Coping With PERA: The Oakland County Model

In theory, it should be possible for government to function efficiently while bargaining collectively with its employees. If PERA has a saving grace, it is that in the event of a bargaining impasse, the local government employer may implement its last, best offer. Before reaching this point, however, the employer must be prepared to demonstrate to the state that it has been bargaining in good faith throughout. It may also need to be prepared for the nonbinding procedures of mediation and fact-finding.[11] In the end, though, it is legally possible for local officials to take firm positions on matters that affect public interests.

But for this to occur, the scope of bargaining needs to be fairly narrow, so that collective bargaining has a minimal effect on taxing, spending and basic government operations. Union political influence would also need to be constrained to ensure that management’s bargainers are effective representatives of the community at large.

One local government has managed to achieve something approximating this state of collective bargaining nirvana: Oakland County.[12] The county’s experience is extremely atypical for local governments in Michigan, however, and as we will see, it will be extremely difficult for other localities to fully implement Oakland’s methods.

Oakland County’s approach to collective bargaining is less a matter of technique than of mindset. Since PERA took effect, Oakland County has refused to be drawn into the typical union-versus-management framework that typifies labor relations in most other jurisdictions. Instead, it has dealt with unions in a fair but firm manner that has reduced conflicts but also has limited opportunities for union officials to exploit taxpayers.

In a legal environment where bargaining is explicitly required, employers are tempted to approach bargaining sessions with a defensive posture, take an extremely tough opening position, then make concessions that will presumably be matched by union concessions until union and management meet in the middle at an agreement that one hopes will be fair and affordable. The problem with this approach is that the course of bargaining remains fluid, and that all subjects — not just hours, wages and benefits, but also working conditions that affect government operations — are open to negotiation and manipulation.

According to Oakland County Director of Labor Relations Tom Eaton, the county’s approach is to determine its budget and its pay and benefit package for nonrepresented employees first. Oakland County also turns to its Human Resources Department to establish work classifications and standards. It then uses its pay package for nonrepresented employees as the basis for bargaining with unionized workers.[13] Because the package extended to nonrepresented workers must be competitive with the private sector in order to retain employees, the corresponding initial offer to unionized workers is likely to be reasonably attractive as well, but from there, the county’s position is fairly firm.[14] The county is willing to make changes, but the union needs to be able to show the reasons behind its positions, and the reasoning has to be the sort that would be persuasive to both elected officials and the public at large. The bargaining team strives to ensure that the interests of taxpayers are not forgotten. The bargainers’ interest in getting a deal done takes a back seat to the concerns of the general public. As Eaton puts it: “Give us a reason. We have people to convince.”[15]

The other key to Oakland County’s approach is that the county’s budget is largely set prior to collective bargaining — tax rates and spending needs are determined outside of collective bargaining, and the contract is framed to fit those, rather than the other way around. This element is critical for maintaining the county’s fiscal condition. “It’s where you put the cart in relation to the horse,” says Eaton, who is the county’s lead labor negotiator. “The budget sets the parameters for bargaining.”[16]

This “best offer up front” approach to bargaining can generate controversy and requires some legal and diplomatic skill to pull off. PERA’s good-faith bargaining standards are premised upon give-and-take at the bargaining table. While neither union nor management is required to make any particular concessions as bargaining continues, PERA does put pressure on both sides to make compromises as talks go on, if only for the sake of appearances. When an employer makes its best offer up front, it limits its own ability to make tactical concessions.

If done skillfully, however, this approach yields substantial benefits: It limits the overall range of bargaining, increasing the likelihood that the final contract will be consistent with the county’s overall policies. The method also improves the county’s standing among its own employees. When an employer stakes out a tough opening position for purely tactical reasons, employees may be misled into thinking that the employer’s opening demands are more serious than they actually are. Opening with one’s best offer gives employees a more realistic sense of the employer’s goals and reduces the risk that union officials will use the employer’s initial offer to build resentment against management.

Oakland County’s approach to collective bargaining tends to lower the stakes in bargaining itself. This limits the influence of union officials, but is not necessarily detrimental to government employees. As Eaton puts it: “Would you rather we be honest and upfront, or would you rather we lowball you?” In collective bargaining, honesty combined with smart planning is the best policy.

Another noteworthy feature of Oakland County’s collective bargaining agreements is the general absence of “agency fees.” The overwhelming majority of collective bargaining agreements feature agency-fee clauses stating that all workers covered by the agreement must pay union dues or fees regardless of their support or opposition to the union. Agency fees effectively guarantee unions a permanent flow of money. Oakland County, however, has only one agency-fee contract.[17] That contract covers deputy sheriffs, who are unique in having access to binding arbitration in the event of a bargaining impasse.

The county is also noteworthy for having established a “defined-contribution” pension plan for all county employees hired after June 1994.[*][18] Defined-contribution plans are far less risky than traditional defined-benefit pensions and rarely develop unfunded liabilities that burden future generations.

Unfortunately, Oakland County’s strategies and experiences with collective bargaining are unusual. For instance, few communities or school districts have managed to avoid awarding unions agency-fee clauses in contracts. So while one rarely encounters the opposite extreme of budgeting following bargaining and contracts dictating spending, it would appear that few local governments meet Oakland’s standards for discipline.

However unfortunate, this is to be expected. Successful negotiations for government are dependent upon unity among members of the executive (mayors, county executives) and lawmaking branches (city councils, county commissions). This unity allows bargainers to act decisively. An ill-considered statement by an elected official will still carry considerable weight with the media and the public and create expectations among employees. As Warren Executive Administrator Louis Schimmel, a mayoral appointee, describes it: “If you don’t have council behind you, it can be very difficult. Sometimes you have council members talking behind your back with the union or with employees. What’s a negotiator to do?”[19]

But political divisions are an unavoidable part of democratic government. Natural ideological or interest-group divisions in local governments are compounded by the political power amassed by many government employee unions — power that is augmented by agency-fee funds. The temptation elected officials face to secure their current position or prepare for higher office by currying favor with government employee unions is considerable, and union officials are certainly capable of using this weakness to gain advantages at the bargaining table. A city where the council unites with a mayor or city manager to pursue fiscal discipline and responsible bargaining will be uncommon.

In addition, good collective bargaining in the government context requires expertise that many smaller communities may be unable to find. According to Schimmel:

You absolutely need a great budget guy. If you don’t have your budget and all the supporting documents together, the union representatives will just eat you up. They’ll ask you question after question that you don’t have answers for, and if you don’t have answers, it gets to be really hard not to give in. They’ll say you have to have money available somewhere.[†]

In theory, local governments could take steps to improve their budgeting and bargaining practices and encourage local officials to present a united front to unions. In practice, this is all highly unlikely. If collective bargaining is to evolve into a form compatible with sound fiscal practices, a well-funded and entrenched interest — government employee unions — will need to adjust its expectations downward, something that rarely happens in government without an intense political fight. At the same time, local elected officials throughout the state, many of whom may be dependent on government employee unions for political support or campaign funding, will have to unite around an agenda of fiscal responsibility and remain united for the long haul. Given the fractious nature of democratic politics and the ubiquity of agency fees, which give unions more resources to exploit divisions or sow discord, this is also highly unlikely.

To sum up, one could imagine a world in which PERA works much better than it has. Oakland County’s practices show one way this might have happened. But the practices of governmental collective bargaining in Michigan are set, and the interest groups that have benefited most from those practices are well-financed. It is unrealistic to expect them to change absent changes to the law itself.

[*] As described by Mackinac Center Adjunct Scholar Richard Dreyfuss, “In a defined-contribution plan, the employee and/or employer make ongoing contributions to a tax-favored account. These are invested, and they accumulate for the benefit of the individual at retirement. Generally, the investment decisions and the associated investment risks are the responsibility of the individual. Upon retirement, the employee can withdraw the account balance as either a lump sum or an annuity, according to the provisions of the plan.” In contrast, “In defined-benefit plans, the employer assumes the responsibility of annually investing employer and employee pension contributions in amounts sufficient to finance a projected annual retirement income or projected insurance premiums for such items as retiree medical, dental and vision insurance. The projected benefits are generally set by a formula.” See Richard Dreyfuss, “Michigan’s Public-Employee Retirement Benefits: Benchmarking and Managing Benefits and Costs” (Mackinac Center for Public Policy, 2010), 3, (accessed Feb. 13, 2011).

[†] Louis Schimmel, Warren executive administrator, interview with Paul Kersey, June 4, 2010. Schimmel previously served as a court-appointed receiver for the small Michigan town of Ecorse, where he privatized city services and renegotiated union contracts. See Robert Daddow, “Responding to Municipal Fiscal Crisis: Bottom Line Lessons From Ecorse, Michigan” (Mackinac Center for Public Policy, 1992), (accessed Feb. 13, 2011).