Legislature Debates Amendments to Bill
Late in the day on June 14, the Supreme Court overturned Dane County Circuit Judge Sumi’s decision to enjoin implementation of the Budget Repair Bill, 2011 Wisconsin Act 10 (the “BRB”). Prior to the Supreme Court’s decision, the Republican-led Legislature reintroduced the BRB as part of the Biennial Budget process through Assembly Amendment 1 to the Budget Bill (as amended following the Joint Finance hearings). The Assembly’s actions follow on the heels of Assembly Substitute Amendment 1, which is the version of the Budget Bill that passed out of Joint Finance. To view a printable copy of the below memo, click Supreme Court declares Budget Repair Bill Valid.
Prior to the Supreme Court’s decision, the Republican-led Legislature reintroduced the BRB as part of the Biennial Budget process through Assembly Amendment 1 to the Budget Bill (as amended following the Joint Finance hearings). The Assembly’s actions follow on the heels of Assembly Substitute Amendment 1, which is the version of the Budget Bill that passed out of Joint Finance. Assembly Amendment 1 incorporates the changes to public employee retirement contributions, health insurance contributions and collective bargaining processes that were previously embodied in the BRB. While the BRB is now law, it remains unclear whether the Legislature will continue to push for the changes to the BRB embodied in Assembly Substitute Amendment 1 and/or Assembly Amendment 1. An explanation of the changes to the BRB in this proposed legislation follows.
1. Pre-Tax Treatment of Employee WRS Contributions.
Under the BRB, it was unclear whether the mandated employee WRS contributions for general municipal employees would be considered pre-tax or post tax. Assembly Amendment 1 includes new language that the employee-required WRS contributions are considered pre-tax contributions under section 414(h)(2) of the Internal Revenue Code. Pursuant to section 414(h)(2), the employee designated contributions will be paid out of the employee’s gross income on a pre-tax basis and, therefore, excluded from an employee’s taxable income. The language of the Amendment mimics the requirements in section 414(h)(2) by stating that the contributions are being paid by the employer in lieu of contributions by the employee and that the employee may not elect, directly or indirectly, to receive the amounts instead of having them paid by the employer. See Page 29, Section 51, Assembly Amendment 1 to Assembly Substitute Amendment 1, to 2011 Assembly Bill 40.
2. “Grandfathering” Current Public Safety Employees and Expansion Of The BRB’s WRS Exemption For Public Safety Employees.
Under the BRB, the only employees who were excluded from the mandated employee WRS contributions were represented “public safety” employees (deputy sheriffs and county traffic police officers). The BRB allowed public safety employees to bargain over whether, and to what extent, the employer “picks-up” the employee’s share of the WRS contribution. 2
The language of Assembly Substitute Amendment 1 continues to allow public safety employees to bargain over WRS contributions, but provides that a municipal employer is prohibited from paying the employee-required contributions if the public safety employee first becomes a participating employee in WRS on or after the effective date of the Budget Bill. In effect, Assembly Substitute Amendment 1 “grandfathers” current public safety employees in a system where they may continue to bargain over WRS contributions, but all newly-hired employees must pay the employee share of WRS.
Assembly Amendment 1 expands the WRS exemption in the BRB as modified by Assembly Substitute Amendment 1 to “nonrepresented law enforcement or firefighting managerial employees” employed by a local government on the effective date of the legislation. The terms “law enforcement” and “managerial employee” are not defined in Assembly Amendment 1. It is assumed, however, Assembly Amendment 1 is referencing sheriffs and other non-represented “managerial” law enforcement employees who are otherwise excluded from law enforcement supervisory collective bargaining units formed under Wis. Stat. sec. 111.70(8).
The effect of this provision is to require municipalities to provide for the same retirement contribution levels on non-represented law enforcement and fire fighting employees that apply to represented law enforcement and firefighting employees in that municipality and who were employed by the municipality on the effective date of the legislation. Presumably, this will be the same percentage as that paid by the “public safety employees” who retain the right to bargain for the employer to pay the employee WRS contribution under the BRB (since the BRB requires represented “non-public safety employees” to pay the full amount of their employee required contribution). What is not yet clear is whether the “me too” situation follows employees throughout their career – e.g., if a group of represented public safety employees in a county agree to a 2% WRS contribution through collective bargaining, then the nonrepresented managerial employees must also pay 2%.
The proposed expanded exemption applies to current nonrepresented law enforcement or firefighting managerial employees. It also applies to current represented law enforcement or firefighting employees who move into managerial positions within the same department on or after the effective date of the legislation. Represented employees who move to a different municipal employer are not covered by this provision.
3. Removal of Public Safety Employees’ Right to Bargain Over Health Insurance and Expansion of Public Safety Employee Exemption for State Plan.
Under the BRB, health insurance is a prohibited subject of bargaining except for public safety employees. Moreover, the BRB prohibited counties that participate in the state health plan (State Plan) from paying more than 88% of the average premium cost of 1st tier health plans beginning January 1, 2012. The BRB exempted public safety employees from these restrictions on State Plan premium contributions.
Assembly Substitute Amendment 1 modifies the BRB and makes “[t]he design and selection of health care coverage plans” a prohibited subject of bargaining for public safety 3
employees. Assembly Amendment 1 requires municipalities to provide the same health insurance premium contribution levels for the State Plan to non-represented law enforcement and fire fighting managerial employees that apply to represented law enforcement and firefighting employees in that municipality and who were employed by the municipality on the effective date of the legislation. This will likely impact State Plan premium contributions for a limited time as premium contribution to the State Plan becomes a prohibited subject of bargaining upon expiration of the current collective bargaining agreement.
The proposed expanded health insurance exemption applies to current non-represented law enforcement or firefighting managerial employees. It also applies to current represented law enforcement or firefighting employees who move into managerial positions within the same department on or after the effective date of the legislation. Represented employees who move to a different municipal employer are not covered by this provision.
4. Effective Date for Employee WRS Contributions.
Assembly Amendment 1 clarifies that employee contributions to WRS will begin on any pay period following the effective date of the Budget Bill. The specific effective date will be determined by the Department of Administration. See Page 122, Section 135 of Assembly Amendment 1.
5. Exemption for Transit Employees.
Under the BRB, the only class of employees exempt from the changes to the collective bargaining laws was “public safety employees.” Under Assembly Amendment 1, the exemption has been expanded to include “transit employees.” Assembly Amendment 1 defines the new exemptions as follows: “The [Wisconsin Employment Relations Commission] shall determine that any municipal employee is a transit employee if the commission determines that the municipal employer who employs the municipal employee would lose federal funding under 49 USC 5333(b) if the municipal employee is not a transit employee.” See Page 46, Section 78 of Assembly Amendment 1. Transit employees, as defined in Assembly Amendment 1, retain all current rights related to collective bargaining including the right to bargain employer payment of the employee share of WRS contributions and right to bargain the provisions of employee health insurance plans.
6. Timing of Certification Vote.
The BRB required all collective bargaining units containing at least one “general municipal employee” to undergo annual certification votes to determine whether to continue union representation. Assembly Amendment 1 clarifies that the first vote relating to certification shall be held in the third month beginning after the effective date of the Budget Bill. See Page 123, Section 139 of Assembly Amendment 1. 4
7. Referendum Requirement for Increase in Base Wages.
The BRB required that a municipality conduct a referendum to allow the municipality to offer a wage increase to general municipal employees beyond the CPI threshold. It was not entirely clear if the referendum requirement applied only to those general municipal employees represented by a bargaining unit. Assembly Amendment 1 clarifies that the referendum requirement applies only to represented general municipal employees. See Pages 39-40, Section 70 of Assembly Amendment 1.
8. Interest Arbitration Factors for Represented Public Safety Employees.
As indicated in an earlier writing, the Joint Finance Committee passed a motion to amend the Budget Bill which, among other things, modified the interest arbitration criteria for represented public safety employees. For years, municipalities have suggested that local economic conditions should play a role in an arbitrator’s decision-making process for interest arbitrations proceeding under s. 111.77 (public safety) similar to the process currently utilized under s. 111.70 (general municipal). Section 2409iv (Page 976) of Assembly Substitute Amendment 1 clarifies that the following factor is to be included in any interest arbitration involving public safety employees:
In reaching a decision, the arbitrator shall give greater weight to the economic conditions in the jurisdiction of the municipal employer than the arbitrator gives to the factors under par. (bm). The arbitrator shall give an accounting of the consideration of this factor in the arbitrator’s decision.
We will continue to analyze the legislation as it proceeds through the Assembly and Senate. We also anticipate providing an analysis of the Supreme Court’s decision and resulting implementation issues related to the BRB. In the meantime, for further information on legislative and legal developments, please visit: the Wisconsin Counties Association’s website at www.wicounties.org, our website at www.phillipsborowski.com, the Wheeler Report at www.thewheelerreport.com, or WisPolitics at www.wispolitics.com. We also encourage you to contact us with questions or concerns: Andrew T. Phillips or Daniel J. Borowski.