Resources & Research

The Sweet Smell of Success

Cover Story – Legislative Reform

The Sweet Smell of Success

By Samantha Harkins

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The new year ushered in a new era for Lansing—Republican control in the Michigan House and Senate as well as a new Republican governor who promised to do things differently. Governor Snyder has certainly pushed the envelope and changed the way things are done here at the capitol. For local units of government, this new establishment has resulted in some major changes to the way we do business. Major reforms that were only a pipe dream even half a decade ago have now been signed by the governor. In terms of cost savings reforms, this has been a good year.

PA 312
Of all the reforms signed, the biggest is to PA 312 of 1969, the law that requires binding arbitration between a local unit of government and a public safety union in the event of a negotiations impasse. Modification of PA 312 has been a goal of local units of government for decades—ever since its initial passage in 1969. In his March special message, the governor indicated that he wanted to alter PA 312, and when HB 4522 passed the Legislature in late June it included everything on the governor’s and the League’s agenda.

The changes to PA 312 make a community’s ability to pay the primary factor an arbitrator must consider in an arbitration proceeding. It also defines the term “ability to pay” in order to create more consistency in arbitrations. The legislation requires an arbitrator to consider internal as well as external comparables. For years, there was no requirement that an arbitrator consider the pay and benefits of other bargaining units within the community.  The use of internal comparables will show a more complete picture in the arbitration process and help to preserve internal equity and morale within the organization. A further change to Act 312 speeds up the arbitration process to 180 days and moves up the parties’ last best offers, requiring submission following mediation.

A tighter timeframe will help reduce costs, direct and indirect, related to binding arbitration. More importantly, quicker resolution may promote more positive labor relations. Future police and fire authorities will be covered under PA 312; however, existing authorities are mostly grandfathered with a few exceptions. These significant changes, particularly the changes to ability to pay, are a huge victory for local units of government.

Further changes for local units came with PA 54 of 2011. It freezes wage and benefit levels after a contract expires and prohibits retroactive wage increases greater than those in the expired bargaining agreement. This new law will result in significant cost savings because contracts are being settled more quickly.

A number of other reforms passed both chambers this summer and are waiting for concurrence by the Senate. Legislation changing PERA, SB 493, would prohibit the creation of an authority from being a subject of bargaining. This gives local units of government the freedom to make important management decisions regarding consolidation. Minimum staffing is being addressed in SBs 485-492, bills that would prohibit minimum staffing requirements in charters or ordinances. Those communities interested in minimum staffing requirements would be able to implement them through the collective bargaining process.

Urban Cooperation Act
Amending the Urban Cooperation Act (UCA) is another issue the League has pushed for a number of years. This year, significant reform passed the House eliminating the most egregious requirement in the Act and a real barrier to cooperation—the requirement which says an employee who is transferred to another department may not be harmed with respect to wages or benefits. They way the Act stood, if two municipalities merged a department (and had been paying different wages), all employees of the newly formed department would have then made the higher salary. This was a barrier to cooperation since it was not a money saver.

The Senate responded to the House amendments by including an amendment requiring unexpired contracts to be transferred—a sticking point with the House. The House subsequently stripped that language and sent the bill back. After a workgroup meeting with all interests, the major differences appear to have been ironed out. We expect the Legislature to wrap up this reform piece quickly after the summer break.

Health Care Reform
Health care reform has also been a hot topic for several years in Lansing. The Senate kicked off the year with its concept embodied in SB 7, a bill requiring an employee to pay 20 percent of their health care premium. This legislation allowed local units of overnment to opt out. The House countered with HB 4572, a bill that would require a hard cap for all public employers with no opt out for any public employer. The compromise, finally inserted into SB 7, was a preference for a hard cap; however, a public employer could instead opt to do an 80/20 premium share. In addition, a local unit of government (city, village, township, or county) could opt out entirely with 2/3 vote of its governing body. In mid-July the Senate voted to not concur with the House compromise and sent the bill to a conference committee. We expect that the committee will meet in the fall. Please note that these healthcare requirements are in addition to what the Legislature has passed to comply with the EVIP program.

In conclusion, though there are a few loose ends to be tied up, this has been a great year for local government cost savings reforms. These reform measures—taken individually and as a package—have created many options to help communities.

What is PA 312?
Public Act 312 of 1969 established a system of mandatory binding arbitration for labor disputes in municipal police and fire departments. PA 312 provides for the selection of, and authority given to, arbitrators; it also prescribes the procedures for the arbitration process.

What was the effect of PA 312?
PA 312 gives power to an individual arbitrator to determine police and fire wages, benefits, and other terms and conditions of employment. Despite its good intentions, PA 312 made it very difficult for local elected and appointed officials to control their largest cost: personnel. It also added significantly to the costs of labor relations, the length of time the process takes, and in many cases, resulted in more contentious labor relations.

Perhaps of greatest concern was arbitrators’ heavy reliance on external pay data in the PA 312 process. This resulted in police/fire employees having significantly more generous compensation packages than other employees working for the same municipality. This type of disparity compromises internal equity in favor of comparisons with an external labor market. Further, the external market considered in the arbitration process often overlooked a community’s location, size, or financial health.

Online Publication of Legal Notices
The League testified in support of legislation to allow public notices to be published online. The legislation would require a notice be posted in the municipal clerk’s office as well as one of the following: a municipal website, a newspaper’s website or on a PEG channel. A substitute was adopted allowing notices to also be posted on TV or radio stations.

As expected, the press associations opposed the legislation due to a perceived lack of government transparency. We countered by saying this legislation would actually bring about more transparency since it expands public access to legal notices. We also informed the committee of the cost savings impact this would have—a poll of about a quarter of our membership showed publication costs of about $1.2 million—not including the city of Detroit. City Clerk Janice Winfrey testified that the city already spent $350,000 this year (2010) on public notices. As of August 2011, the bill is still in committee.

Testimony from Members
“As legislative chairman for the Michigan Association of Chiefs of Police I have had many opportunities to work closely with the League’s Lansing Staff on a variety of issues, most notably the reform of Public Act 312. It has been a pleasure to work with such knowledgeable and professional individuals. The League is well served and should be proud to be serviced by such high quality individuals.”
—Howell Police Chief George Basar; Michigan Association of Chiefs of Police liaison

“Involvement in the League allows for a multitude of advantages. In addition to supporting issues that are important to elected officials and their constituents, involvement in the League provides a platform for networking and interaction with fellow dignitaries and officials across the state. The League seeks to provide one collective voice for Michigan communities while simultaneously advocating for improved communities and an improved Michigan.”
—Detroit City Clerk Janice Winfrey

“In anything, you can sit on the sideline and complain or you can make a difference,” Auger said. “I’ve always been one that’s been not waiting to see what happens. Control your own destiny. If you don’t like something, work to
change it.”
—Auburn Hills City Manager Pete Auger

Samantha Harkins is a legislative associate for the League. You may reach her at 517-908-0306 or [email protected].

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