1. 1 Reform of the Industrial Relations in the Ontario BPS: Any Lessons from Michigan? Richard N. Block Arbitrator Professor and Director Emeritus School of Human Resources and Labor Relations Michigan State University For Prospects for Reform of Industrial Relations in the Ontario Broader Public Service Toronto, Ontario June 22, 2012

2. 2 Basic Characteristics of Michigan Public Sector Bargaining Statute covers county, township, school district, and local employees –State employees covered under Michigan Civil Service Law Strikes are illegal –Statutory penalties only for strikes by school district employees Interest arbitration available only for uniformed public safety employees (primarily police and firefighters) http://legislature.mi.gov/doc.aspx?mcl-Act-312- of-1969http://legislature.mi.gov/doc.aspx?mcl-Act-312- of-1969

3. 3 Context Since the 2010 elections, a political movement in the United States to limit public sector collective bargaining in the states in which it exists Legislation at state-level has placed constraints on –Unions and bargaining –arbitration Wisconsin narrowing of bargaining rights for non-public safety public employees Ohio (statute repealed by vote) Elimination of arbitration New Jersey Limits on arbitrators –45-Day Limit to Issue Awards –$1,000 fine on arbitrators who are late Numerous states considering bills Can be traced to 2009 debate on Employee Free Choice Act in U.S. –First contract arbitration provision heavily criticized by employer community –Expanded into general skepticism about arbitration Local government employment dropped from 14.57M in 2008 to14.16M in 2011 (U.S. BLS) –Economic Stagnation –Tax Policy

4. 4 Michigan General –Has had interest arbitration in lieu of right to strike for uniformed public safety employees (police and fire) and EMS since 1969 Followed national trend in 2011 –Decade-long campaign by public employers and conservatives to eliminate arbitration but without providing a right to strike Detroit News Mackinac Center – Conservative “research” center Many public officials In 2011, “surgical” changes Not “slash and burn” Likely influenced by persons who knew quite a bit about interest arbitration

5. 5 Michigan Local Government Employment 2003: 459,100 2011: 388,800

6. 6 Michigan Public Sector Arbitration Law – Statutory Factors 1969 –Ability to Pay –Comparability –Consumer prices –Overall level of compensation –Lawful authority of the employer –Stipulations of the parties –Changes in circumstances during proceedings –Other factors traditionally taken into account 2011 –Ability to Pay –Comparability –Consumer prices –Overall level of compensation –Lawful authority of the employer –Stipulations of the parties –Changes in circumstances during proceedings –Other factors traditionally taken into account

7. 7 Michigan Public Sector Arbitration Law - Ability to Pay 1969 –(c) The interests and welfare of the public and the financial ability of the unit of government to meet those costs. 2011 –(a) Financial ability of unit of government Financial impact on community Interests and welfare of public All liabilities, whether or not they appear on the balance sheet of the unit of government Any laws or directives issued under emergency financial management act –Under certain circumstances, EFM may terminate CBA’s

8. 8 Importance In Michigan, substantial reductions in local budgets –Declining property values Property tax revenues YEARLOCAL PROPERTY TAX COLLECTIONS IN 2010 DOLLARS 2001$12.6 Billion 2002$13.4 Billion 2003$13.35 Billion 2004$14.1 Billion 2005$14.3 Billion 2006$14.7 Billion 2007$15.0 Billion 2008$14.3 Billion 2009$14.3 Billion 2010$13.4 Billion Source of Table: Center for Michigan, at http://bridgemi.com/2011/11/1-6-billion-shaved-off-michigan-property-tax-bills /

9. 9 Importance (continued) –Declining revenue sharing from 2001 to 2009, total statutory revenue sharing (from state to localities) from the retail sales tax went from $1.55B to $1.045B, due to declining sales tax revenue and legislative and executive decisions (Michigan Department of Treasury) Constitutional revenue sharing constant at 15% of sales taxes Not unusual in the public sector in the U.S. –Economic stagnation –Tax policy (political climate)

10. 10 Michigan Public Sector Arbitration Law - Weighting of Factors 1969 –Statute silent on weighting 2011 –The arbitration panel shall give the financial ability of the unit of government to pay the most significance, if the determination is supported by competent, material, and substantial evidence.

11. 11 The Actors True actors are –Attorneys –Arbitrators who are primarily attorneys Both comfortable with applying rules and statutory criteria but less so with accounting Ability to pay evidence often minimal –City manager or treasurer would offer the municipal budget

12. 12 Michigan Public Sector Arbitration Law - Comparability 1969 –(d) Comparison of wages, hours and conditions of employment of the employees involved in the arbitration proceedings 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. 2011 –(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 in both of the following: –(i) Public employment in comparable communities. –(ii) Private employment in comparable communities. –(e) Comparison of the wages, hours, and conditions of employment of other employees of the unit of government outside of the bargaining unit in question

13. 13 Assumption Non-arbitrated, collectively bargained outcomes in the absence of a strike threat are the “correct” or “market” outcomes Arbitrated outcomes are “incorrect” or “above-market” outcomes

14. 14 Other Important Attributes of Statute Issue-by-Issue –Economic issues (money) – Final Offer –Non-economic issues (non-money) – Conventional Pre-Hearing Conference 180-day Limit on Issuance of Award –New in 2011 Prohibition on ordering retroactivity for wage increases –New in 2011 (P.A. 54) In general, Michigan has placed statutory constraints on the arbitrators

15. 15 Conclusion for Michigan Michigan still has a fairly healthy interest arbitration system that functions well Michigan has placed statutory constraints on the arbitrators 2011 amendments to statute have tilted arbitration a bit toward employer interests

16. 16 Lessons for Ontario? General –Interest arbitration exists to serve the public purpose When public comes to distrust the arbitration process it will have negative consequences for arbitration and collective bargaining –Distrust for legitimate reasons –Distrust for political expediency and gain Arbitrators must make sure to keep their house in order Criteria –If the province wants arbitrators to consider certain factors, write that in the legislation –Require arbitrators to consider each of the criteria in their awards Imposes a legal structure on the arbitrators and constrains their authority Parties’ advocates know what they must do –Pre-hearing conference If possible, obtain agreement on the comparables prior to the hearing Narrow number of issues Required Arbitrator Training in Michigan –Basics of Municipal Finance –Pensions