New battle over binding arbitration in San Luis Obispo


Eleven years ago, San Luis Obispo voters passed a measure that altered the way public safety unions and the city decide on pay, benefits and working conditions.

The change introduced a rule that stipulated a third-party authority would decide on those issues if an agreement couldn’t be reached.

The unions declared it a victory, saying it would lead to better working conditions for their members. City leaders shuddered, saying the decision could potentially take away local control of the city’s budget.

Now, the same issue is being put before voters again — this time to undo what was put into place by voters in 2000.

An additional measure is also being put before voters to pave the way for future pension reform. Those for and against the voter-approved rules have long debated them, and a political maelstrom will likely ensue in coming weeks as the August election nears.

At the heart of the dispute are two significant changes to existing policy now on the ballot: the repeal of a mandate entitling public safety unions or the city to turn to a third-party arbiter if labor negotiations reach an impasse, and the removal of a city charter section requiring voter approval before retirement benefits for future employees can be reduced.

The outcome of both measures could impact how much money the city has to spend on basic services. The police and fire unions — the only employees with the right to use binding arbitration — are fighting passionately against its repeal.

They say the rule has led to better working conditions and more streamlined negotiations between the unions and the city.

Their opposition, including the majority of the City Council, argues vehemently that the changes are necessary to guarantee future fiscal sustainability and to keep decisions regarding the city’s pay and benefits in local hands.

The debate reflects what is taking place across the nation as governments search for ways to cut costs and unions fight to save hard-won rights.

A different time

In 2000, when police and fire unions in San Luis Obispo rallied the public to support binding arbitration, they did it on the premise that their needs were being ignored by the city during negotiations.

The impetus for seeking the mandate came from years of failed contract negotiations between the police union and the city. Disputes over salary, health benefits and working conditions led to police employees working without a contract multiple times because an agreement couldn’t be reached.

Union leaders said the issue was not about wages but fairness. The public agreed, and on Nov. 8, 2000, police and firefighters won binding arbitration by 57 percent of the vote — creating a new system for resolving contract disputes between the city and its two largest unions.

At the time, a similar movement was happening statewide. The economy was strong, and Gov. Gray Davis had just signed a bill that would make binding arbitration standard operating procedure for all cities and counties. Three years later, the California Supreme Court overturned that law, declaring it unconstitutional. The 2003 ruling declared that California could not require cities governed by general law as well as counties to submit to binding arbitration during labor disputes with police officers and firefighters.

But 21 charter cities, including San Luis Obispo, kept binding arbitration because local voters had approved it. It is no longer allowed in general law cities.

It has been used only once here. On June 14, 2008, an arbitrator’s ruling awarded police officers a raise of 27.28 percent and dispatchers a raise of 32.82 percent for the period 2006-09.

The cost to the city was an additional $4.4 million in 2008-09 because of retroactive pay and an ongoing annual cost of $2.5 million.

At the same time the recession began to jeopardize local revenues, impacting staffing and services. That, coupled with the impact of the 2008 arbiters’ decision, revived opposition to the process.

Public opinion shifts

When the recession struck in 2008 and cities began to face steep declines in revenue, sentiment nationwide emerged questioning the levels of public sector pay and compensation.

Two California cities — Stockton and Vallejo — have repealed binding arbitration in recent years. San Jose also modified its binding arbitration to consider a broader range of factors, such as the rate of revenue growth and prohibiting the arbiter from granting retroactive benefits.

In recent years, San Luis Obispo has focused intently on staffing costs — which account for up to 80 percent of its general fund budget — as a way of freeing up more cash to provide basic services. Public safety costs typically account for about 50 percent of the general fund.

The city’s pension costs have also risen dramatically — quadrupling to $8.3 million today from $1.8 million in 2002-03. That cost is expected to increase.

Public safety pay is also being scrutinized. Eighty-five percent of the 50 top-paid city employees for the last two fiscal years were firefighters and police officers — many of them pushed there by overtime pay, according to a Tribune analysis.

San Luis Obispo has about the same number of employees today as 10 years ago but is paying double for their salaries and benefits. Staffing costs increased by 102 percent in the past decade — mainly fueled by the rising cost of pensions.

The city estimates that creating a two-tiered pension plan for new employees would save it more than $100,000 by the third year after its implementation and up to $500,000 annually within 10 years.

“In 2000, we hadn’t experienced any kind of economic situation like we have now,” said Dwight Stenbakken, deputy executive director of the League of California Cities, an opponent of binding arbitration.

“Things were going gangbusters with the pension system,” he said.

“Part of the assumption may have been that we typically go through a recession every 10 years, but we also bounce back. Obviously, that is not the case anymore, and we are vulnerable. That is what has changed people’s minds,” Stenbakken said.

Many business and city leaders have adamantly opposed binding arbitration from the beginning. However, others living in the community saw things differently.

“The public tends to be the most conflicted in an issue like this because they admire police and fire and are sort of emotionally inclined to support them,” said Max Neiman, a senior resident scholar at the Institute of Governmental Studies at UC Berkeley.

However, the general public’s response to the pay and compensation of public employees has shifted with the downturn in the economy, he added.

“It is clear that the public believes that public employees are overcompensated,” said Neiman, referring to their pensions. “In part, that is fueled by the general erosion of wages, benefits and jobs in the private sector.” At the same time, local governments are facing an overall decline in revenue and are struggling with how to make up for that loss, he said.

“Almost every community in California has to re-examine and acknowledge that the long-term revenue stream will continue to be considerably lower than anticipated,” Neiman said. “Clearly, cities are going to have to have an option of trying to reduce cost, and that is going to have to come from somewhere.”

Ultimately, he said, it comes down to trust between unions and management.

Neiman said having the option of compulsory arbitration “is not a bad thing because it does provide a certain type of political cover for everybody.”

“I think that these issues are not too difficult to manage if people will stop playing hardball,” Neiman said. “It can work in a situation where public safety employees are dealing with a management they believe has everyone’s best interest in mind and isn’t just out to get them.”

The tough issue facing cities is that public safety costs are such a large part of a dwindling budget, he said. In San Luis Obispo, public safety staffing accounts for $22.6 million of the $42.1 million in total staffing costs. “Everyone in the country, from banks to public employees, are trying to minimize the burden that they have to bear to manage through this crisis,” Neiman said. “Public employees would like to hold on to the benefits that they got in the good times.”

That is what infuriates many people in the public, he added.

“And in some sense, it might be shortsighted for public employees to play that game because the next thing you see is a ballot measure before the voters.”

What the two SLO measures would do

Here’s a closer look at the two measures:

Measure A

Asks San Luis Obispo voters to amend the city charter to eliminate a requirement that the City Council hold an election to obtain voter approval to terminate its contract with CalPERS or negotiate another contract with reduced employee benefits.

As it is now:

Voter approval is necessary in order for the city to reduce employee retirement benefits for future employees.

How it would change:

San Luis Obispo would continue to contract with CalPERS to provide city employees and retirees with retirement benefits; however, the city could negotiate lower pension benefits for new employees without voter approval.

The retirement benefits and formulas of existing employees would stay the same.

Measure B

Asks San Luis Obispo voters to repeal binding arbitration, which was approved by voters in 2000.

As it is now:

The final authority over disputes arising from police and fire contracts about wages, hours or terms and conditions of employment falls to a three-person arbitration panel.

Each party submits a last offer on each disputed issue to the arbitration board. The board picks either the city’s final offer or the union’s final offer.

After the arbitration decision is reached, the two sides have 10 days to meet privately and attempt to work out a further compromise.

At the end of that period, the arbitration award becomes binding on both parties. No further action by the City Council is allowed.

How it would change:

 Contract disputes between the city and its police and fire unions about wages, hours or terms and conditions of employment would be handled by existing state and local procedures.

 When those procedures have been exhausted, the city may implement its last, best and final offer.

 Police and fire unions would still be able to require the city to discuss issues with them that may impact their wages or benefits before the City Council adopts the annual budget. No third-party arbiter would be available to weigh in.

Tuesday forum

The pros and cons of the two initiatives will be discussed at 6:30 p.m. Tuesday at the Ludwick Center. The forum, organized by the League of Women Voters of San Luis Obispo County, will feature speakers on both sides. Panelists will also answer audience questions. Measures A and B will be voted on in an all-mail special election in August. For more information, call 782-4040.

Aug. 1: First day ballots will be mailed to residents

Aug. 15: Last day to register to vote

Aug. 30: Election Day; drop-off centers will be open from 7 a.m. to 8 p.m. All ballots must be received by 8 p.m.