Editorial: Wage freeze ruling gives Nassau leverage

Nassau County's municipal unions have suffered a stunning setback in their legal efforts to free themselves from the wage freeze imposed by the Nassau Interim Finance Authority. This should kill a new police contract on the table.

Friday's ruling by a federal appeals court eviscerates County Executive Edward Mangano's key justification for giving the Police Benevolent Association a new deal that would repay all the money -- $230 million -- taxpayers have saved since the freeze was instituted in 2011.

Mangano and PBA head James Carver recently announced they had negotiated a police contract that would lift the freeze for Nassau's most costly municipal workers and its other unions as well.

The deal just isn't good enough for taxpayers, as we argued last week. But Mangano insisted there was a key intangible factor at play: the risk that the PBA could win a pending lawsuit challenging NIFA's authority to impose controls. Mangano argued that without a settlement requiring the PBA to withdraw the suit, the county could be forced to repay all the freeze money at once. Carver repeatedly made the same argument. The county executive even upped the fear factor by claiming the court would impose 9 percent interest on the refund, although there was no certainty the penalty would be imposed.

NIFA, which must sign off on contracts because the county is under state fiscal controls, had already raised red flags on the deal because it would borrow from the future. Rather than use NIFA's warning to get more givebacks, Mangano wanted the umpire changed. Last week, Gov. Andrew M. Cuomo complied by replacing NIFA chairman Ronald Stack with former North Hempstead Supervisor Jon Kaiman, and by appointing two board members to vacancies his administration had ignored for a very long time.

Before the new board could even meet, however, a unanimous federal appeals court ruling crushed whatever leverage the PBA had. Hours later, Kaiman suggested in a statement that the latest deal was dead by urging everyone to "re-engage."

Nassau's public unions went to federal court soon after NIFA imposed the freeze in 2011. The unions had two bullets: The freeze violated the U.S. Constitution's ban on impairing contracts, and the New York law permitting a freeze had expired. In February, U.S. District Court Judge Leonard Wexler issued a bizarre decision that ignored the federal issue, choosing instead to interpret the state law in the union's favor. NIFA appealed, and on Friday, a three-judge panel of the Second Circuit of Appeals, in forceful language, overturned Wexler's ruling and ordered the claim dismissed. The ruling highlighted NIFA's critical role and why any interpretation of the law that defines it must be determined by the state courts.

The appeals court said NIFA was created: ". . . To rescue Nassau County from the brink of bankruptcy, to monitor its financial condition, and to take steps necessary to prevent a relapse." Note the word "relapse."

U.S. District Court Judge Edward Korman emphasized again in his conclusion that the control board was created by the state "to prevent the fiscal demise of Nassau County." The PBA most likely bypassed the state judicial system when it first filed the lawsuit because New York's top court ruled against a similar challenge by Buffalo's unions to that city's control board. The New York Court of Appeals ruled in favor of the control board, interpreting an ambiguous law by finding the intent of the legislature was to preserve the fiscal health of the city.

The PBA may seek to start over in state court, but not only is there a bigger risk of losing on the merits of the case, it now must overcome the argument that it has run out of time permitted to pursue its claim.

Mangano just got dealt two aces. With NIFA's wage freeze more potent that ever, and time on the county's side, the county executive is in much stronger position to demand real savings to stabilize Nassau's finances. This time Mangano should play his hand for the benefit of the taxpayer.