Cilento: Binding arbitration is the wrong target

Local governments have real problems to solve, but

Local governments have real problems to solve, but binding arbitration, which ensures the continuity of vital public services, is not one of them. (Credit: iStock)

The governor's executive budget includes a dramatic alteration to the state's binding arbitration law. For many who have been indoctrinated by the anti-public worker sentiment that is all too prevalent, the proposal may seem like manna from heaven. But in reality it's a distraction that does nothing to address municipalities' underlying fiscal problems.

Binding arbitration is a part of the state's civil service law that applies to police, fire and a select few other areas of public service. It continues the collective bargaining process and provides an alternative method for resolving a contract impasse. This additional avenue recognizes just how calamitous a disruption in critical services such as police and fire could be.

The budget proposal would limit compensation awards in binding arbitration decisions to 2 percent in financially distressed localities. But arbitrators are already charged with considering a local government's ability to pay under current law, among other factors. In practice, this proposal would prevent the arbitrator from considering any factor other than the synthetic cap, which is clearly not in the spirit of the original statute.


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Setting aside the existing ability to pay considerations, capping binding arbitration is superfluous. A 2010 study published in the Cornell Industrial Labor Relations Review, "The Long Haul Effects of Interest Arbitration: The Case of New York State's Taylor Law" found arbitration has not resulted in "an escalation of wages beyond the wage levels negotiated by police and firefighters in other states without arbitration." A rollback of binding arbitration, therefore, would be only a diminishment of rights, not a cost saver.

We need to start focusing on the real problems facing local governments. First, local governments have sacrificed their tax base through special breaks for businesses that promise job creation that often never materializes. Second, the property tax cap is seriously flawed and is leaving local governments short funded at the exact wrong time.

The first step is reforming Industrial Development Agencies (IDAs), which are the vehicles through which local governments dole out corporate welfare. An analysis by Getting Our Money's Worth -- a broad coalition of public policy experts, government watchdogs, labor unions and others -- found that 48 percent of IDA projects lost jobs or failed to create jobs in 2010, up from 38 percent in 2009.

These special breaks have a real cost for property taxpayers. When a business is exempted from paying taxes, it shifts the amount that would have been paid to other taxpayers. According to a report from the state comptroller's office, downstate taxpayers pay an average of $71 more each year in taxes to compensate for projects with IDA-granted exemptions.

If we are going to let employers off the hook for their tax liability in return for jobs, there must be some accountability. The state should pass legislation that includes "clawbacks" so that government can recoup its investment if job goals are not met; requires prevailing rate in construction and wage standards after construction to ensure that the jobs created are good ones, not poverty jobs; and increases transparency so that all transactions and associated information are available to the public.

Next, we should fix the tax cap. With or without a cap, local governments have a responsibility to provide the services New Yorkers demand. All a cap does is limit local governments' flexibility to provide those services; it institutes an artificial constraint that has no basis in reason or fact. When coupled with no offsetting increase in state aid, the cap has simply tied one hand behind each locality's back.

The New York State cap has often been compared to Massachusetts' Proposition 2½, but there are key differences. Massachusetts tried to offset the negative impact by stepping up state support and providing a reasonable method for override. Our state needs to provide adequate resources to give local governments a chance to maintain the services New Yorkers rely on. In addition, the supermajority cap override should be changed to a simple majority, as Massachusetts did in 1987, so that local elected officials and voters can once again have some semblance of home rule.

Local governments have real problems to solve, but binding arbitration, which ensures the continuity of vital public services, is not one of them. The right solutions for New Yorkers are creating some sense of accountability when local governments give away your tax dollars and fixing the state's flawed property tax cap.

Mario Cilento is president of the New York State AFL-CIO, the largest state labor movement in the country, representing 2.5 million workers in 3,000 union affiliates throughout the state.

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