Teresi Applauds Arbitration Reform

After a strong push from organizations such as the New York Conference of Mayors, local governments are finally beginning to see some support from the state on hot-button issues like binding arbitration.

Gov. Andrew Cuomo announced recently that an agreement has been reached on legislation which will create a financial restructuring board for local governments, as well as reform the binding arbitration process.

“While this isn’t even close to being the solution in my book, in the opinion of myself and most of my colleagues, it’s still a good first step.” said Mayor Sam Teresi. “I think that it’s heartening to see that something is finally being done.”

Bills endorsed by Cuomo were approved by the Senate and Assembly on Friday.

They will force arbitration panels to consider a municipality’s ability to pay as long as the municipality is deemed to be financially distressed.

The binding arbitration reform will help eligible municipalities manage their finances and provide public services in a more cost-effective manner. Also included in the legislation is an alternative binding arbitration process that municipalities and unions will be able to voluntarily opt for that could resolve contract issues through an expedited process.

“Localities across the state are facing a growing financial crisis of soaring retirement costs while their populations stagnate and property values drop,” said Cuomo. “The only options for struggling municipalities cannot be bankruptcy or being subject to a financial control board. By helping localities to make tough decisions and manage their finances now, the state as a whole will benefit in the long term because we simply cannot afford to kick the can down the road any longer.”

FINANCIAL RESTRUCTURING BOARD

The legislation will establish a 10-member financial restructuring board that will be available year round to offer assistance to any eligible municipalities. The board will be authorized to make recommendations to these municipalities on improving fiscal stability, management and the delivery of public services. It will also have the authority to provide awards of up to $5 million per municipality through the Local Government Performance Efficiency program.

According to Teresi, the financial restructuring board will also be able to provide an alternative form of binding arbitration for some municipalities.

“What the (financial restructuring) board will do is create a different form of arbitration in which the 10-member review panel will be the arbitrator,” said Teresi. “In order to be eligible, the community has to be approved by the board, then both the municipality and the union have to agree to use this form of binding arbitration. What I want to emphasize, though, is that there is no cost to the municipalities or unions that choose to use this. They also guarantee that a decision will be put in place within six months, which is much faster than traditional binding arbitration.”

BINDING ARBITRATION

Under this legislation, the statute authorizing binding arbitration will be extended for a three-year period. For fiscally eligible municipalities, the statute will establish clear “ability to pay” standards that arbitration panels will be obligated to follow, giving far greater weight to a municipality’s ability to pay for services than under current law.

“From what I understand, it will be broken down into three tiers,” said Teresi. “The first tier will be a straight extension of the existing program for non-distressed municipalities, though. If you don’t fall into the category of being ‘distressed,’ you get stuck with an extension of binding arbitration exactly as it has been since 1974.”

The second tier would be reserved for any distressed municipalities, which currently includes 56 of the 61 cities in New York, not including New York City. Roughly half of the villages with police and/or fire departments also meet the definition, according to Teresi.

“They have put some additional qualifications on the process for distressed municipalities,” said Teresi. “They’ve built some stronger language into the legislation, which is a good thing. The arbitrators have to consider the taxpayers’ ability to pay. The next step, though, is to begin considering what impact the binding arbitration decisions will have on the ability of a local government to fund other municipal services, including funding the parks and keeping roads clear during winter.”

The third tier is the creation of the financial review board, which will be authorized to act as arbitrators in some instances.

“I think that this is a good step,” said Teresi. “This legislation has some welcome news in it, including some things that we’ve been asking for a long time. The governor deserves some credit for understanding the needs of local governments and being the first state leader in 39 years to recognize the need to have a conversation about this and push for changes, too. I give the governor high marks for even taking something as politically sensitive as this and pushing for reform.”