Southeast Michigan Council of Governments

1. Southeast Michigan Council of Governments

2. SEMCOG University: Union Negotiating Strategies June 22, 2010 The workshop begins at 10 a.m. Please enter questions in text box on your screen by selecting Dave Boerger as the recipient Southeast Michigan Council of Governments

3. Agenda 10:00-10:25 Union Negotiating Techniques, Key Issues & Act 312 Arbitration Dave Boerger, SEMCOG Consultant 10:25-10:50 Case Studies Ray Riggs, retired Fire Chief and former Union president, West Bloomfield Twp. 10:50-11:00 Wrap-up, Q&A and Evaluation

4. Union Negotiating Techniques, Best Practices & Act 312 Arbitration Dave Boerger SEMCOG Southeast Michigan Council of Governments 535 Griswold St., Suite 300 Detroit, MI 48226 www.semcog.org

5. SEMCOG’s Local Government Effectiveness Efforts • Provide tools to improve local government effectiveness • Assist 160 member governments deal with the fiscal crisis • Share benchmark data and best practices • Work with member communities to reduce cost • Facilitate local government collaboration • Help local governments restructure • Provide training to member local governments • Perform fiscal assessments for member communities • Develop website resources focused on the above themes • Manage the AgileGov database of >600 successful ideas • No direct involvement in union negotiations

6. Top Ten Strategies to Successful Union NegotiationsSource: Oakland County • Start with a clear understanding of your financial picture • Utilize experts • Provide financial facts to stakeholders • Determine organizational priorities and assign budget reduction tasks based on those priorities • Decide how to restructure, cut costs and reduce services • Avoid filling vacancies where possible (e.g., hiring freeze, retirement incentives, use of part time employees or temporary staff) • Benchmark your wages, benefit & retirement plans • Treat union and non-union employees similarly • Be credible and lead • DO SOMETHING….incremental but significant changes reap huge benefits over time.

7. Know Your Fully Fringed Costs

8. Key Techniques in Contract NegotiationsSource: Dennis DuBay, Labor Attny., Keller Thoma, Pc • Wages  • Freeze/reduce wage rates • No/limited signing bonus or retroactive pay • Two tier - lower starting rates & longer time to reach a lower peak • Other wage reduction techniques • Shortened work week (4 days w/ 1 day ext. hrs) • Overtime cost control • Temporary unpaid furloughs • Longevity/uniform allowance/leave/vacation reductions • Performance incentive systems – lump sum not in base wage

9. Wage Trends

10. Key Techniques in Contract Negotiations (cont’d) • Health Insurance Active Employees & Future Retirees • Employee premium contributions (5-20%) • Higher deductible/co-pay plans to lower premiums • Healthcare reimbursement accounts (HRA) • Prescription changes – 3 mos. mail order, generics, etc. • Change providers – “equivalent or better” clause • Eliminate continuation clause for dependents > age 18 • Incentivize/mandate spouse’s H/C coverage • Flexible spending account/cafeteria approach • Self insure dental and optical care

11. Key Techniques in Contract Negotiations (cont’d) • Health Insurance Active Employees & Future Retirees (cont’d) • Modify life/workman’s comp/disability insurance terms • Establish heathcare prevention incentives • Increase the time to retirement eligibility • Narrow the definition of who is covered by the benefit • Reduce the scope of coverage • Reserve the right to make changes once employees retire • Require the employee/retiree to pay a portion of the future costs • Place a “cap” on employer payments • Eliminate Retiree Health Care and provide a defined contribution plan (Health Savings Account)

12. Key Techniques in Contract Negotiations (cont’d) • Health Insurance for Current Retirees • Narrow the definition of who is covered by the benefit • Reduce the scope of coverage • Require retiree contributions to assist in funding the benefit • Reserve the right to make changes in the future • Require the retiree to pay a portion of the premiums • Place a “cap” on employer payments • Require all Medicare-eligible retirees to apply for Part A, B & D

13. Key Techniques in Contract Negotiations (cont’d) • Defined Benefit Pensions • Active Employees – Current Defined Benefit Plan • Maintain defined benefit plan for all employees but stabilize or reduce the employer contributions • Increase employee contributions • Place a “cap” on employer contributions • Place a “cap” on final avg. comp. (FAC) components • Place a moratorium on pension benefit increases • New Hirees • Maintain defined benefit plan for current employees and provide a less costly defined benefit plan for new hirees (e.g., higher age/service requirements, reduced multiplier, elimination of escalator, etc.) or better yet… • Negotiate Defined Contribution Plan for new hirees

14. Key Techniques in Contract Negotiations (cont’d) • Defined Contribution (DC) Pensions • Advantages to an Employer • Required contribution amount is easily determined, known in advance and typically constant from year to year • Pension costs for service rendered are always fully funded • Cost of administration is less than for a defined benefit plan • Provisions of a defined contribution plan • Require employee contributions • Flexibility regarding municipal contributions • Restrict ability to borrow from the Plan • Provide education and access to professional money management

15. New Hire Fully-Fringed Compensation

16. Key Techniques in Contract Negotiations (cont’d) • Other factors • Eliminate restrictive work rules • Optimize scheduling flexibility • Minimize/eliminate paid time for union work • Negotiate lower union dues • Reduce allowable sick days – combine sick & leave days • Eliminate/reduce vacation carry forward terms – use or lose • Minimize FAC contributors – limit to base pay • Allow greater use of temporary employees • Mid-term re-openers • Act 312 Arbitration – take the initiative & directed settlement

17. Act 312 Arbitration • Statutory Framework • The Criteria for Decision Making – MCL 423.239 • Setting the Stage – Preparation for Act 312 Arbitration • Expedited, Lower Cost Approach

18. 1. Statutory Framework • Petition • Appointment of Panel Chairperson and Panel Delegates • The hearing and presentation of evidence • Submission of Final Offers of Settlement • Scope of the Panel’s jurisdiction

19. 2. The Criteria for Decision Making – MCL 423.239 • The lawful authority of the employer. • Stipulations of the parties. • The interests and welfare of the public and the financial ability of the unit of government to meet those costs. • Comparison of the wages, hours and conditions of employment of the employees involved in the arbitration proceeding with the wages, hours and conditions of employment of other employees performing similar services and with other employees generally: • In public employment in comparable communities. • In private employment in comparable communities.

20. 2. The Criteria for Decision Making – MCL 423.239 (cont’d) • The average consumer prices for goods and services, commonly known as the cost of living. • The overall compensation presently received by the employees, including direct wage compensation, vacations, holidays and other excused time, insurance and pensions, medical and hospitalization benefits, the continuity and stability of employment, and all other benefits received. • Changes in any of the foregoing circumstances during the pendency of the arbitration proceedings. • Such other factors, not confined to the foregoing, which are normally or traditionally taken into consideration in the determination of wages, hours and conditions of employment through voluntary collective bargaining, mediation, fact-finding, arbitration or otherwise between the parties, in the public service or in private employment.

21. 3. Setting the Stage – Preparation for Collective Bargaining and Act 312 Arbitration • Non-binding mediation proceeds arbitration • Establish pattern – wages, fringes – non-union, non-Act 312 groups • Develop five-year capital improvement plans • Provide OPEB reports • Project financial position – two-three years in the future • Project impact on the General Fund balance • Prepare similar data for comparable communities

22. 4. Expedited, Lower Cost Approach to Act 312 Arbitration • Negotiations begin • Local government initiates Act 312 petition (rather than Union) • Mediation process pursued concurrent with negotiations • Mediator recommends a settlement proposal • Arbitrator selected • Local government & union requests arbitrator make a directed settlement • Union membership and elected officials do not vote on arbitrators binding directive, whether directed or not.

23. Union Negotiating Case Studies Ray Riggs SEMCOG Southeast Michigan Council of Governments 535 Griswold St., Suite 300 Detroit, MI 48226 www.semcog.org

24. Bloomfield Township - Firefighters • Self-insured health care up to $75,000 • Premiums potentially cut in half or more • First $3,000 for a family plan paid by the township • Employee pays next $1,000 • Employee pays 10% of future expense until employee has paid 2nd $1,000 • Then township covers 100% until the insurance kicks in • Net savings typically ~15%

25. Macomb County’s Multi-Union Contractual Settlement Union Agrees to Concessions 2/7/2009 USA Today MOUNT CLEMENS, Mich. (AP) — Members of Macomb County's largest employee union have voted to accept a two-year wage freeze and other concessions. County officials say the concessions approved by Local 411 of the American Federation of State, County and Municipal Employees, coupled with givebacks by other bargaining units, will help reduce an $18 million deficit. The contract approved Friday on a 396-256 vote also raises employees' co-pays and deductibles for health care, and eliminates a retirement plan allowing workers with 20 years' service to retire at age 50. The Detroit News says that without the concessions, county commissioners were prepared to eliminate as many as 200 jobs. Local president Donna Congemi tells The Macomb Daily of Mount Clemens that the contract includes re-opener clauses that could allow the union to recoup some of the givebacks should economic conditions improve.

26. Oakland County Timeline of Fringe Benefit Changes 3 1 2 3 4 5 9 8 7 6 5 4 2 3 1 9 8 7 6 5 4 2 1 9 8 7 6 23 23 21 22 22 21 22 21 23 10 10 10 11 11 11 12 12 12 13 13 13 14 14 14 15 15 15 16 16 16 17 17 17 18 18 18 19 19 19 20 20 20 2007 Trust Certificates Issued 2007 Trust Certificates Issued 2007 Trust Certificates Issued 2007 Hiring freeze begins 2007 Hiring freeze begins 2007 Hiring freeze begins 2008 Switched vendor for prescription coverage & Medicare Parts A&B 2008 Switched vendor for prescription coverage & Medicare Parts A&B 2008 Switched vendor for prescription coverage & Medicare Parts A&B 1994 Buy-out offered to deferred retirees to waive future healthcare 1994 Buy-out offered to deferred retirees to waive future healthcare 1994 Buy-out offered to deferred retirees to waive future healthcare 2003/2004 Active & retirees move to 3-tier prescription co-pay 2003/2004 Active & retirees move to 3-tier prescription co-pay 2003/2004 Active & retirees move to 3-tier prescription co-pay 2006 Discontinued traditional retiree health benefits for new hires. HSAs offered. 2006 Discontinued traditional retiree health benefits for new hires. HSAs offered. 2006 Discontinued traditional retiree health benefits for new hires. HSAs offered. 1994 Defined benefit pension plan closed to new hires. Defined contribution plan offered. 1994 Defined benefit pension plan closed to new hires. Defined contribution plan offered. 1994 Defined benefit pension plan closed to new hires. Defined contribution plan offered. 2008 Discontinue social security tax for PTNE. Replaced with tax deferred retirement accounts 2008 Discontinue social security tax for PTNE. Replaced with tax deferred retirement accounts 2008 Discontinue social security tax for PTNE. Replaced with tax deferred retirement accounts 1987 Begin prefunding retiree healthcare obligations 1987 Begin prefunding retiree healthcare obligations 1987 Begin prefunding retiree healthcare obligations 2010 Elimination of Deferred Compensation Match Program 2010 Elimination of Deferred Compensation Match Program 2010 Elimination of Deferred Compensation Match Program 2003 Healthcare contributions increased for new hires 2003 Healthcare contributions increased for new hires 2003 Healthcare contributions increased for new hires 1997 Healthcare contributions required for new hires 1997 Healthcare contributions required for new hires 1984 Discontinued longevity pay for new hires 1984 Discontinued longevity pay for new hires 1984 Discontinued longevity pay for new hires 1997 Healthcare contributions required for new hires 2007 Employee Wellness Program Begins 2007 Employee Wellness Program Begins 2007 Employee Wellness Program Begins 1985 1990 1995 2000 2005 2010 1985 1990 1995 2000 2005 2010 1985 1990 1995 2000 2005 2010 2008 Healthcare contributions imposed on previously “grandfathered” employees to match new employees; first half implemented in 2008 - second half in 2009 2008 Healthcare contributions imposed on previously “grandfathered” employees to match new employees; first half implemented in 2008 - second half in 2009 2008 Healthcare contributions imposed on previously “grandfathered” employees to match new employees; first half implemented in 2008 - second half in 2009 2009 Prescription formulary changes 2009 Prescription formulary changes 2009 Prescription formulary changes 1995 Retiree healthcare vesting schedule lengthened for new hires; graduated schedule implemented 1995 Retiree healthcare vesting schedule lengthened for new hires; graduated schedule implemented 1995 Retiree healthcare vesting schedule lengthened for new hires; graduated schedule implemented 1985 Retiree healthcare vesting schedule lengthened for new hires 1985 Retiree healthcare vesting schedule lengthened for new hires 1985 Retiree healthcare vesting schedule lengthened for new hires 2007 Buy-out offered to deferred retirees to waive future healthcare 2007 Buy-out offered to deferred retirees to waive future healthcare 2007 Buy-out offered to deferred retirees to waive future healthcare 2002/2003 Early Retirement Incentive DB & DC 2002/2003 Early Retirement Incentive DB & DC 2002/2003 Early Retirement Incentive DB & DC 1993 Early retirement incentive DB 1993 Early retirement incentive DB 1993 Early retirement incentive DB 2007 Raised co-pays & deductibles for actives & retirees. Raised retiree Rx drug co-pays = actives employees 2007 Raised co-pays & deductibles for actives & retirees. Raised retiree Rx drug co-pays = actives employees 2007 Raised co-pays & deductibles for actives & retirees. Raised retiree Rx drug co-pays = actives employees 2008 Retirement incentive offered to employees already eligible to retire 2008 Retirement incentive offered to employees already eligible to retire 2008 Retirement incentive offered to employees already eligible to retire

27. Oakland County • Recent changes in health care benefits have proven effective for controlling cost. • 2008 costs were reduced by 8% from prior year’s costs. In comparison, according to the National Coalition on Healthcare, employer-based premiums rose an average of 5% in 2008. • Prior to the reduction in 2008, the average annual increase was 13% for the period 2004 through 2007.

28. Royal Oak Initiates Act 312 Arbitration – Ruling in Their Favor Police take hit in arbitration Wednesday, April 1, 2009 by Catherine Kavanaugh, Daily Tribune Staff WriterROYAL OAK — Newly hired police officers won't receive health care benefits when they retire, according to an arbitration ruling that imposes a two-tier system on their union.The long-awaited, binding decision of arbitrator Paul Glendon relieved city officials but came as a surprise to the 75 members of the Royal Oak Police Officers' Association, which also represents public service aides and parking enforcement workers.In addition to losing retiree health care for future co-workers, all ROPOA members will pay more for their health care and prescription drugs and they will contribute 5 percent of their wages to the pension system — up from 2 percent.In exchange they received wage increases of 1.5 to 3 percent for the five-year contract, which is retroactive to 2006 and expires in July 2011."We were taken aback at how poorly we did," said Police Officer Patrick Schneider, the past president of the ROPOA.

29. City of Warren - Firefighters • IAFF local has accepted a two-tier contract • Pay for new firefighters tops out at $51,103 versus $71,227 • AEMT differential changes from 10% base wage to $1,000 per year • 2nd-tier retirement health care an HSA with the city contributing 1%, employees contributing a minimum of 4% up to a maximum of 10% • Defined benefit plan retained • Minimum staffing reduced

30. Northville Township • New contracts with police and fire unions • All employees switched to HMO (HAP) • All employees contribute 5% of healthcare premium • All retirees switch to Medicare part A, B and D • Defined benefit plan retained but township contribution capped at 20% of base pay • No contractual minimum staffing

31. Shelby Township Police Command Act 312 Ruling Feb 2010 • Arbitrator ruled in township’s favor in 8 of 9 issues • Wages frozen for 2 years • FAC reduced regarding accrued vacation & sick time • Shift premium & pension multiplier not increased • Higher deductible healthcare insurance plan • Employee HC premium sharing & higher prescription co-pays • ST disability reduced to 75% from 100%, LT same • “At the core of this decision must be the Employer's present and estimated future financial status, particularly reductions in revenue from revenue sharing and property taxes. A realistic analysis emphasizes the imperative of reducing costs. Wage increases, through the multiplier effect, relate directly to all other issues in dispute, including FAC, sick leave, shift differential, and pension computations”.

32. Wrap Up, Q&A and Evaluation Please enter questions in text box on your screen PowerPoint presentations will be emailed shortly after the webinar, along with an Evaluation Form for completion. Webinar: Union Negotiating Strategies June 22, 2010 Southeast Michigan Council of Governments 535 Griswold St., Suite 300 Detroit, MI 48226 www.semcog.org

33. SEMCOG University Webinar: Union Negotiating Strategies Thank you for participating in this SEMCOG University Webinar For no-cost assistance or more information, contact: Dave Boerger SEMCOG Local Government Effectiveness & Collaboration Office: 313-324-3427 boerger@semcog.org www.semcog.org Southeast Michigan Council of Governments

34. Southeast Michigan Council of Governments