In the case of public safety, especially police and fire departments, Michigan Public Act 312 of 1969 establishes that when an impasse is reached, either side may call for “binding arbitration.” In this case, binding arbitration consists of a three-member panel composed of a union representative, an employer representative and a neutral chairman selected from a list provided by the state. The panel resolves all disputes and effectively writes a contract.
The process has shown itself to be slow and unwieldy. In practice, all truly controversial issues are resolved by the single neutral arbitrator, who must choose between government and union proposals on key “economic” issues. In spite of the lengthy list of criteria given in the statute, the neutral arbitrator in fact has little guidance; the statute provides no priorities or burdens of proof, and the arbitrator’s word is essentially final. As a consequence, a task force convened by Gov. Jennifer Granholm concluded that arbitration adds as much as 5 percent to the cost of local government.
According to the statute, the purpose of binding arbitration is to provide an “expeditious, effective and binding procedure for the resolution of disputes.” In terms of being expeditious, binding arbitration has clearly failed: Mackinac Center research has shown that the typical arbitration process lasts 15 months, and at least one arbitration decision was delayed to the point where the contract it was supposed to settle would have expired. In terms of being effective and binding, the PERA rule allowing local government to implement its own last, best offer is every bit as serviceable. Given the funds available to unions for politics and the requirements of good-faith bargaining, the last, best offer will probably be reasonably fair as well. In short, the best solution to the problems created by binding arbitration under Public Act 312 is to end the practice.
If lawmakers are unwilling to end Act 312, they should at least take note of the sweeping discretion left to the “neutral” arbitrator. The arbitrator is in a position to award or deny government employees millions of taxpayer dollars without dealing with the consequences afterward and without effective review by the courts. If arbitration cannot be done away with politically, effective reform will start with changing the burden of proof. The union should have the burden to show by clear and convincing evidence that its economic proposals can be sustained without tax increases, diminishment of services or layoffs. Establishing a burden of proof would also allow effective review of arbitrators’ decisions by the courts. Judges would be expected to defer to the arbitrator’s judgment on the close calls, but an arbitration ruling that is clearly against the evidence can and should be set aside.
An arbitration award is, at bottom, an educated guess at what might be fair and what the local taxpayers can afford. At a time when so many local governments are facing a fiscal crisis, arbitrators should at least give taxpayers — not unions — the benefit of the doubt.