number of storks living on the roof. Although the statistical relationship was significant, obviously it was merely coincidental, and did not meet the requirement that there be a rational explanation for the correlation. The article chastised economists for "failing to separate statistical significance from plausible explanation." Id.
The two most common surrogates used in interest arbitration, geography (i.e., local labor market), and population, have passed the economic reality test and are specifically sanctioned by ORS 243.746(4)(e). By comparison, the State did not even show the correlation between its statistical surrogates (such as prison population, per capita tax revenues, corrections spending and unemployment rate) and corrections wages. Moreover, it did not offer a plausible explanation for what its statistics purported to demonstrate; in other words, it did not pass the economic "smell" test.
4.
0 I gather that in the past, the State has vigorously resisted using the four-state average (fearing in particular, the impact of the "800-pound gorilla," California). But with California (and Washington State) also having their budgetary woes, the four-state average is now much more in line with Oregon corrections pay.
5.
0 Although there are some awards that have given a reduced or increased weighting to certain comparators, the reduction or increase never accounts for more than about 10% of the total.
6.
0 Although the State contended that the Association did not prove that the Willamette Valley constituted the recruiting area for bargaining unit positions, I disagree. Besides being a matter of common sense, at least two of the State's own witnesses gave evidence that permits an inference favorable to the Association. Gary Kilmer, DOC's Recruitment Manager, admitted that for the Salem institutions, the State must compete with county recruiting efforts in the Willamette valley. Arthur Ayre, an economist for the State, testified that for lower paying occupations, recruiting generally takes place locally.
7.
0 I also note that the State did not propose a configuration of counties that it believes would be more appropriate. Rather, it challenges the use of any counties as comparators.
8.
0 My review of the parties' four-contiguous states comparator analyses of the components of the compensation package, for a 15-year employee with an AA degree, showed some curious differences. For example, on PERS contributions, the Association's figures show Oregon employees' benefit is nearly three times the average, while the State shows its contribution to be about 14% below the average. The State shows its social security contribution 3% above average; the AOCE shows the bargaining unit benefit to be more than twice the average. I did not attempt to reconcile these differences since both parties' analyses showed the bargaining unit pay to be above the average.
9.
0 I note that beyond this assertion, the Association did not elaborate upon its argument or advance any supporting citations. Nor did it present evidence that it has filed a complaint with the Employment Relations Board. On January 4, 2004, the State, however, sought a declaratory ruling from the Board on the issue but because neither the Association nor AFSCME would join in the petition and agree to stipulated facts, the Board declined to rule. Exh. A 6.

10.
0 The order in which I am discussing the statutory factors is one that is convenient to the flow of this discussion. One should not infer that they are discussed in order of importance.
11.
0 An exception would be when the hours of required training reflects the minimum needed to maintain an employee's professional certification. That is not the situation in this case.
12.
0 I recognize that employees who are at the top of the salary schedule (reached after eight years) will not be affected at all by the step freeze.