Lessons Learned From the Clark County School District’s Recent Interest Arbitration Victory

Binding interest arbitration is how unions representing teachers, police and firefighters resolve an impasse in collective bargaining in Nevada.  The unions like to repeat the mantra that the binding arbitration procedure in NRS 288 is the quid pro quo for “giving up” the right to strike.  (Of course the right to strike did not exist under common law so the unions merely gave up the right to ask legislators to pass a law giving them the right to strike.)  Furthermore, buying into the concept of interest arbitration was a no-brainer for the unions—there is little risk—usually the arbitrator is simply deciding how big a raise will be or whether to freeze wages.  On rare occasions real givebacks are at issue—like this firefighter decision in favor of Clark County.   That decision will not cause unions to quake in fear unless and until other local governments resolve to bravely press aggressive positions all the way through to decision.  But enough on that soapbox—that is a conversation for another day.

Even in light of the recent decisions in favor of Clark County and the Clark County School District, cases where unions and local governments actually go to hearing and get a decision in interest arbitration are still relatively infrequent.   I believe there have been less than a dozen in the last twenty years in Southern Nevada and probably even fewer in the rest of the state.  On February 4, 2013 arbitrator Jay Fogelberg issued this decision in favor of the Clark County School District and against the Clark County Education Association.  Here are two lessons we can glean from the decision.

Lesson #1:    Consider the Local Government’s Entire Mission When Arguing Ability to Pay

 

Too often, the arbitrator simply looks at whether the local government has money in its budget to pay the requested wages and benefits.  Cases like that have historically been relatively easy for unions to fight.  The expert accountants hired by the unions seem to be able to find piles of cash in nooks and crannies throughout a budget.  But the real question for the arbitrator should be whether the local government could use the money in its budget to pay the wages and benefits and still accomplish the tasks it is mandated to carry out.

Under the school district section of NRS 288 when considering ability to pay an arbitrator must give due regard to:

“…[T]he obligation of the school district to provide an education to the children residing within the district.”

For all other local governments the arbitrator or fact finder must give due regard to:

“…[T]he obligation of the local government employer to provide facilities and services guaranteeing the health, welfare and safety of the people residing within the political subdivision.”

Arbitrators usually look at revenue and expenses and in the Clark County School District case Arbitrator Fogelberg did the same. He duly noted that the Great Recession had created serious problems in Nevada and observed “While there is currently some evidence of an upturn in the economy nationwide, there is little effort to support a finding of significant improvement in Nevada at this time.”

In his written decision Fogelberg discussed the challenges the School District had on the revenue side.  However he spent nearly half of the analysis section of the written decision discussing the School District’s inability to carry out its obligation to provide an education to the children residing in the district.  He cited test scores, class sizes and even quoted a statement made by the President in the first debate.

How can other types of local governments convince arbitrators to consider how granting wage or benefit increases could impair the local government’s ability to provide facilities and services guaranteeing the health, welfare and safety of the residents?  In fire and police cases the focus is many times on the safety of the residents in terms of fires, EMS calls or criminal acts.  Thus the unions usually trot out statistics showing fire call volume or crimes or police officers per 10,000 residents.

But what if by granting the money demanded by the fire or police unions the city or county’s ability to provide animal control, or lifeguards, or swimming lessons, or building inspections would be impaired?  Or what if there is no money for parks, which give youth an outlet for energy and recreation—don’t those services impact health and safety?

What does mean for a local government to guarantee the “welfare” of the residents?  Webster defines welfare as “the state of doing well, especially in respect to good fortune, happiness, well being, or prosperity.”  Don’t worry—you’ll never hear me argue in favor of a “welfare state”.   I don’t know about libertarians but even fiscal conservatives will agree that it is appropriate for a local government to do more than simply provide for police, fire and trash pickup.

There are ways to measure those other services and how their reduction or elimination impairs the ability of the local government to provide for the welfare of the public.  When preparing for arbitration the parties collect wage data and make detailed comparisons to other local governments.  But these data and comparisons  should be collected for the other services provided by local governments.  Just Google “park playgrounds” and you will find lots of interesting data like this.

The bottom line is that the current economy requires us to look at ability to pay in a different way.

Lesson #2:    Don’t Assume Any Arbitrator is Heartless

 

In its final offer the School District was careful to make its step freeze proposal retroactive but provided that it would forgive any overpayments of salary that occurred between the beginning of the fiscal year and the imposition of the District’s final offer.  The arbitrator found that aspect of the offer, forgiving the overpayments, made the offer more palatable for him.

The union had put on evidence that imposing a retroactive wage freeze would create a hardship for some teachers.  No matter how convincing such evidence is, the arbitrator is human and such evidence would be hard to completely ignore.  Note that arbitrators have in the past ordered retroactive wage reductions that required repayment to the local government—see this decision.  However even if there is a chance that an arbitrator could make such a difficult decision is it best to try and avoid putting him or her in such a tough spot.  (Of course if the “evergreen” doctrine were legislatively abrogated there would be little risk of a retroactive wage reduction.  Something along these lines may occur if the planets align during this legislature.)  Bottom line:  keep the human side in mind.

Nothing in the recent Fogelberg award changes my thoughts on preparing for collective bargaining—see this prior blog post.  But now local governments should remember to be ready to explain in detail at the bargaining table how other services will be affected by the union’s demands.