May 29, 2012 | By | Posted in Legislature

Bill to clarify Act 47 arbitration moving through Pennsylvania Senate

Lawmakers, local officials call for more change
By Melissa Daniels | PA Independent
HARRISBURG — Future reform to Pennsylvania’s plan for cities in dire straits begins with a single word choice — "award" or "settlement."

Senate Bill 1321, sponsored by Sen. Jane Earll, R-Erie, would amend what municipalities can pay unions while considered fiscally distressed under Act 47. The bill comes in response to a state Supreme Court ruling in October that hinged on the distinction between an arbitration award versus a settlement, which the bill clarifies. 
The ruling in City of Scranton v. Fire Fighters Local Union 60 says Act 47 recovery plans did not apply to determining arbitration awards given under Act 111 for police and fire unions, despite the fact the city, in its distressed financial state, would have no ability to pay the full award. It was a situation not covered by state law, which specified arbitration settlements — not awards — could be subject to the needs of the recovery plan.
The potential change is good news for the 21 indebted and cash-poor municipalities that fall under the act — local finances are helped through a state-developed economic plan, restructuring debt and avoiding bankruptcy.  
But it won't stop here, say state and local lawmakers who support the measure.
The court said the city of Scranton, declared financially distressed under Act 47, must pay nearly $30 million in arbitration awards to the local firefighters union, including legal fees. Scranton’s attorneys argued that paying the award would violate its recovery plan, an argument accepted by two lower courts before it was overturned. But the firefighters argued the award was outside the scope of Act 47 limitations, which the court accepted.
“The Supreme Court essentially said that plan was no longer a limitation on settlements of the arbitration process,” said Senate Majority Leader Dominic Pileggi, R-Delaware. “It effectively gutted the Act 47 statute. What this legislation attempts to do is to reinstate the Act 47 process as a limiting factor on arbitration awards.”
Rep. Chris Ross, R-Chester, introduced a corresponding measure in the House, saying additional hearings on Act 47 may be held in that chamber.
“The long-term issues really go on for a period of time, and it took a number years for everybody to get into this fix, and it’s going to take a little time for us to reverse this ship,” Ross said. 
In addition to clarifying the choice of words, an amendment to the bill introduced specifications on how local governments under Act 47 can bargain with union workers, and when arbitration agreements can exceed limitations. That process would require an arbitration board to provide facts and evidence to deviate from the recovery plan.
Pileggi said additional conversations with public safety unions will happen before the bill reaches the floor for a vote.
The bill is not retroactive, meaning Scranton’s fiscal health amounts to a monetary sacrifice that local taxpayers will bear. But it does reaffirm what Act 47 was intended to do in the first place in regard to expenses stemming from arbitration awards — the largest portion of a municipal budget, according to Pileggi.
Rep. John Blake, D-Lackawanna, says while incremental reforms write new chapters to Act 47, he favors comprehensive reform later, a concept supported by lawmakers on both sides of the aisle, and in both chambers.
“It wasn’t intended to be a perpetual engagement of state government with local government,” Blake said. “It was meant to be means by which to exit financial distress.”
Twenty-one communities are listed under Act 47, which was created in 1988, and eight of those were designated more than 20 years ago. Six additional boroughs have had the designation removed.
Art Martynuska, president of Pennsylvania Professional Firefighters Association, said the state should consider worker equity while putting limits on collective bargaining and arbitration for Act 47 cities. While the award may have fiscally drained Scranton, workers waited nine years without wage or benefit increases before arbitration kicked in.
When it comes to negotiations, public safety unions are willing to compromise, Martynuska said, pointing out that workers in Scranton are negotiating deferments with city officials. But what’s even more frustrating, he says, is when local officials don’t initiate cost-saving measures.
He cites one example in Johnstown, where he was a firefighter for 20 years. There, the union drew up a plan that would create nearly half a million dollars in health care savings that was not addressed, he said. A federal grant to hire more firefighters in a temporary capacity was never applied for, Martynuska said.
“If we have to take it on the chin, so be it, I understand the economics,” Martynuska said. “The only thing I can ask is that communities investigate every option. There’s nothing in the plan that says you can’t increase revenues; there’s nothing in the plan that says you can’t find cost savings.”
Public safety workers want an exit strategy, Martynuska said, something few Act 47 municipalities have managed.
Lock Haven Mayor Richard Vilello, president of the local government association Pennsylvania League of Cities and Municipalities, said that the proposed fix for Act 47 will help all distressed municipalities, giving them “every tool in the toolbox” to manage their finances.
Vilello is a member of the Coalition for Sustainable Communities, an organization of business and government interests that supports the passage of SB 1321 and future reforms to Act 47.
The coalitions’ focus will turn to other reforms that would prevent the need for Act 47 in the first place, such as looking at Act 111, a state law that provides binding arbitration for public safety workers.
Suggestions include eliminating post-retirement health care benefits as a subject of arbitration; another is to split arbitration costs equally between both parties.
“Our goal is not to do away with collective bargaining or to reduce current pension benefits,” Vilello said while speaking on behalf of the Coalition for Sustainable Communities during a news conference in the Capitol Media Center last week. ”Moving forward, however, we do seek a more fair system that can be sustained.”
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