Even with negotiations between the City of Miami and its four unions starting to sour last month, city leaders didn’t fret about being able to close a $60 million hole in the city’s $485 million operating budget.
That’s because the city had a powerful card to play: a legal maneuver known as “financial urgency.” The seldom-used provision in state law allows municipalities to force employee concessions to balance the books, even after union contracts are in place.
Financial urgency has been a nightmare for labor unions, which have little control once a municipality invokes the statute. Unions see the provision as a way for local governments to sidestep negotiations — and balance their budgets by slashing employee pay and benefits.
In the case of Miami, union leaders point out that city administrators have declared financial urgency three years in a row, and that the city’s financial outlook is actually improving. Revenues from property taxes are up over last year, and the city commission has given a tentative nod to lowering the overall tax rate.
“They are abusing the statute,” said Anthony Hatten, president of the local AFSCME, the city’s general employees’ union. “They are using the economy as an excuse to really hit us harder than they have to.”
Leaders of the city’s four unions — firefighters, police, sanitation and general employees — have called on Miami commissioners to raise taxes and hike the rents on city-owned properties.
Miami City Manager Johnny Martinez contends that declaring a financial urgency for the coming budget year was necessary because salaries make up 80 percent of the city’s budget and the unions were unwilling to negotiate concessions.
“The financial situation is getting a little better, but not a lot better,” Martinez said. “There’s still a gap we need to fill and we don’t have agreement from the unions.”What makes the debate tricky is that financial urgency is not defined in state statute. It is different from declaring a “financial emergency,” which has clearly defined conditions, including the failure to pay debt, employee salaries or retirement benefits. A financial emergency can lead to a state takeover of a city’s finances.
The best definition of urgency comes from the state Public Employees Relations Commission, which serves as the appeals board for labor disputes. But even that language is murky, calling it “a financial condition calling for immediate attention and demanding prompt and decisive action.”
“The fundamental problem with this section of the statute is that it is unusually vague,” said Robert Suarez, president of the Miami firefighters’ union. “There is no real standard here.”
Suarez believes the law may violate the Florida Constitution.
“The right to collective bargaining is a constitutional right and nothing shall abridge that right,” he said. “Yet with the financial urgency clause, there is inherently a problem.”
Miami City Attorney Julie O. Bru sees it differently.
“The intent of the statute is to give the legislative body flexibility,” she said, adding that emergencies come in too many forms to list in a statute.
Though challenging to define, urgency is easy to declare. The chief executive of a city or school district can do so without the consent of the legislative body involved, for example a city commission or school board. The CEO then has two weeks to negotiate with the labor unions. If no agreement is reached, the legislative body can unilaterally approve changes to employee contracts.
Statewide, the provision has only been used a handful of times. Although the financial urgency statute became law in 1995 as a way to expedite negotiations in financial crises, it was seldom used until the economy tanked in 2008.In 2009, when the Pembroke Pines municipal charter-school system was facing a $2.1 million budget shortfall, the city used the measure to renegotiate its contract with the Broward Teachers Union.
Pines commissioners invoked the statute a second time to make changes to the pension plan.
Neighboring Hollywood has declared thrice financial urgency. Most recently, city leaders in 2011 relied on the law to slash police and firefighter salaries by 12.5 percent and general employee salaries by 7.5 percent to cover an unexpected budget hole.
Miami has also been a repeat user of the statute.
The city first declared financial urgency to help alleviate a $116 million budget deficit in 2010. Commissioners went on to cut more than $80 million out of union contracts by imposing pay cuts, eliminating perks and scaling back pension benefits. The actions took effect after three of the four union contracts had expired, and lasted one year. The firefighters’ contract was changed despite having one year remaining.
Miami again declared urgency in 2011, when the budget shortfall topped $61 million. But the city was able to reach agreements with its four labor unions before having to force any concessions.
Both Miami and Hollywood have faced legal challenges from their unions. In all cases, the Public Employee Relations Commission sided with the city.
In 2010, the police and fire unions in Miami claimed city leaders had misused the statute.
In its final order in the police union appeal, PERC said “financial urgency” had indeed existed in Miami because the city had instituted a hiring freeze, stopped replacing police and fire vehicles, and eliminated some positions.
Had the city failed to act, PERC wrote, “the city would have been in the untenable situation of being unable to pay for essential governmental purchases, such as improvements, electricity and fuel for city vehicles. The city would have been able to operate or maintain its buildings, and its pension costs would have depleted approximately 25 percent of the city’s budget.”
An appeal of PERC’s ruling is pending, as are appeals in other cases.
David Miller, an attorney who has represented Hollywood in its financial urgency matters and written and lectured on the subject since 2009, noted that PERC did not quantify financial urgency in any of the cases.
“What PERC has said is that it will look at the entire financial picture of the employer and will make a judgment as to whether those circumstances constitute’’ financial urgency, he said.
The battle isn’t over in Miami.
The city needs to plug a $60 million hole in its 2012-13 budget. Although revenues from property taxes are expected to be about $3.3 million more than last year, the city must pay millions more into its pension funds to offset a loss in revenue from investments.
It will ultimately be up to the Miami commissioners to force concessions — a move they might have to make, since raising taxes is no longer an option. Commissioners last week voted to advertise a slight decrease in the overall tax rate, and cannot go back on that decision.
After three years, Commission Chairman Francis Suarez said he is wary of urgency.
“I think we should try to avoid it whenever possible,” he said. “Hopefully, it will be something that we won’t have to invoke in the future.”