The Treasure Hunt: Budget Search Behavior by Public Employee Unions

Abstract

Bevars Mabry, in his Pure Theory of Bargaining, states that agreement represents the balancing point of power that each party is able to bring to bear on the negotiations.' In today's age of information and stress, it is not surprising that a key source of power in state and local union contract negotiations is information about problems and potential sources of funds to for union demands. Frequently in negotiations a jurisdiction will raise the argument of inability to pay, and this often triggers a search by the local union or its national-level researchers to find money in the jurisdiction's budget. This search may be intensified if the dispute proceeds to mediation, factfinding, arbitration, and/or a strike. Despite the frequency of this and the fact that hundreds of millions of dollars in wage settlements can be affected by the success of these searches, previous research into analysis by public sector unions is extremely sparse. In a 1970 study of 22 public school districts in California, James Craft coined the term budget search behavior and described several techniques used by local teacher unions to locate fat in school district budgets.2 These techniques included searching for possible overallocations of money for hiring new employees; looking for federal or state funds that could for wage and benefit increases; reducing costs over which the teachers had control (such as sick leave) and reallocating the savings to increase salaries; and trying to capture contingency funds set aside by management. If these techniques were unsuccessful and management was unwilling or felt unable to for the union's proposed package, then an impasse might be reached and militant action might result. The only other major study is a short manual for public sector managers by Mulcahy and Smith on how to make an effective inability to pay case in bargaining and arbitration.3 In this manual the authors list a number of useful tools, including doing population and income trends for the jurisdiction; comparing the gross tax rates (municipal, school, and special district) for the jurisdiction with other similar jurisdictions; showing the revenue effect of property tax limits on the jurisdiction; showing the expenditure effect of potential unexpected emergencies such as liability claims; comparing management to nonmanagement wage increases; and doing wage and benefit comparisons with surrounding jurisdictions. Other literature that touches on this topic generally deals with whether or not jurisdictions really hide * Numerous public sector wage and benefit disputes revolve around the jurisdiction's ability to payfor union demands, and on many occasions local unions, often with the assistance of their national research staffs, search through the jurisdictions' budgets looking for funds they can capture. This paper describes the relationships between the local and national unions in this process; lists the sources of information typically used by the unions; reviews typical econometric and comparative approaches used by unions in analyzing public budgets; describes the long-term strategies advocated by some unions; proposes an expanded theory of management hiding behavior; and discusses the effectiveness of union techniques.