NTF Issue Paper: LegWatch69.doc. 4-11.

NEBRASKA TAXPAYERS FOR FREEDOM ISSUE PAPER:
REFORM THE NEBRASKA COMMISSION OF INDUSTRIAL RELATIONS.

BACKGROUND. The Commission of Industrial Relations is costly and inequitable to the financial health of Nebraska taxpayers. This state agency resolves labor disputes between state and local government employees, including public utilities, and their respective managements. According to the Commission, most cases involve public school teachers. The state constitution authorized this agency, and the legislature created the CIR in 1947. The primary objective of this third party arbitrator is to prevent public employees from striking and bringing to a halt public business. In an industrial dispute, an employer, employee, labor organization, or NE attorney-general by himself or on order from the Governor, may file a petition with the CIR, invoking its jurisdiction. The CIR determines who represents employees during collective bargaining, resolves disputes by establishing pay rates and employment conditions comparable to standards set for similar work, orders good faith bargaining, mediation, or fact-finding, and appoints persons to implement such. The CIR handles wage, sick leave, vacation time, work rules, and fringe benefit disputes most often. It accepts wage and conditions of employment cases upon request of one party after negotiation impasse. Union representation cases arise less often, as most public sector employees already are unionized. However, it is possible to decertify a current union, if there exists grounds for such action. The most damage to taxpayers involves wage disputes. Here, the CIR must consider the overall compensation of employees. This rule requires that overall compensation be comparable to the prevailing wage rates paid and employment conditions, like hours worked, for the same or similar work of employees exhibiting like or similar skills under the same or similar working conditions. The CIR considers vacation and sick leave and all benefits, including insurance and pensions. Both parties present evidence of proposed comparable arrays of pay and benefits. The CIR then selects an array(s) believed comparable and establishes wages and employment conditions based on “prevalent wages and conditions of employment of the selected array members.” Two key factors used by the CIR are comparable figures for geographic proximity and size of employer. The state supreme court has declared that the CIR is an administrative agency with judicial authority, that its proceedings must conform to the code of civil procedure used in district courts. A party may appeal its final decisions to the state Court of Appeals.

ITS COMMISSIONERS. The commission includes 5 judges appointed by the Governor, with legislative approval, for staggered 6-yr. terms. Commission members earn $475 a day, plus traveling expenses, while conducting business. They win appointment supposedly because of their background experience and knowledge in legal, financial, industrial, and labor matters. Any of the 3 judges together can make a ruling for the entire commission. Current commissioners are the following:

G. Peter Burger, Presiding Commissioner
116 West E St.
P. O. Box 1205
McCook, NE  69001-1205
(308) 345-7500
Fax:  (308) 345-7503
e-mail:  pete@burgerbennettlaw.com

Jeffrey L. Orr
322 W. 39th St.
P. O. Box 1060
Kearney, NE  68848-1060
(308) 234-5579
Fax:  (308) 234-9305
E-mail:  jorr@jonlaw.com

William G. Blake
Wells Fargo Center
1248 "O" Street
Suite 600
Lincoln, NE  68508
(402) 475-1075

Fax:  (402) 475-9515
e-mail:  wblake@baylorevnen.com

Loren L. Lindahl
551 N. Linden
P. O. Box 277
Wahoo, NE  68066-0277
(402) 443-3225
Fax:  (402) 443-4005
e-mail:  thefirm@wahoolaw.com

Bernard J. McGinn
4140 S.58th St.
Lincoln, NE 68506
(402) 770-0426
Fax:  None
e-mail: bmcginn71@gmail.com

THE PROBLEM. The CIR too often sides with unions and satisfies their demands, so unions feel little need to compromise during collective bargaining. In 2010, about 265 professors in the NE State College System received 11% wage hikes from the CIR. Base salaries for new employees rose by 9%. All promoted faculty won $3,000 bonuses. The increases were identical for all full-time instructors, regardless of tenure, and were the same as proposed by the faculty union, This decision lined up these pay hikes with other institutions in areas in states having higher costs of living. This ruling came when the 3 state colleges were cutting deeply their budgets in this recession and warning of layoffs. College trustees had offered more than 4%, higher than the cost of living increase for NE and suffered interminable decision delays. A college appeal to the state supreme court won a ruling that the court had limited legal grounds to reverse CIR decisions. Its decisions have caused Omaha police and fire union wages and benefits to soar, and personnel costs in Lincoln have grown steadily. The 7 comparables used in the Omaha Police case have average costs of living 3% higher than Omaha. Lincoln faces a projected $6.8 million budget gap. In 2000, a new Lincoln firefighter earned $18,000. Because of CIR rulings, beginning firefighters now earn almost $36,000, and veteran firemen can earn up to $51,030, $54,000 counting overtime. The average Lincoln city employee salary is $46,546, almost $10,000 more than the average Lincoln employee, according to the Federal Wage Survey, and more than an average state employee earns. Growth in local government employee salaries is unsustainable. 70% of the Lincoln budget funds personnel costs. Spending on city employee pay and benefits has risen 42% there since 1997. Spending on benefits for full time employees doubled, from $7,573 to $14,189, and salaries increased by 39%, though the number of full-time and part-time employees rose only 7%. According to the U.S. Bureau of Labor Statistics (Jan. 2010), full-time Lincoln private employees earned about $17.87 per hour in 2009, less than the $22.38 per hr. for Lincoln full-time city employees. The city cannot merely slash or freeze salaries, wages established by negotiations with 5 labor unions that have a CIR ally. Lincoln can only leave positions vacant to save dollars. The CIR ruled in Sept. 2010 that Scottsbluff could not implement alterations in its insurance plan for city police officers. The city had added snowmobiling, riding ATVs, and motorcross racing to its hazardous hobbies exclusion in the plan. The commission ruled that the city must reimburse officers for health insurance benefits withheld. The Grand Island city council raised from 24 weeks to 27 weeks the amount of sick leave that city employees may accumulate, citing precedent from the CIR. The CIR has created a ruling class over the serfs who pay the taxes to feed these bureaucrats. It compares Lincoln salaries to those in other cities that can range twice as large and in more expensive areas, like Minneapolis. The Omaha firefighters union is dragging the city to the CIR, seeking outrageous wage hikes costing $2 million. The CIR ignores city budget ability to pay its outrageous mandates. Though language appears to allow comparison with private sector employees of similar education and same or similar work, such does not happen. Public employees and their unions apparently have established substantial case law to compare only teachers to teachers, police officers to police officers, firefighters to firefighters, etc., and only in large school districts and cities comparable to the Omaha entities above. This comparison results in inflated salary and fringe benefit hikes for public sector employees, as evidenced by the growth in these categories on every financial report published by various government units for the past 25 years. Nebraska cities contend that the CIR too often rules unpredictably, forcing taxpayers to pay outrageous pay increases to public employees. The CIR can and has imposed budget-busters on cities. For example, the commission ordered pay hikes of from 9% to 20% for Lincoln firefighters back to 1995, far above the 4% anticipated by the city. Existing property tax lids and proposed spending lids would make impossible cities coping with large, unexpected budget hikes. Remember that about 75% of municipal budgets pay personnel costs. In the private sector, even where unionized, there is a basic philosophy that productivity, merit, and profitability play an important role regarding increases in salaries and fringe benefits on a regularly reviewed basis. In the public sector, there is no regard for the productivity or merit concept. Instead, we see raw negotiating power on an upward spiral, on an entitlement basis. Negotiated increases have occurred since the early 1960s, without a break in this pattern. Because the CIR continually raises salaries, government subdivisions, particularly school districts, face an upward spiral of wage hikes driven by CIR decisions. As a result, the tax burden in Nebraska has reached an intolerable level, and the disparity between public and private sector pay and fringe benefits has widened. Cases brought to the CIR have accelerated drastically in recent years. Liberal officeholders and government officials enjoy this situation, because they can avoid hostile strikes and absolve themselves of responsibility to confront the unions, many of whom contribute liberally to officeholder campaigns and endorse them.

Public Sector vs. Private Sector Compensation.

Public sector pay averaged $39.66 per hour in 2009, which was 45% higher than the private sector average. The public sector advantage was 34% in wages and 70 percent in benefits.

Table 1. Average Compensation, 2009 Dollars per Hour Worked:

State Private

Total compensation: $39.66 Total compensation: $27.42

Wages and salaries: $26.01 Wages and salaries: $19.39

Benefits: $13.65 Benefits: $8.02

Paid leave: $ 3.27 Paid leave: $1.85

Health insurance: $ 4.34 Health insurance: $1.99

Defined-benefit pension: $ 2.85 Defined-benefit pension: 41c

Defined-contribution pension: 31c Defined contribution pension: 53c

Other benefits: $ 2.53 Other benefits: $2.40 Source: U.S. Bureau of Labor Statistics, June, 2010.

This table shows that public sector workers enjoy the largest advantages in health insurance, defined benefit pension plans, and paid leave. Those advantages stem both from the more expensive features of public sector benefit packages and from the greater availability of benefits in the public sector.

THE SOLUTION. The CIR must consider ability of a company or government subdivision to pay CIR-mandated wages and benefits. The CIR should use the last and best offer made by a government subdivision as its focal point, examining subdivision ability to pay. The CIR is the mother’s skirt behind which every board, council, county commission, and administrator hides whenever they plead that they cannot control the biggest part of their respective budgets. It is time for all elected officials and appointed administrators courageously to represent the taxpayers and lobby to eliminate the Commission of Industrial Relations, then offer public employees the right to strike. If elimination is legislatively impossible now, then comparison with the private sector and more similar arrays with similar living costs should become the minimum result. The CIR hampers fiscal control in all government subdivisions in the State of Nebraska. Though there have occurred major developments in controlling spending at all levels of government via the real estate tax revolt and loose spending lid approaches, the core issue still remains the salaries and fringe benefits of public sector employees. Lobby state senators to pass one of the following resolution and/or bills in the 2011 legislative session:

LR 29CA: Nelson. A constitutional amendment to prohibit state or local government entities or agencies from engaging in collective bargaining with public sector unions. GOOD BILL/ IN BUSINESS & LABOR COMMITTEE.

LB 482: Utter. To reform the Comm. of Industrial Relations by placing a higher burden of proof that working conditions are comparable on parties seeking an out-of-state job match and requiring income adjustments when using out- of-state matches. The CIR must give preference to comparing similar public jobs within NE. It also must consider private sector wages and benefits. Health insurance and retirement benefits would be only permissive subjects of bargaining. The CIR could not compare defined benefit plans with defined contribution plans when ruling on retirement benefits. Unions oppose this bill; the state Chamber of Commerce endorses it. GOOD BILL/ IN BUSINESS COMMITTEE

LB 564: Fulton. To allow the CIR only to engage in fact-finding and recommend solutions to labor disputes. GOOD BILL/ IN BUSINESS & LABOR COMMITTEE
LB 619: Larson. To remove public school districts, educational service units, and the Learning Community from access to the CIR. GOOD BILL/ IN BUSINESS & LABOR COMMITTEE

LB 623: Lautenbaugh. To limit CIR authority to establish insurance and pension benefits for City of Omaha and Douglas County employees. The CIR could not issue orders regarding insurance and pension benefits for these employees. The commission could use only more local public and private employers when comparing wages and benefits for Douglas County employees. Government entities need more control over public sector wages, because now they are unable to institute wage freezes and similar measures to cut spending in a recession, which now sees spiraling spending, higher taxes, and taxpayer anger. Public sector unions, the recipients of so many generous decisions by the CIR, oppose all legislation to reform the CIR. GOOD BILL/ IN BUSINESS & LABOR COMMITTEE

LB 664: Nelson. To abolish the Commission of Industrial Relations and prohibit public employees from striking or engaging in work slowdowns or face a Class I misdemeanor. To prohibit state and local governments from recognizing public service unions. GOOD BILL/ IN BUSINESS & LABOR COMMITTEE
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Lobby your state senator to oppose the following: LB 397: Lathrop. The Comm. of Industrial Relations must consider pension and health insurance benefits when comparing compensation with other employers. It must consider comparable pay paid by private employers, preference given to NE jobs that are comparable within a reasonable distance. If the CIR compares NE jobs to those in another urban area, the area must be equal size, and cost of living differences considered but not mandated. If wages are higher than in an array of comparable jobs, NE employees would see wages frozen until back in line but not reduced. School districts could request another hearing to argue that they are unable to afford a wage ruling issued by the CIR. However, businesses would have to disclose proprietary information about wages and benefits to the CIR, leading to massive invasions of privacy. It would create additional work for the CIR, add regulations, and not lower costs but cause more expense for government entities. BAD BILL/ GENERAL FILE

TAKE ACTION NOW. Contact NTF to obtain a Legislative Watch Project packet. Email us at netaxpayers@gmail.com or write NTF, P.O. Box 6452, Omaha, NE. 68106. Use the packet materials and information in this issue paper to lobby your state senator to pass a conservative bill and to oppose LB 397.

Research, analysis, and documentation for this issue paper done by Nebraska Taxpayers for Freedom. This material copyrighted by Nebraska Taxpayers for Freedom, with express prior permission granted for its use by other groups in the Tax Freedom Network. 4-11 C