EDITORIAL
Arbitrator award may be too costly for state
| • | Arbitration process needs reform |
During arbitration hearings on a new wage contract between the state and counties and the HGEA, employers warned that wage demands by the public workers would lead to huge budget shortfalls, mass layoffs and program cutbacks.
"It would be a pyrrhic victory for the union to get what it wants now, only to suffer layoffs and a California-like disaster soon," the employers said.
That is essentially the message Gov. Linda Lingle has carried this week to lawmakers, news media outlets and others.
If other units receive similar awards (which is a reasonable assumption), the state will face a shortfall of around $100 million a year going forward. There is no way the state could make that up, Lingle says.
The question is, can the Lingle administration sell this idea to the Legislature, which appears ready to approve the arbitrated contract?
On paper, the arbitrator's decision tends to support the Legislature's position.
"The employer has failed to establish that the union's proposal, much less the panel's award, would bring about layoffs or any similar negative consequences."
But Lingle contends there are several flaws in the reasoning that led to the arbitrator's conclusion.
The most striking was the arbitrator's finding that the state has $972 million in "unrestricted net assets," that is, cash on hand that has not been budgeted for other purposes.
The problem, Lingle says, is that that money is found in various special-purpose funds that by law cannot be used elsewhere. The money may be unrestricted within those funds, but it is unavailable.
In addition, she says, the arbitrator counted on taxes and accruals that are due but not yet in the state treasury and discounted obligations that are due although they have not yet been paid.
The bottom line: The "cushion" the arbitrator saw is simply not there.
The union's final offer going into arbitration was 4 percent raises for each of the two years of the contract plus step or longevity increases for workers. The state and counties offered zero percent the first year and 1 percent the second year and no longevity increases.
The arbitrator compromised, proposing no financial increases in the first year, but continuing step increases in the second year plus an across-the-board 5 percent raise.
Still too rich, Lingle insists. She will formally propose a compromise Monday that offers first-year step increases and 1.5 increases, plus steps in the second, for an overall raise of around 4 percent.
That, says Lingle, will cost the state around $60 million a year compared with the $100 million implied by the arbitrator's award. The money would come from program cuts, taking money from special funds and some small "revenue enhancements."
Lingle makes a good case that the arbitrator's award may be too rich for the state's blood, if not in the first year, then in the out years. Lawmakers should treat her proposal seriously. She makes a strong point that the state (and counties) should not deal with multi-year contracts on a year-to-year basis.
If legislators decide to fund the arbitrator's award, they must present a financial plan that accounts for the money not just in the first year, which is relatively simple, but for the ensuring years and beyond.
It's the responsible thing to do.
