PA 312 Forces Unreasonable Conditions Upon Community Management

Budgets are falling across the state of Michigan.  It happens.  Revenues decrease in recessionary periods, and the realities of financial forecasts become vague and somewhat Picasso-ish when markets, where much of municipal pensions funds lay, become unpredictable.

So it goes in the City of Traverse City, Michigan where the future of pensions of Firefighters were considered on Monday. A new contract was signed increasing wages 2 % retroactively to June of 2009 when their previous contract expired.  Further there was an additional sweetener into the pension promises made for the firefighters.  The vote passed the commission was 6-1:

A factor used to determine firefighters’ pensions proved a sticking point in commission discussion and led Commissioner Mike Gillman to cast the lone dissenting vote against approving the contract.

The new contract increases the pension factor — a figure that’s combined with an employee’s years of service and wage level at retirement to determine pension — from 2.5 to 2.8 percent.

Firefighters are supposed to contribute enough toward their pension to make up for the increase, but Gillman contends the city “almost undoubtedly” will end up losing money on the deal.

“Actuarily covering it and actually covering it are two different things,” he said, referring to actuaries who help craft the pension formulas.

Bifoss agreed with Gillman, but said the city could lose bigger if the city wound up on the losing side of an arbitrator’s ruling on the matter.

The Numbers that commissioner Gillman describes are based on hypothetical investment returns considerably higher than recent or anticipated yields.  The numbers expect an 8% return in the market based pension, when in fact it is maintaining barely 2.5%.  The added contributions made by the firefighters will not automatically guarantee the value that the multiplier provides, and that can leave the city with a deficit in its contractual obligation.

In other words, its a unknown liability that the commission passed on to future budgets.

Ultimately, Traverse City, like much of the state’s cash conscious municipalities,  should make an attempt to move into a purely “defined contribution” plan, which does not punish a future city government for the decisions of today’s contract makers.  The increased benefits come at a cost to the taxpayers later in the scheme.

Bifoss’ remark however, gives a clue about why certain decisions are made, and that the underlying best option may not be what has been accomplished.  He essentially said “We will lose more if we were to take this to binding arbitration.”

So why worry about arbitration?

Here is  the sticker.  The findings of compulsory arbitration are indeed final.  But because of P.A. 312 of 1969, it stacks the deck against local governments.  The preface to the bill reads:

AN ACT to provide for compulsory arbitration of labor disputes in municipal police and fire departments; to define such public departments; to provide for the selection of members of arbitration panels; to prescribe the procedures and authority thereof; and to provide for the enforcement and review of awards thereof.

It IS the authority in such cases, and a labor dispute arbitration over the Traverse City contract would result in the possibility of the city having to concede even further to the demands of the union, whether it likes it or not.

The problem is spelled out in the act:

423.240 Majority decision of arbitration panel final and binding; enforcement; effect of new municipal fiscal year; awarding increased rates or benefits retroactively; amending or modifying award of arbitration.

Sec. 10.

A majority decision of the arbitration panel, if supported by competent, material, and substantial evidence on the whole record, shall be final and binding upon the parties, and may be enforced, at the instance of either party or of the arbitration panel in the circuit court for the county in which the dispute arose or in which a majority of the affected employees reside. The commencement of a new municipal fiscal year after the initiation of arbitration procedures under this act, but before the arbitration decision, or its enforcement, shall not be deemed to render a dispute moot, or to otherwise impair the jurisdiction or authority of the arbitration panel or its decision. Increases in rates of compensation or other benefits may be awarded retroactively to the commencement of any period(s) in dispute, any other statute or charter provisions to the contrary notwithstanding. At any time the parties, by stipulation, may amend or modify an award of arbitration.

Essentially, the act says that decisions made during the arbitration process need not  even CONSIDER  a municipality’s fiscal ability to pay for the contract, in the decision making of the panel.

Perhaps it is time to consider P.A. 312 a hindrance to sound fiscal planning, and call for its removal from our legislative record.

This year, for the first time since its passage in 1969, the legislature is considering amendments to P.A. 312.  Amazingly, a simple provision saying that a municipality’s ability to pay should be considered by the arbitrator is considered controversial! Public employee unions continue to have an ownership interest in our Michigan Legislature.

Perhaps you should ask YOUR legislator where he or she stands?

6 comments for “PA 312 Forces Unreasonable Conditions Upon Community Management

  1. May 6, 2010 at 8:26 pm

    Where did you get these false talking points? The Mackinac Center? Their/your rant on PA 312 is simply not true. The arbitrator certainly can consider a municipality’s fiscal ability to pay for the contract, and the municipality can present any evidence they wish to the arbitrator.

    The assault on PA 312 is just part of the rightwing’s assault on workers, on unions and collective bargaining. Since 1969 PA 312 has provided a fair and equitable process for contract disputes between firefighters and police officers and municipalities instead of a strike. PA 312 is intended as a last resort in negotiations, not as a bargaining tool.

    • jgillman
      May 6, 2010 at 9:52 pm

      I posted the language which specifies the point I made. It speaks for itself. PA 312 is a problem.

  2. Craig
    May 11, 2010 at 2:04 am

    Actually, you didn’t post the language. MML has been trying to get rid of 312 for years. You’re far too short-sighted to see what the result would be. Ever heard of the Blue Flu?

  3. May 11, 2010 at 1:18 pm

    Sounds like a good idea then to write legislation requiring a doctors note for sick days when it comes to law enforcement or firefighters.

    Shucks, that would close the backdoor method of striking. I hate it when that happens.

  4. Robert
    February 28, 2011 at 3:19 pm

    The section you posted does not pertain to the point you were trying to make. The following section does, read part “C”.

    Act 312 of 1969

    423.239 Findings and orders; factors considered.

    Sec. 9.

    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, and wage rates or other conditions of employment under the proposed new or amended agreement are in dispute, the arbitration panel shall base its findings, opinions and order upon the following factors, as applicable:

    (a) The lawful authority of the employer.

    (b) Stipulations of the parties.

    (c) The interests and welfare of the public and the financial ability of the unit of government to meet those costs.

    (d) Comparison of the wages, hours and conditions of employment of the employees involved in the arbitration proceeding with the wages, hours and conditions of employment of other employees performing similar services and with other employees generally:

    (i) In public employment in comparable communities.

    (ii) In private employment in comparable communities.

    (e) The average consumer prices for goods and services, commonly known as the cost of living.

    (f) The overall compensation presently received by the employees, including direct wage compensation, vacations, holidays and other excused time, insurance and pensions, medical and hospitalization benefits, the continuity and stability of employment, and all other benefits received.

    (g) Changes in any of the foregoing circumstances during the pendency of the arbitration proceedings.

    (h) Such other factors, not confined to the foregoing, which are normally or traditionally taken into consideration in the determination of wages, hours and conditions of employment through voluntary collective bargaining, mediation, fact-finding, arbitration or otherwise between the parties, in the public service or in private employment.

    History: 1969, Act 312, Eff. Oct. 1, 1969
    Constitutionality: This act is clearly constitutional. Local 1277, Metropolitan Council No 23, American Federation of State, County and Municipal Employees, AFL-CIO v City of Center Line, 414 Mich 642; 327 NW2d 822 (1982).
    Popular Name: Act 312

  5. JGillman
    February 28, 2011 at 6:05 pm

    Thank you. I believe when I wrote this I was interpreting more than I had to. This part in particular:

    “The commencement of a new municipal fiscal year after the initiation of arbitration procedures under this act, but before the arbitration decision, or its enforcement, shall not be deemed to render a dispute moot, or to otherwise impair the jurisdiction or authority of the arbitration panel or its decision. “

    But simple is best.. Again, I thank you.

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