One of New York’s most costly unfunded mandates—compulsory binding arbitration of police and fire contract disputes—would be renewed for an extra-long period under one of Governor Andrew Cuomo’s proposed budget bills.

A five-year extension of the state’s binding interest arbitration law, which has been periodically renewed since its enactment as a temporary law in 1974, is included in Part F (page 23) of Cuomo’s Public Protection and General Government bill.

Municipal officials have long complained that the law encourages unions to resist proposals to restructure costly work rules, benefits and staffing ratios—forcing employers instead to split the difference on unions’ demand for big pay increases and few changes in other contract provisions.

A 2013 Empire Center review of 136 arbitration outcomes found every case resulted in the union winning pay raises, which on average exceeded inflation both before and after the Great Recession. As E.J. McMahon explained:

Police and firefighter unions in New York have reaped a bonanza from the state law allowing them to insist on binding arbitration of their contract impasses. And taxpayers have paid a heavy price for it — especially on Long Island and in the lower Hudson Valley, where police and professional firefighters typically earn six-figure salaries before retiring in middle age on plush pensions.

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Over the years, pay awards by arbitration panels often have been well above inflation, even during economic downturns. Local officials like Suffolk County Executive Steve Bellone have been willing to negotiate costly and lengthy contract extensions just to avoid having something even worse imposed on them by arbitrators.

Unaffordable pay hikes are only part of the arbitration problem. The process also tends to perpetuate costly and inefficient work rules such as minimum manning requirements, shift differentials, guaranteed overtime, plentiful vacation and leave time, and large severance payouts.

The law is especially burdensome for cities, where police and fire services can make up half of city budgets, as well as for Nassau and Suffolk, which fund the only two sizable county police departments.

Mayors looking to adjust how department resources get deployed face the threat of costly arbitration decisions if they press too hard for changes to existing contracts.

In early 2013, Cuomo’s FY 2014 executive budget proposed a major reform of the arbitration law: a 2 percent cap on increases in compensation costs. A similar cap had just been imposed in New Jersey.

However, under pressure from unions, the governor backpedaled and accepted minor tweaks requiring arbitrators to weigh more heavily a locality’s ability to pay. While the governor claimed he had achieved a major reform, the head of the New York State Professional Firefighters Association could more convincingly declare victory.  Three years later, Cuomo didn’t even attempt real reform of the law, signing a three-year extension with no changes.

If binding arbitration were allowed to expire as scheduled on July 1, nothing would immediately change. Police and fire unions would lose their special privilege of demanding arbitration of future disputes and would instead bargain under the same laws as teachers and other public employees. Local officials (and the governor) would have a greater ability to bargain for substantive operational changes without fear of being dragged through an arbitration that can have unpredictable, and expensive, results.

A potential flashpoint

The extension was not mentioned in Cuomo’s nearly hour-and-a-half State of the State and budget speech. Its inclusion in the budget is noteworthy, because it makes it that much easier for the Legislature to rubber-stamp the existing law as part of a bigger package of unrelated items.

Matters related to law enforcement are one of the few areas in which political daylight exists between Cuomo and Democrats who now control large majorities in both legislative houses. Uniformed unions have been a cornerstone of Cuomo’s political coalition, but also supported many Republican candidates for state Senate last fall.*

Cuomo’s proposal would perpetuate a key element of the statutory status quo that has saddled New York with some of the highest personnel costs in the country. Driven by inefficient work rules and contractually dictated staffing ratios protected by arbitration, police pay in many downstate suburbs (even in poor upstate cities) mounts well into six-figures.

As noted, Cuomo’s last extension was for three years. A five-year extension would allow police and fire unions to retain crucial collective bargaining leverage halfway into the next gubernatorial term, two legislative election cycles from now.

The length of the extension suggests the governor is trying extra hard to solidify alliances with police and fire unions at a time when he also is pushing legalization of recreational marijuana, about which law enforcement officials are less enthusiastic.

* Senate Republicans have historically supported binding arbitration, rejecting Cuomo’s cap in 2013 and voting unanimously for the stand-alone renewal in 2009, their previous time in the minority, despite their claimed opposition to unfunded state mandates.