Binding arbitration a bad deal for taxpayers

From The Beacon, May 2010, Vol. XXXVI, #5

Last month’s ruling that awarded Boston firefighters a whopping 19 percent pay increase is ample evidence that binding arbitration is a bad deal for taxpayers. After a four-year delay caused by the Boston fire union’s steadfast refusal to agree to reasonable salary adjustments and random drug and alcohol testing, the union was rewarded for its confrontational and over-the-top antics with a pay increase that is staggering in size and damaging to the city budget.

The ruling will cost Boston taxpayers an estimated $74 million. Firefighters will receive the 19 percent raise retroactively, while most other city unions had negotiated raises of 11 percent covering the same time period, and teachers and police officers received 14 percent increases. This will place enormous pressure on the city when negotiating new contracts with all other employees, and if the police unions threaten binding arbitration, the true cost to Boston taxpayers could easily exceed $74 million.

Who’s responsible? An unelected, unaccountable arbitrator who does not have to live with the impact of his decision, that’s who.

Binding arbitration was repealed by the voters in 1980 as a core element of Proposition 2½, because voters recognized that with a tax cap in place it would be irresponsible and foolish to give an outside party the ability to create a fiscal crisis by giving special or unaffordable benefits to any segment of the workforce. In the 1980s, the Legislature reinstated a form of binding arbitration through the Joint Labor Management Committee for police and fire employees. Under that system, if an impasse is sent to binding arbitration by the committee, the subsequent ruling is binding on the municipal executive, who is prevented from speaking against the ruling. The municipal council must vote to accept the decision, and it is extremely rare to have a ruling rejected.

In the years leading up to binding arbitration’s repeal in 1980, the evidence was crystal clear that most arbitrators were issuing findings that favored labor and imposed a very heavy burden on communities. Cities and towns have no interest in long and protracted negotiations and would offer comparable wage increases throughout the workforce. Yet unions holding out for binding arbitration would almost always receive more than other employees, creating imbalances and inequities, and driving up costs.

Fortunately, there have not been many binding arbitration cases in recent years, yet the Boston case could trigger a renewed interest on the part of the unions.

On Beacon Hill, union leaders have even been floating a proposal to tie binding arbitration to any change in municipal health insurance plans, and they succeeded in getting the Senate to adopt this language last year. Fortunately, the legislation was shelved after local officials across Massachusetts forcefully argued that the bill would have been much worse than no action at all. Expanding binding arbitration to cover health benefit changes would drive up taxpayer costs to sky-high levels.

Binding arbitration flies in the face of transparency and accountability. Last month’s arbitration award was issued by a New York-based mediator who will not feel the impact of this decision one way or another, except perhaps to be hired by another union in another part of the country looking for the same result.

The lessons learned from this experience may be very expensive, but let’s hope state officials recognize the deep and abiding flaws with binding arbitration, and let’s hope they listen to the outraged taxpayers, too.