If several unions have their way, cities will have to go bankrupt before they can declare financial urgency and renegotiate their contracts with public-sector employees.
On Wednesday, a three-judge panel at Florida's 1st District Court of Appeal heard oral arguments by lawyers litigating Broward County Police Benevolent Association v. City of Hollywood, the latest in a series of legal challenges being brought by public employee unions against local governments which have modified labor contracts after declaring a state of financial urgency.
Since 1995, Florida's Public Employees Relations Act (PERA) has allowed local governments to renegotiate labor contracts when faced with unexpected fiscal emergencies. State law requires city and county governments to adopt a balanced budget each year for the following fiscal year.
Facing a budget gap of almost $12 million, the city of Hollywood declared a state of financial urgency in September 2010, after which it successfully renegotiated its contracts with unions, including the Broward County Police Benevolent Association (BCPBA). But six months later, after projected revenues failed to materialize and the city was expected to lose another $7.4 million, a second state of financial emergency was declared.
But this time, the unions were having none of it.
It is the position of the BCPBA that this was an urgency declared without good faith, Rhea Grossman, the police union's lawyer, told judges Wednesday. Her reason? Because it was the second such emergency declared in the same fiscal year.
Would you have us declare that, as a matter of law, a city could not declare financial urgency more than one time in a fiscal year?Judge Nikki Clark asked Grossman.
Taking a few seconds to prepare her response, Grossman replied, Yes, I would say ...
Now, by what authority? Clark interrupted. I look at the statute ... I see nothing in here that prohibits that declaration of financial urgency more than once in a year.
David Miller, who is defending Hollywood in this suit and in one other brought by the fire unions, told Sunshine State News Grossman's suggestion would contradict the intent of state law.
That doesn't really make sense; a financial urgency is intended to allow the local government to address a rapidly developing situation that's forced on it by external financial conditions, he explains. Why would you put a limitation on it? If you can only declare it once in a year, [the law is] not going to fulfill its purpose.
Grossman herself seemed to back away from her initial claim, after finding that the judges were not receiving it sympathetically.
It's very difficult for [good faith declarations of financial urgency] to happen more than one time in a fiscal year if there has been prior negotiations, she told the court. And if there has been a new contract or [memorandum of understanding] that has been signed by the city, that has been signed or affirmed by the [union] members, and then within the same 12 months per nothing new has happened.
But Miller told judges something new did happen in March 2011 projection of yet another unexpected budget shortfall. It'd be absurd, he suggested, for the court to rule that the city had to wait for the shortfall to materialize before it could renegotiate its contracts.
Financial urgency provides a method for governments to step off the tracks before they're flattened by the locomotive of bankruptcy, he said.
Nobody saw this recession coming, he later told SSN. Nobody knew that the housing bubble in Florida was going to deflate to a completely flat balloon on the ground, and that the revenues were going to go through the floor the way they did.
Grossman did not return request for comment before this story went to press.
Attorneys close to the litigation expect it will eventually be taken up by the Florida Supreme Court; Miller warns that if the high court accepts the unions' argument that declaration of a financial urgency twice in the same year is proof of bad faith -- the fiscal toll on local governments will be nothing short of catastrophic.
This goes to the ability of local governments to maintain their solvency, he told SSN. If this law is interpreted in a very strict way, as the PBA is advocating, then the local government is going to have to stand there and wait until that locomotive hits it before it can take action.
I think that the public policy of Florida, and what citizens and taxpayers want, is a government that can avoid bankruptcy, if possible, rather than being chained to the train tracks and wait there to be run over.
Reach Eric Giunta at email@example.com or at 954-235-9116.