Just this month, city of Ann Arbor officials were told at a City Council retreat they face an $8 million deficit for the rest of this fiscal year and the next.
To make matters worse, the city was ordered by an arbitrator in February to give a series of retroactive raises – one as high as 3 percent – to one of its largest police unions going back to 2006. That will cost the city an additional $1.5 million, according to Ann Arbor Chief Financial Officer Tom Crawford.
Ann Arbor’s financial hard times highlights what many believe are a problem with Public Act 312. That act makes arbitration mandatory for labor disputes in municipal police and fire departments when negotiations fail.
State Representative Joe Haveman, R-Holland, introduced House Bill 5325 that would give arbitrators more criteria when making a decision. It would ask arbitrators to consider the financial impact five years from the date of the award as well as take into consideration the climate of the state and whether the municipality can cover the costs and still keep a balanced budget.
In Ann Arbor’s case, the arbitrator pointed to a $10 million plus general fund reserve as evidence the city could afford the retro-active raises.
Ed Jacques, director of member services, Police Officers Association of Michigan, called the reform of PA 312 “unnecessary.”
“The arbitrators know what ‘ability to pay’ is,” Jacques said. “It’s too much. The process works very well. I think it is the great equalizer.
Jacques said a trend is emerging where employers are taking unions to arbitration.
“They want more back and they know they are not going to negotiate a substantial health care cut,” he said. “You are not going to negotiate a 0-percent raise for three years. No one will take that back for ratification.”
But Crawford said that when an arbitrator looks at a city’s savings and says it should be used for retroactive raises, that imposes the arbitrator’s will over that of the community. Crawford said taxpayers may want that surplus money spent on projects other than police and fire salaries.
Haveman said the arbitrators make decisions that elected officials are voted into office to make.
“It puts decision making in the hand of somebody who can make a decision and leave town and not have to live with the consequences,” Haveman said.