Proposal 3 would have the following effects:

1. Proposal 3 would replace the existing, flexible system of labor relations with a more rigid, constitutionally mandated system of collective bargaining.

Proposal 3 would reduce the authority of the CSC, which was established to allow representatives of the public to control state employment, while at the same time protecting state employees from partisan political influence. The Civil Service Commission has established rules regarding hiring, political activity and use of union dues, and the creation or elimination of positions, and all of these rules, and the strife-ridden situations they settle, would once again become matters of contention under Proposal 3. These issues relate directly to state laws and policy.

The public is best served by a workforce that has good morale, high qualifications, and experience in public administration. However, the ability to maintain a well paid workforce must be balanced against other state priorities, such as the need for tax reductions, shifts in priorities, and the reform or elimination of unneeded or counterproductive state programs. An outside arbitrator may prove to be less likely to keep all these interests in mind than a bipartisan board appointed by elected officials.

By mandating both collective bargaining and binding arbitration, Proposal 3 would reduce the ability of public officials, and by implication the public itself, to shape an appropriate workforce through the CSC. This would likely lead to budgetary and administrative difficulties unforeseen by supporters of the measure.

2. Proposal 3 would create legal uncertainty with respect to the authority of the CSC and the arbitration process.

The language of the amendment itself is very specific about union prerogatives but silent about corresponding governmental powers. Michigan courts would need to settle a wide range of questions, with little guidance from the amendment itself. There are at least four questions the courts will probably have to decide at some point:

How much authority would an arbitrator have under Proposal 3?  Under P.A. 312 arbitrators have extremely broad powers, and judicial review is limited to fraudulent or capricious decisions. However, under the language of Proposal 3 the CSC would seem to retain final authority over public employment and personal services contracts. The amendment gives no guidance regarding conflicts between CSC rules and an arbitrator's ruling. Current CSC rules protect the interests of state taxpayers by streamlining privatization when it saves money or improves services, limiting the use of employee leave for union business, preventing political activity during work hours, and preserving the state's right to hire and release employees as needed for the efficient administration of state business. The force of these rules would be called into question by the use of arbitrators whose jurisdiction is not clearly defined.

Would arbitration procedures mandated by Proposal 3 be subject to revision?  P.A. 312's provisions are open to modification by the Legislature, and if new methods are developed to make the process more efficient and fair, the law can be changed to implement reforms. However, Proposal 3 would institute an arbitration process that is "the same as now provided by law for public police and fire departments" (emphasis added). This language could easily be interpreted to mean that the arbitration process is fixed as of the date of ballot approval and that modifications to the process should be very limited thereafter. The effect of this interpretation would be that procedural changes, even if agreeable to all parties, could not be made.

Where would the critical "neutral" arbitrators come from?  Under P.A. 312 the neutral arbitrator, who also serves as chairman of the arbitration panel, is selected from a list of candidates submitted by the Michigan Employee Relations Commission. This may be acceptable at the local level, but state employee unions may be unwilling to accept a "neutral" arbitrator who has been recruited and certified by the state, that is, the party on the other side of the negotiating table from the union. Union officials may demand that the chairman be certified by a private organization, such as the American Arbitration Association, which would require time-consuming litigation.

Does the state Legislature retain its veto authority?  Under the current constitution the Legislature can institute an across-the-board salary and benefit reduction. This power is rarely used, and requires a two-thirds vote of both houses to implement. But its very existence is an important check on the authority of the Civil Service Commission. The legislative veto power may become even more valuable if critical wage and benefit issues are resolved by arbitrators who are less publicly accountable than the CSC or Legislature. Yet Proposal 3 may remove this legislative authority. It does not revise the existing constitutional language establishing the veto power so that it includes arbitration awards, and there's no comparable provision in P.A. 312 itself for local legislative bodies to check the authority of arbitration panels.

3. Proposal 3 may permit state employee strikes.

CSC rules currently prohibit strikes by state employees. Typically, binding arbitration is extended in lieu of the right to strike. While Proposal 3 does not mention strikes, it does contain language that could be interpreted as leaving open the possibility of a strike:

State classified employees shall have the right to elect bargaining representatives...for the purpose of collectively bargaining with the state employer and for other mutual aid and protection (emphasis added).

Significantly, the phrase "other mutual aid and protection" did not appear in the 1978 amendment that extended binding arbitration to the state police. Its inclusion could be taken as an indication that state employee unions retain other rights besides that of binding arbitration, including the right to strike.

In the long run it is more likely that the state Supreme Court would rule that a strike prohibition is implied as part of binding arbitration. But it is impossible to say for certain. Changes in the court's membership, outlook and rulings could change on this or any issue. It is also possible that while waiting for the state's highest court to rule, lower courts could decide to permit state employee strikes. At least in the short term Proposal 3 would increase the risk of such strikes.

4. Proposal 3 seems certain to increase the cost of state government.

Currently the state is awaiting the outcome of an arbitrator's ruling, three years overdue, for state police troopers. Depending on the arbitrators' ruling the state could be forced to pay $20 million to $35 million in retroactive wages for 2,000 troopers.

There are currently more than 44,000 Michigan employees with union representation. If the back-pay scenario currently playing out with the troopers were extrapolated to all state employees (not an inconceivable scenario, since state employee contracts typically start and end together, and arbitrators tend to follow precedents set by earlier arbitrators) the state could be presented with a $500 million back-pay award sometime in the not-too-distant future.

There is reason to believe that arbitrators' awards will be more generous than those granted by the CSC. According to the Senate Fiscal Agency, pay increases awarded to state troopers through arbitration average 1 to 2 percent higher than increases awarded to other state employees under the Civil Service system. In other words, where other state employees might receive a 3 percent pay increase, troopers are likely to receive a 4 or 5 percent pay increase. Extended to all 60,000 state employees, this one- or two-percent additional compensation adds up to $30 to $60 million per year, which would have to be made up through reductions in state programs, tax increases, or both.16

Also significant is that under the terms of Proposal 3, both the CSC and the Legislature would be limited in their ability to revise binding arbitration rules. Even if methods exist to improve the binding arbitration process, it is doubtful they could be applied to state employee arbitration without another constitutional amendment.

Evidence suggests that an arrangement under which outside arbitrators determine what government must pay its employees puts the state and taxpayers at risk of paying public employees more than elected officials believe is prudent. Consequently, cuts in government services, tax increases, or both would probably become necessary under Proposal 3.