1995 NAC 114 State of Oregon, and Oregon Public Employees Union, Local 503, SEIU, AFL-CIO, CLC

Title: State of Oregon, and Oregon Public Employees Union, Local 503, SEIU, AFL-CIO, CLC
Date: March 27, 1995
Arbitrator: Luella E. Nelson
Citation: 1995 NAC 114

In the Matter of the Factfinding

between

Oregon Public Employees Union, Local 503, SEIU, AFL-CIO, CLC,

and

State of Oregon.

FACTFINDER'S

FINDINGS OF FACT

AND RECOMMENDATIONS

This Factfinding arises between Oregon Public Employees Union, Local 503, SEIU, AFL-CIO, CLC ("Union"), and State of Oregon ("State"). LUELLA E. NELSON was selected to serve as Factfinder.

Hearing was held on February 15, 16, and 17, 1995, in Salem, Oregon, and February 18, 1995, in Portland, Oregon. The parties had the opportunity to examine and cross-examine witnesses, introduce relevant exhibits, and argue the issues in dispute. The Union tape recorded the hearing, but the parties have not agreed to make those tapes part of the official record of testimony.

The Union submitted a portion of the matter on closing oral argument; both parties filed post-hearing briefs on or about February 24, 1995. The Union further submitted a copy of the March 1995 Oregon Economic Review and Forecast, and letter commenting thereon, which were received on or about March 2, 1995. The State submitted a letter in response to the Union's comments, which was received on or about March 4, 1995.

Tim Nesbitt, Assistant Executive Director, Oregon Public Employees Union, P. O. Box 12159, Salem, OR 97309

Gary M. Cordy, Assistant Attorney General, Labor Law Section, General Counsel Division, Justice Building, Salem, OR 97310; and Eva M. Corbin, Labor Relations Manager, Department of Administrative Services, State of Oregon, 155 Cottage Street NE, Salem, OR 97310

In making her Findings of Fact and Recommendations, the Factfinder weighed and considered the following criteria set forth in the Oregon Public Employees Collective Bargaining Act ("PECBA"), ORS 243.746(4), and the Rules of the Oregon Employment Relations Board ("ERB"), OAR 115-40-010(15):

(d) Comparison of the wages, hours and conditions of employment of other employees performing similar services and with other employees generally:

(e) The average consumer prices for goods and services commonly known as the cost of living;

(f) The overall compensation presently received by the employees, including direct wage compensation, vacations, holidays and other excused time, insurance and pensions, medical and hospitalization benefits, and continuity and stability of employment, and all other benefits received;

(g) Changes in any of the foregoing circumstances during the pendency of the arbitration proceedings;

(h) Such other factors, not confined to the foregoing, which are normally or traditionally taken into consideration in the determination of wages, hours and conditions of employment through voluntary collective bargaining, mediation, factfinding, arbitration or otherwise between the parties, in the public service or in private service.

(1) Shall there be an across-the-board salary increase, effective April 1, 1995?

The State has proposed an increase of one range for Communicable Disease Investigator.

The Union has agreed to the above increases for Elevator Mechanic, Disability Analyst 1, 2 and Communicable Disease Investigator, subject to resolution of related issues described in Issues #3 and #4.

(c) Electrician, Corrections Electrician and Electric & Control Systems Tech: +8 ranges (+6 ranges for Electrician above rate proposed by the State)

(g) Mental Health Therapy Shift Coordinator & Mental Health Therapist Coordinator: +1 range

(n) Ship's Assistant Cook, Ship's Cook, Ordinary Mariner, Able Mariner, Boatswain, Boat Operator, Ship's 1st Mate, Ship's 2nd Mate, Ship's 3rd Mate, Ship's Electrician, Asst Port Engineer, Ship's 1st Asst Engineer, Ship's 2nd Asst Engineer, Ship's Chief Engineer: +2 ranges

(p) [withdrawn at hearing, to be consolidated with non-strikeable unit interest arbitration]

(3) Shall the implementation provision for the selective salary increases offered by the State or recommended by the factfinder be modified from the current contract provision as proposed by the State:

The State has proposed that employees shall not receive an increase unless their current step is below the first step of the new salary range or their current rate is not a rate in the higher range; in that event, they shall be placed on the higher step closest to their current rate of pay.

The Union proposes current language for the implementation of selective salary increases. That language (Article 27, Section 5) reads:

... [E]mployees ... shall be placed at that step of the new salary range which results in a one-step increase; provided, however, that if any employee is more than one (1) step below the first step of the new salary range, he/she shall be placed at that first step. ...

(4) Shall the selective salary increases offered by the State or recommended by the factfinder include a sunset provision, as proposed by the State?

The State has proposed a five-year sunset provision, after which continuation of the higher range would revert to the prior salary range unless justified by market and recruitment or retention factors.

This factfinding concerns employees represented by the Union who are not prohibited from striking by ORS 243.736 ("strikeable" employees).[1] The parties' 1993-95 collective bargaining agreement ("the Agreement") included an across-the-board wage freeze in the first year and a wage reopener for the second year. The parties have been unable to agree on wages in bargaining under the wage reopener.

The parties have specifically excluded from consideration the impact of the recent passage of Measure 8 (requiring employees to pay a 6% contribution into the Public Employee Retirement System, or PERS). The Union has agreed that any salary increases awarded in this proceeding will offset the proposals now on the table for the 1995-97 Agreement. Those proposals, of course, are not at issue in this proceeding.

Of the criteria in ORS 243.746(4), the parties have identified three principal areas of contention as to proposed across-the-board and selective increases. Those areas are ORS 243.746(4)(c), the public interest and ability to pay; 243.746(4)(d), the comparison with other employees; and 243.746(4)(e) the cost of living.

The State calculated the estimated cost of the Union's proposals for the portion of the 1993-95 biennium for which they would be effective, as well as the costs of those proposals for the 1995-97 biennium. Those initial estimates, including the cost of those selective proposals on which the parties are in agreement, are shown as Appendix A, attached hereto. The parties' ability-to-pay arguments center around that portion of the proposed increases that would be funded from the General Fund. Therefore, unless otherwise specified, the figures discussed herein refer only to General Fund revenues and expenditures.

The state constitution requires a balanced budget. The state budget routinely incorporates an ending balance. This provides a cushion against unanticipated expenses or revenue shortfalls. Until the last two biennia, the rule of thumb was to keep the ending balance at 2% of the total budget; an unspecified lower figure is now used. Appendix B shows the budgeted ending balance versus the actual ending balance, in millions of dollars, for 1987 through 1997.

The 1993-95 budget appropriated General Funds for personal services of $1,504.3 million. The December 1994 estimates anticipated the State would actually spend only $1,496.3 million of those funds by mid-1995. The State also reduced expenses in other areas below the budgeted amounts, for a total General Fund savings of $48.1 million in 1993-95. $12.3 million of the savings came from underexpenditures within agencies whose employees are represented by the Union.

Each budget includes appropriations to an Emergency Fund to cover unanticipated expenses arising after the legislative funding process has ended. A joint legislative committee, the Emergency Board, rules on agency requests for Emergency Funds when the Legislature is not in session. If the Emergency Board does not approve a request, agencies must fund unanticipated expenses by other means, such as reductions in other program expenditures.

Between 1985 and 1993, the Emergency Board allocated most or all of the Emergency Fund reserved for compensation changes. Those sums ranged from $43 million to $96.8 million per biennium. In the 1993-95 biennium, the Emergency Fund contained $21.8 million for compensation changes. $15.5 million of this money was earmarked for anticipated insurance premium increases. The remaining $6.3 was expected to cover possible salary and insurance increases for collective bargaining agreements that remained open at the close of the legislative session.

By the start of the 1995 legislative session, the Emergency Board had allocated only about $14.4 million of the funds reserved for compensation changes, largely because insurance premiums did not rise as anticipated. The remaining $7.4 million in Emergency Funds is added to the beginning balance for the 1995-97 biennium, and will be reflected in budget revisions. The proposed 1995-97 Emergency Fund includes $52 million for selective salary increases.

In 1990, Measure 5 reduced the maximum property tax rates for local schools over five years, and set maximum tax rates for non-school government operations. It required the State to make up lost local school funds from the General Fund through fiscal year 1995-96. A 1992 attempt to raise the maximum local tax rate for non-residential property failed, as did a 1993 proposed sales tax.

The State has always provided some General Fund support to schools. As a result of Measure 5, the amount of General Fund school support has increased since 1990. This increase has included both mandatory and discretionary funding. Attached as Appendix C is a chart showing, in millions of dollars, the general fund revenues and school support (Measure 5 and discretionary) for fiscal years 1988 projected through fiscal year 1997. The State is not legally required to replace lost local school fund revenues after fiscal year 1995-96. The proposed school support for the 1995-97 biennium exceeds the amount needed to replace lost local school fund revenues by roughly $.5 billion.

Lottery revenues are dedicated to economic development. Since 1993, the Legislature has used lottery "backfill" to fund economic development programs (including some school funding) which it formerly funded from General Funds. Both projected and actual lottery revenues have varied widely. Accurate projections for coming years are difficult because of the possibility that Indian gaming may reduce lottery revenues. Attached as Appendix D is a chart showing the actual and projected lottery revenues, and the amount of lottery backfill, in millions of dollars.

In 1993, the Legislative Fiscal Office estimated that, for the 1993-95 biennium, the budget would require $7.54 billion to fund services at the level that prevailed in the 1991-93 biennium. It projected resources at $6.45 billion. After accounting for the ending balance, that left a $1.2 billion "current service gap." The Legislature took the following steps to fill this gap:

According to Cost Analyst Tom Perry, the Legislative Fiscal Office estimated it would be necessary to reduce positions by 1,762 from a January 1992 baseline in 1993-95. The 1993-95 Budget Highlights shows a planned reduction of 2,140 positions and 1,363.7 FTE's relative to the 1991-93 biennium. Total full-time equivalent ("FTE") positions actually decreased from 47,203.26 in 1991-93 to 46,215.14 in 1993-95, a reduction of 988.12 FTE's, or 2.1%. Perry testified the State laid off 382 employees between January 1992 and July 1993. The record does not reflect whether any of those laid off found other jobs in State government. The recommended 1995-97 budget provides for an increase of 518.89 FTE's, to 46,734.03, an increase of 1.1%. The March 1995 Oregon Economic and Revenue Forecast estimates state government employment will increase by 1.5% in 1995.

In calculating payroll costs, the State applies an unspecified vacancy rate for the budgeted positions. The Union estimates the State saves an average of $159,863 in General Fund payroll costs monthly for each 1% rise in the unit vacancy rate. Attached as Appendix E is a chart summarizing vacancy rates within this unit between February 1994 and January 1995.

The budget does not account for savings resulting from replacing departing senior employees with new hires at a lower step in the salary range. The average unit employee is at Step 5.4. The Union estimates the State saves an average of $371 per month in payroll costs by replacing a Step 5 unit employee with a Step 1 new hire. Of that amount, an average of 29.5%, or roughly $109.45, comes from the General Fund. The Union attempted to estimate the total savings from unit separation figures provided by the State. Unfortunately, those figures shed little light on this issue. See Appendix F for an analysis of the turnover data.

The 1995-97 recommended budget includes a 6.6% inflation factor over the biennium for services, supplies, capital outlays, and some special payments; it applies other inflation factors for medical services and a few other areas. The 1993-95 budget assumed roughly a 6% inflation factor for similar items; however, it required some agencies to absorb some or all of the inflation.

When income tax revenues exceed projections by more than 2%, ORS 291.349 requires a tax credit to taxpayers of the excess, referred to as the "kicker credit." In December 1994, the State estimated the combined personal and corporate kicker credit that would be due in the 1995-97 biennium at approximately $270 million. The March 1995 revisions estimate the kicker credit at $318.6 million. The Legislature can suspend the operation of ORS 291.349, as it did for the 1991-93 and 1993-95 biennia. The 1995-97 recommended budget assumes the "kicker" credit will take effect.

The 1995-97 recommended budget does not recommend funding for an estimated $216.4 million in contingent liabilities. The amount of some of the contingent liabilities has been fixed, but the schedule for payment remains uncertain; the amount of others has not been determined; and some may be resolved without a net cost to General Funds.

The March 1995 Oregon Economic and Revenue Forecast noted robust growth in jobs, particularly in construction and high technology manufacturing, during 1994. It predicted a slowdown by the second half of 1995 and continuing into 1996, especially in residential construction and durable goods manufacturing. It noted that personal income grew at an estimated 7.5% in 1994, and predicted a rate of 6.8% in 1995. Looking specifically at wage and salary income, it reported growth of 8.5% in 1994 and predicted growth of 7% in 1995. Predicted rises in manufacturing and private service wages were virtually tied, at 4.3% and 4.2%, respectively. It predicted that rising mortgage rates and prices, combined with somewhat less net in-migration, would slow residential construction. It predicted that Oregon income, population, and employment growth would exceed the national average into 2001, but per capita income growth would lag behind the national growth rate.

The 1995 Portrait, Regional Economic Review and Outlook, prepared by the Northwest Policy Center and U.S. Bank, noted above-average growth in the Oregon economy for both 1993 and 1994. It predicted slower growth in 1995 in both employment and personal income.

Standard & Poor's September 12, 1994, Creditweek Municipal report rated the State AA- and the outlook as "negative." The AA- ranking placed Oregon in a 9-way tie for 28th place nation-wide. The basis for the pessimistic outlook was the impact of Measure 5. S&P noted two pending measures that could radically amend the state's tax structure, Measures 5 and 20. It also noted the defeat of a proposed 5% sales tax in 1993, Measure 1. The report recommended reshaping the State's revenue and expenditure structure. Moody's October 10, 1994, Municipal Credit Report rated the State Aa; it had last rated the State A1 in July 1982. Moody's commented on the hardship evoked by Measure 5 and the potential negative impact of various then-pending ballot measures.[2] It predicted the State economy would outpace the national economy. Both rating agencies commented approvingly on the State's relatively low debt, the healthy historical and projected growth of the State's economy, and the increasing diversity of the State's economy.

The State's total balance as a percent of expenditures ranked sixth in the nation for fiscal 1993, fifth for 1994, and second for 1995. It ranked fourth in per capita net financial assets (including balances, excess fund assets, rainy day funds, and permanent funds for resource revenues).

General funds in the five most populous counties of the State increased between 52.6% and 156.8% between fiscal year ending 1987 and fiscal year ending 1994, and averaged 81.1% over the five counties. For ten counties reviewed by the State (including Clark County in Washington), general funds increased between 20.3% and 156.8% in the same period, averaging 75.3% overall.

The parties did not submit annual State General Fund figures for fiscal year ending 1987, thus preventing a direct comparison with county revenues for the eight-year period used by the State. However, between fiscal years 1988 and 1994, State General Funds rose by 70%. Using the biennium figures for the eight-year period covered by the 1985-87 to 1991-93 budgets, State General Funds rose by 59.5%; using the 1987-89 to 1993-95 estimates, General Funds rose by 73.2%.

If one subtracts out school support, net General Funds available for non-school programs rose by 50.6% between fiscal years 1988 and 1994; the net non-school biennium figures are 45.7% for 1987-89 to 1993-95. Because of the lack of annual school support figures for the 1985-87 biennium, the same comparison cannot be made for either 1987-94 or 1985-93.

Emergency Fund allocation best represents the results of the democratic process, and is therefore the best evidence of the interest and welfare of the public in striking a balance between funding programs and employee compensation.

The State is relatively unable to pay the proposed increases. Measure 5 has nearly tripled school support, while revenues have increased by only 82%. The percent of general fund revenues available for other programs has declined. The State is less able to pay increases than are counties, which have not been as affected by Measure 5. Particularly after accounting for increased school support, the State's General Fund increases were about half that of counties. Further, counties are not affected by the kicker credit. The counties' ability to pay far exceeds the State's.

The Factfinder should reject the proposed distinction between mandatory and discretionary school funding. It is unrealistic and contrary to public interest to end some or all of the discretionary school funding simply because it is discretionary. Both bond rating agencies considered Measure 5 to have a significant effect on the State's outlook.

Lottery revenues are an unreliable source of funds for State programs because of the variability in revenues. Declines in anticipated lottery revenues would result in program reductions. "Backfill" is only necessary because Measure 5 has diverted General Funds to school support.

Budget flexibility is at an all-time low. The proposed ending balance is the lowest of the last three biennia, and is below the 2% rule of thumb. The State has been unable to raise additional General Fund revenues through two ballot measures, both of which were defeated by three-to-one margins. It has turned to program reductions, layoffs, and increased fees to make up budget shortages. Unfunded contingent liabilities also present a significant risk to the continuity of programs.

Spending $1 in one year reduces services by $2 in the next year. Short-term resources used to pay for the proposed increases would have a detrimental effect on the continuance of programs in future years.

The public interest includes fair and competitive pay for employees who provide services. The vote against Measure 15 demonstrated public support for that principle.

The State has not made a general argument for inability to pay affecting funds other than the General Fund. The economy is robust, and thus does not establish an inability to pay. The State has not established it is unable to raise the revenues necessary to pay for the proposed increases.

There is no need for additional revenues to fund the Union's proposals, given the growth in General Fund revenues. These funds are possible offsets to unbudgeted contingent liabilities. The failure of Measure 7 in 1992 and Measure 1 in 1993 did not affect the General Fund budget for those years. In contrast, the defeat of Measure 15 in 1994 preserved resources that otherwise would have been diverted to local schools. Despite increased school funding required by Measure 5, net General Fund revenues increased in 1993-95 and will increase again in 1995-97. Lottery backfill has increased General Fund expenditures for non-school programs even more.

Measure 5-related layoffs have ended. Recent layoffs have not been shown to be linked to Measure 5, and the 1995-97 budget projections will bring State employment back to pre-Measure 5 levels. No evidence exists of likely cuts in vital programs from the proposed increases.

Budgeting does not trump bargaining. The Emergency Fund for compensation increases does not define the ability to pay. However, the unspent 1993-95 Emergency Fund is an obvious first source for funding these proposals without reducing resources for 1995-97. The 1995-97 Emergency Fund is also a first source for funding the 1995-97 "roll-up" costs of the Union's proposals.

Both turnover and the number of vacancies have increased during this biennium. If the higher vacancy rate continues through the end of the fiscal year, the State will save an additional $1.63 million over projections during the last half of this fiscal year. The State will realize an additional $3.837 million in savings if vacancies are 1% higher than the assumed rate for 1995-97. If turnover averaged 2,252 per year, the State would realize an additional $8.065 million in General Fund savings for 1995-97.

The State's budgetary practices are biased toward underestimating revenues and overestimating expenditures. If the figures were off by only as much as the 1991-93 biennium, an additional $188.7 million would be available during 1995-97. Contingent liabilities should not be considered as evidence of inability to pay. In this regard, the budget does not recommend funding for those contingent liabilities, and offsetting revenue options exist to address those contingencies.

The alleged inability to pay is a matter of priorities. The State has built an inflation factor into the budget for services and supplies, including payments to contractors and contract employees. It has also built inflation into school funding over and above replacement amounts dictated by Measure 5. It has also built inflation into grants and transfer payments to cities and counties. School districts, cities, and counties have continued to grant salary increases for their employees. This suggests the State is able to pay similar increases to its own employees.

Obviously, spending a dollar this year results in lower resources next year. The same is true of any dollar spent in any year, whether the dollar is spent on employee compensation, school support, supplies, or contractors. The inescapable impact on future years' resources is a question of priorities, and does not establish an inability to pay. As other factfinders and interest arbitrators have found, inability to pay is established only if spending that dollar will place a severe burden on the State's finances such that its solvency or its ability to fund vital programs are endangered. The burden of proof on this point rests with the State.

Measure 5 continues to affect the analysis of ability to pay. As Arbitrator Calhoun noted in his 1993 award involving the Oregon State Police, the public has indicated a general unwillingness to fund services at their previous levels. In light of this sentiment, the ability to fund services at current levels is a less compelling aim than ensuring that those services which continue to be funded are compensated at levels that assure high morale and the maintenance of a high-quality work force.

The expiration of the State's school funding replacement obligation under Measure 5 does not make school support funds an unrestricted pot of money for other purposes. Local government tax rates for education are capped indefinitely. For those already at the cap, school funding revenues can rise only to the extent that property values rise. Without a change in law, there is no readily available substitute for continued State school support. However, the end of mandatory school support does give the State greater discretion in budgetary priorities in this area. Further, even if the State elects to continue school support at the levels previously mandated by Measure 5, that support will no longer be artificially accelerated by falling local tax caps in 1996-97 and future years.

It is misleading to gauge trends in ability to pay from an examination of General Fund revenues after subtracting school support, as suggested by the State. The past few years have been affected disproportionately by Measure 5's decreasing local school property tax rate. That series of local tax decreases has now ended. The impact in future years will be more stable, as demonstrated by the relatively level school support in 1995-97 proposed budget. However, even if one were to take the non-school portion of General Funds as the measure of ability to pay, the State's ability to pay has increased more quickly than in some counties, and is roughly comparable to the least prosperous of the five largest counties in the State.

The record does not establish that the increase in vacancies made additional funds available for compensation increases. The State already backs out a predicted vacancy rate in preparing its budget. It cannot be determined whether the rising vacancy rates during the past year provided unanticipated savings, or merely brought payroll savings from this factor in line with expectations.

The record does not permit an estimate of savings from turnover. From the separation report, one cannot determine how many departing employees left year-round positions. Even if one could account accurately for seasonal layoffs, it is unlikely employees will leave in numbers proportionate to their placement in the various salary steps. Experience tells us that turnover rates tend to be higher among new employees in most industries. Further, certain one-time expenses accompany the departure of employees, particularly long-term employees with accrued vacation leave. Recruitment and training of new employees also increases net costs for a position.

The purpose of a wage reopener is to permit an interim look at finances during a period of uncertainty. On this record, the State's financial picture is substantially less bleak than estimated during the budgeting process for 1993-95. Revenues are up (even after accounting for the kicker credit), and expenditures are down. The 1993-95 budget was balanced, as is the proposed 1995-97 budget. No evidence exists that the 1993-95 budget did not maintain programs the State deemed vital, or that the proposed 1995-97 budget would be unable to do so.

The State economy is sound and stable. The State has been more than prudent in spending, with the result that it has actually underspent its budget. Unanticipated economic gains have also made greater resources available for the second half of this biennium and the next biennium than anticipated at the time of the negotiations for this Agreement. Ignoring those greater resources would defeat the purpose of the reopener. Thus, whether one looks at unexpended appropriations or unanticipated revenues, the proposed salary increases are not beyond the State's financial reach.

For all the above reasons, the State has not established an inability to pay any or all of the proposed increases. As Arbitrator Levak noted in his 1985 interest arbitration involving the State Corrections Division and AFSCME, such ability to pay is a condition precedent to consideration of the other statutory factors.

Under ORS 243.746(4)(D), addressing comparability requires identification of (1) "comparable communities," (2) the "wages, hours and conditions of employment" of both private and public sector employees who perform "similar services" and "other employees generally," and (3) the appropriate weight to be accorded to the compensation for each such group of employees. In past cases involving bargaining units of State employees, the parties and neutrals have pointed to certain identified employers ("comparators"). Those comparators may be divided into "internal comparators" (other State agencies or bargaining units, including those not represented by the Union) and "external comparators" (employers and bargaining units that are not part of the State government).

The Union points to the four contiguous states--California, Washington, Idaho, and Nevada--as a group which, together, comprise a comparable community of public employers. The State argues that California should be excluded from the mix of state comparators. Of 11 factfindings and interest arbitrations involving State employees where the factfinder or interest arbitrator looked to any state comparators, all but two included these four states in the mix. One of the exceptions excluded Nevada in 1985; the other excluded the State of California because it had no employees performing work comparable to that of unit employees, but included California county employees performing similar duties.

The Union proposes two alternative calculations for weighting state comparators. One takes the number of state government employees in each state, sums those, then calculates the percentage of the total from each state in weighting compensation data for each state (herein referred to as the "4 States #1" data). The other recognizes the disproportionate impact of the major metropolitan areas of California. It therefore uses only the number of state employees stationed in the "Northern 30" counties of California (those counties lying north and east of the metropolitan counties bordering on the San Francisco Bay). The latter analysis (herein referred to as the "4 States #2" data) matches the portion of California used by U.S. Bank and the Northwest Policy Center of the University of Washington in assessing Northwest regional economies. Appendix G shows the relative size of the state comparators and their workforces, looked at through the three prisms used by the parties.

Over 90% of applications for State jobs come from within Oregon, usually from the local jurisdiction for non-exempt positions. The State places virtually all of its newspaper advertisements for rank-and-file jobs in Oregon newspapers. The largest of those, the Oregonian, circulates in Oregon and Southwest Washington.

The Union argues Oregon's economy is no less diverse than California's, and is becoming increasingly similar to California's. In this regard, it introduced evidence that Oregon's economy is moving away from natural resource-based industries such as timber, and toward high technology industries such as electronics and computers. It notes that, like California and Washington, but unlike Nevada and Idaho, Oregon contains major metropolitan areas and sits on the Pacific Rim. To the extent interest arbitrators or factfinders have questioned the inclusion of any of the four state comparators, the Union notes they have suggested that Idaho and/or Nevada are the least like Oregon. In this regard, the Union submitted statistics on non-agricultural employment shares for Oregon and the four contiguous states. Appendix H summarizes those statistics.

The State introduced evidence that California dwarfs all other regional states (and, in some measures, all other states) in total population, workforce size, population density, and gross state product. It argues the Union's use of the "Northern 30" acknowledges the validity of the State's objections to using California figures. The Union responds that the impact of California's relative size is accounted for by weighting the figures.

The Task Force Report questioned the practice of using the four contiguous states as comparators. It argued the "market" for State employees was Oregon residents, particularly outside the higher-level professional and management positions. It suggested comparing lower-level positions with small, medium, and large Oregon employers and higher-level positions with a Northwest market. It acknowledged that some State positions exist only in public sector employment, and thus could be compared only to other public sector employment. It argued that Oregon's economy was most like that of Washington and Idaho, and least like California and Nevada. It recommended excluding California data because of the impact that data had on the results.[1] Because of local differences in compensation and the cost of living within the State economy, the Report suggested segmenting the Oregon market and developing geographically-based pay differentials.

In 1992-93, 16,915 California drivers' licenses were exchanged for Oregon drivers' licenses; another 19,499 went to Nevada, and 7,522 to Idaho. The December 23, 1994, Federal Reserve Bank FRBSF Weekly Letter predicted that any reversal in California's population exodus would have the greatest impact on Idaho, Nevada, Oregon, and Washington. The September 1994 S&P report noted that roughly two of every five new arrivals in Oregon move from California. The Union argues this suggests a labor market connection between the two states. It notes it is not always possible to document whether an in-state job applicant is a new arrival from California. In any event, it argues the labor market is not synonymous with comparability. It submits the migration patterns suggest the two states have inter-related labor markets. In response, Perry described three approaches to identifying states which are "labor markets" for unit employees.

The U. S. Department of Labor, Bureau of Labor Statistics ("BLS") designates Metropolitan Areas ("MA's") as a Metropolitan Statistical Area ("MSA"), Primary Metropolitan Statistical Area ("PMSA"), or Combined Metropolitan Statistical Area ("CMSA"). MSA's are combined into PMSA's, may become part of CMSA's, if they meet criteria for population and economic and social integration. A January 1993 memo adopts MSA and PMSA definitions for major Labor Market Areas ("LMA's"). The State urges MSA's as one definition of the labor market.

Oregon contains the Eugene-Springfield MSA (consisting of Lane County), the Medford-Ashland MSA (consisting of Jackson County), part of the Portland-Vancouver PMSA (consisting of Clackamas, Columbia, Multnomah, Washington, and Yamhill Counties in Oregon, and Clark County in Washington), the Salem PMSA (consisting of Marion and Polk Counties), and the Portland-Salem CMSA (a combination of the Portland-Vancouver and Salem PMSA's).

California contains 13 MSA's, 12 PMSA's, and 3 CMSA's. The California MSA closest to Oregon is Redding, 147 miles from the Medford-Ashland MSA. Washington contains 4 MSA's, 5 PMSA's (of which one, the Portland-Vancouver PMSA, overlaps the Oregon border), and 2 CSMA's (of which one, the Portland-Salem PMSA, overlaps the Oregon border). Nevada contains two MSA's, Las Vegas and Reno. The closer of those, Reno, lies 394 miles from the nearest Oregon MSA, Medford-Ashland. Idaho contains one MSA, Boise City.

The State Employment Department ("EDD") uses the BLS criteria to analyze metropolitan labor markets. EDD defines a "labor market area" as "an economically integrated geographic area within which individuals can reside and find employment within a reasonable distance or can readily change employment without changing their place of residence." In non-metropolitan areas, the rough rule of thumb is that "at least 15.0% of the employed workers residing in one county commute to another county to work." Based on this definition, EDD has identified eastern Malheur County and the adjoining Idaho counties as a labor market area. That area does not contain an MSA.

At the hearing in this matter, Perry defined "labor market" as an area within a one-hour commute, or roughly a 60-mile drive. He testified a "reasonable person" would not commute longer than an hour. Based on that definition, he testified it is not reasonable to commute from any of Oregon's MSA's to MSA's in California or Nevada. He did not compute the distance between non-MSA populated portions of Oregon and adjoining states. He concluded Oregon has labor market connections with Washington and Idaho, but not with California or Nevada. The connection with Washington is based on the shared MSA; that with Idaho is based on the non-MSA labor market area identified by the EDD.

The Union relies on data gleaned from the Local Government Personnel Institute survey. It uses the five most populous counties in Oregon--Clackamas, Lane, Marion, Multnomah and Washington Counties. Those comparators have been used in past factfindings and interest arbitrations in this and other State units. Other combinations of counties have also been used in some proceedings, such as the "Option 1" counties in cases involving parole and probation officers.

The State argues the county comparators should also include four additional Oregon counties--Columbia, Yamhill, Polk, and Jackson--and Clark County in the State of Washington. The State argues for inclusion of these counties because they are included in Oregon MSA's. However, it did not submit wage or employment data for the counties it would add. The Union's data includes information on the size of Oregon counties the State would add; however, it does not include wage data. Appendix I shows the available data on the relative size of the asserted county comparators. The Union argues that the State has selected additional counties to survey, at least in part, in an attempt to change the "yardstick" by which to measure comparability.

The Union argues a county's ability to pay is irrelevant to whether it should be used as a comparator. Comparators should be a mix of large and small employers in order to give a representative cross section of the labor market. It notes that its comparators account for 59% of unit employees, and 66% of the unit locations.

Over the years, the State has attempted to do direct surveys of private employer compensation for comparable jobs. These attempts have been stymied by confidentiality concerns. Only about 60 employers responded to the last survey conducted by the State. The State has discontinued doing surveys because of the disproportionate amount of resources required to do them, as well as concerns over collusion and price-fixing. Instead, it receives the results from independent surveys in which it participates, and purchases additional private and public surveys.

In 1991, the State commissioned a wage and benefit survey of Oregon business, conducted by Towers Perrin. After issuance of the report, the Union commissioned a review, conducted by ECO Northwest. The two reports diverged widely regarding the appropriate methodology for conducting the survey, as well as for interpreting the results. Towers Perrin's recommendations included a recommendation that the comparators include a mix of large, medium, and small private sector employers, as well as public sector employers. However, the employers surveyed by Towers Perrin all had workforces under 500 employees. Towers Perrin acknowledged that small employers tend to pay lower wages than larger employers. The ECO Northwest study was critical of the recommendation to use medium and small employers. It pointed out that State service is more akin to working for a large private sector employer.

The Union has submitted data from some surveys of private industry employers, as well as prevailing wage rates for public works contracts. That data will be addressed in the discussion of the proposed across-the-board increase and the applicable proposed selective increases.

The basic structure of the State's compensation system was affected by the "comparable worth" requirements of ORS 240.190 and ORS 292.951. A classification and compensation plan was developed using the Hay point job study. A major aim of that study was to eliminate sexual stereotyping. As might be expected from the prevalent sexual stereotyping in society, however, the resulting salary structures have, at times, proven seriously out of line with market realities. Thus, various "pay line exceptions" to the compensation system have arisen. Those pay line exceptions now amount to approximately 1/3 of the workforce.

In July 1993, most of the AFSCME units received a 2% increase in the maximum salary range. The non-strikeable AFSCME Corrections unit received an additional 3% raise plus a flat $65 raise per step effective July 1994, through a contract settlement in late 1994. The AOCE unit received a flat $65 raise for each step in January 1993 and a 3% raise in July 1994. The OSPOA received a 3.6% raise effective July 1994. In a 1993 interest arbitration for the Union's non-strikeable unit, the Union sought no general salary increase; however, it sought and achieved selective increases in 1993 for major segments of the unit, including a 1% increase for two classifications for which it seeks selective increases in this proceeding (Mental Health Therapy Shift Coordinators and Mental Health Therapy Coordinators). It also achieved a wage reopener in 1994.

The Union argues it agreed to a wage freeze and reopener for the strikeable unit in the belief that Measure 5 would have a more drastic impact. Since then, interest arbitrations in other units have uniformly awarded pay increases. It argues that similar increases should be given here.

Although the Task Force Report summarized its conclusions regarding comparability of compensation to "the market," it did not provide the underlying data leading to those conclusions. It also did not attempt to correlate its definition of "the market" to the statutory factors. On the contrary, it argued the relevant "market" was the source of job applicants, and questioned the use of some factors specified in ORS 243.746. The Factfinder is a creature of statute. It would serve no purpose to adopt the Task Force Report's recommended criteria in place of the statutory criteria.

Although the Task Force Report concluded that "the economies of California and Nevada are significantly different from Oregon's," it recommended excluding only California from compensation comparisons with other states. That recommendation was based on its finding that "California's inclusion in or exclusion from the market used for compensation comparisons can significantly affect the results." The fact that a particular comparator brings the result up (or, for that matter, down), is not a basis for excluding that comparator. Exclusion of the relatively low-wage state of Nevada would also affect the results, but in the opposite direction. It has a smaller effect only because of the use of weighted statistics.

Moreover, it is difficult to say that Oregon's economy differs from California's more than it differs from Idaho and Nevada. Ironically, the State has begun arguing for California's exclusion at the same time that Oregon's economy is growing more similar to California's in its mix of industries. Idaho's small size makes it unrepresentative at the short end in much the same way that California is at the long end. Idaho and Nevada also differ substantially from Oregon in industry mix, urban areas, and geographic location. Perhaps the factor Nevada shares most closely with Oregon is the impact it has felt from California's out-migration. Oregon's economy continues to most resemble Washington, with whom it also shares a Pacific Rim location.

Neither the Factfinder nor the parties write on a clean slate. No perfect match has been found in the search for comparators. Instead, a combination of communities has become accepted as the best approximation. For positions which exist solely or primarily within state government, the four contiguous states, as a group, have been widely accepted as external comparators.[2] For positions which also exist at lower levels of government, the five largest counties have gained almost as much acceptance. Although there is much room for dispute over the choice of surveys (particularly as it relates to the size of the participants), there is little basic disagreement on the principle of including private industry comparators. Finally, for those positions which overlap other bargaining units within State service, it is hard to imagine a better comparator than the State. Historically, both the parties and neutrals have accorded considerable weight to the need for internal consistency.

For at least the past ten years, interest arbitrators and factfinders have recognized the value of predictability in the use of market comparables. They have therefore placed the burden on the party arguing for a change in the comparables, to demonstrate a substantial change in conditions warranting the change. That burden recognizes the benefit to using the same market comparables in successive years. In doing salary surveys and making other preparations for negotiations, the parties know what communities have been used in past, what kinds of allowances to make for differences in economies, and how past settlements based on those comparables have performed in attracting and retaining qualified employees. At the same time, such comparables are not engraved in stone. A substantial change in circumstances could make one or more comparables less appropriate, or other comparables appropriate to add.

Increasing refinements in analysis may change the manner in which comparables are used. Thus, in 1985, Tim Williams announced a rough rule of thumb that Oregon's wages should be above the four-state average. This recognized the greater similarities to the generally higher-wage states of Washington and California, while allowing for some comparability with Nevada and Idaho. The parties later began presenting weighted data to reflect the impact of California on the 4-state labor market. This refinement allowed a more predictable result than the earlier test. The "northern 30" weighting suggested by the Union in this proceeding is a substantial step toward overcoming the remaining "800-pound gorilla" objection to the use of weighted data. Accordingly, in looking at state comparators, the Factfinder will rely principally on the "4 states #2 data" submitted by the Union.

It is unnecessary to spend considerable time on the mix of county comparators. Compensation cannot be gauged in a vacuum. The only compensation data in evidence excludes the counties suggested by the State. It cannot be determined whether adding those counties to the mix would have any substantial impact on the figures.[3] Moreover, the asserted bases for including most of these counties are suspect. While these counties lie within statistical MSA's, the four Oregon counties represent only a small part of the State population, and thus of the local market within which the State is most likely to do its recruiting for this unit. Therefore, in looking at county comparators, the Factfinder will consider the available data--that for the five largest counties.

The mix of private sector comparators changes with each case. Such comparators do not provide reliable matches for many public sector positions. Moreover, private surveys are inherently spotty because of the lack of any requirement to respond to surveys or make employment data publicly available. The State included surveys heavily weighted toward small employers.[4] As discussed infra, data weighted toward small employers is of comparatively little utility.

The Factfinder is reluctant to place much reliance on either the Towers Perrin report or the Task Force Report regarding private sector comparability, nor is she comfortable with all aspects of the alternative analysis of the Towers Perrin data suggested by ECO Northwest. Simply put, the methods of analysis in each tend to skew the results in favor of the party that paid for the report.

One matter touched on lightly by both Towers Perrin and the Task Force Report affects the review of the other private survey data submitted. That is the observation, in both reports, that pay scales at small employers tend be lower than at larger employers. That observation is consistent with what experience tells us. The State, of course, is a large employer. This has major implications for the comparability of data that includes significant percentages of small employers.

Labor market surveys seek broad participation, in part, because it is rare to find perfect matches for duties. By having a representative mix of employers, variations in job classification may even out. Emphasis on small employers defeats this purpose. Duties may sound similar on paper, but those at different sized employers are likely to have different emphases, affecting the level of skill and knowledge required. This may make facially comparable positions at small employers relatively poor real-world matches. Also, small employers offer non-wage, and sometimes non-economic, rewards that make a lower salary acceptable. Since a large public employer cannot match those rewards, identifiable compensation at other large employers is more likely to be comparable.

In summary, private sector surveys are problematical, but provide some useful information. However, the Factfinder places little reliance on those private sector surveys whose survey population includes many small employers if the resulting data is substantially at odds with other comparables.

The parties are at odds regarding the best evidence of changes in the cost of living, as well as the period over which such changes out to be reviewed. Both parties have varied their use of indices in factfinding and interest arbitration proceedings. Appendix J summarizes compounded wage increases in this unit, as compared with annual and compounded figures submitted by the parties for the US All Cities CPI-U, CPI-W, and Portland CPI-U indices.

In this proceeding, the Union presented data covering mid-1979 to January 1995 from both the US All Cities CPI-U and the Portland-Vancouver CPI-U. In the recent interest arbitration for the non-strikeable unit, the Union looked at the Portland CPI for January 1991 to June 1993. In a 1989 factfinding, it used the All Cities CPI-U index. The State argues that, to the extent the CPI is used, the appropriate measure is the All Cities CPI because the Portland CPI sample is too small to be reliable. In the recent interest arbitration for the non-strikeable unit, the State looked, in part, at the Portland CPI figures starting with fiscal year 1985-86. However, it also urged use of the All Cities index. In this proceeding, it submitted All Cities CPI-W data.

The State notes that price increases are much more modest now than in prior years. It argues the cost of living is not accurately measured by the CPI. In this regard, it notes that the BLS calls the CPI a measure of "price change." The BLS cautions the CPI does not reflect substitution and other strategies for avoiding price increases, changes in consumer preferences, and quality improvements. The BLS has suggested discounting the CPI when using it for escalator clauses. Federal Reserve Board Governor Alan Greenspan recently testified the CPI currently may overstate the cost of living by ½-1½ per year. He also noted that the CPI in effect into the early 1980's[5] overstated inflation even more by using an inflated housing cost measure.

The BLS suggests that parties using the CPI for escalator clauses take a number of steps. Most of those relate to identifying the use to which the CPI will be put. For example, it suggests specifying the precise change that will occur with changes in the CPI. If parties wish to "share" inflation risks, the BLS suggests limiting increases to, e.g., 75% of the percentage rise in the CPI. The BLS suggests the same use of the CPI if the parties wish an alternative to setting fixed upper and lower limits for escalation clauses. One factfinder, Jane Wilkinson, discounted the CPI to 85% in a 1994 case involving a local school district.

The Union argues that, regardless of the CPI chosen, unit employees lag behind the cost of living. It disputes the wisdom of discounting the CPI. It notes that, by the time a CPI-induced pay raise occurs, employees have already been paying increasing prices over the period studied. This lag offsets any distortion induced by the CPI. Moreover, whatever problems there are with the CPI, it is the only available measure of inflation. It argues the purpose of a COLA is to raise the salary structure to keep pace with inflation, not necessarily to give each employee a raise consistent with that employee's cost of living. The Union argues its principal basis for seeking a general salary increase is the comparability issue, not the cost of living.

The CPI includes the cost of medical services. The State argues that, to more accurately measure changes in employee compensation, the State contribution toward employee health insurance and the BUBB flexible benefit program should be added to salary before calculating the percentage of wage increases. State contributions to insurance and flex are flat figures. Their effect on percentage compensation increases is greatest for low-paid employees. Depending on whether a particular year's change in insurance and flex contributions for a particular salary range is greater or less than the general wage increase, calculating in these payments may increase or decrease the percentage gain in total compensation.

The State submitted figures showing annual raises since 1986 for an employee at the top step of Salary Range 13. As an example of the differential effect of adding in flat contributions, Appendix K shows the result for raises between FYE 1992 and FYE 1993, when employees received a 3% general salary increase. Sample employees are the State's hypothetical employee, an employee at the 1993 unit average base salary rate (slightly above the top step of Salary Range 16), and for employees at the top step of Salary Range 5 (the lowest range) and 38 (the highest range).

It is no secret that no version of the CPI is a perfect measure of inflation. However, it is the only available measure. It is therefore appropriate to use it as the gauge of this statutory factor. However, as Arbitrator Stratton noted, the best use is as "a supplemental, rather than a prime factor, in determining whether monetary benefits should be increased." That the parties have so used it in the past is suggested by the fact that the parties have not chosen to tie year-to-year increases in this unit directly to the CPI through, e.g., an escalator clause. The choice of CPI's becomes fairly insignificant. The three versions in evidence reflect similar trends year-to-year, including during the term of this Agreement. The Factfinder's personal preference is the All Cities CPI-U, because its broad base minimizes the likelihood of sampling distortion.

The Factfinder takes notice that medical costs have driven much of inflation over the past few years. In recognition of this fact and the varying funding mechanisms for medical care, the CPI-U index permits parties to back out a separate "medical services" component. In the future, backing out the "medical services" component would be the most reliable means of reflecting the impact of employees savings from medical benefits. The alternative suggested by the State would be a more cumbersome means, and not all the figures are in evidence that would be necessary to do those calculations. Accordingly, the Factfinder must rely on the data at hand, while recognizing that the savings on medical benefits have ameliorated some effects of inflation.

The Factfinder does not read the BLS comments regarding use of a 75% figure as a recommendation to do so in all or most cases. In context, the cited comments are an example of one way to share inflation risk, not a recommendation that parties share that risk. In this instance, unit employees conditionally assumed all of that risk for the first year of this Agreement, by agreeing to a wage freeze with a reopener. The need for a continued share of that risk is more accurately gauged by looking at the other statutory factors.

The Union proposes a 6.5% general increase effective April 1, 1995. Unit employees last received a general wage increase of 3% in April 1993. That increase, in turn, was the first since a 3% raise in December 1991. 47.8% of employees in this unit are at Step 7, the highest salary step. Another 2% are "red-circled" above the maximum rate. Thus, without a general or selective wage increase, roughly half the unit will receive no wage increase in the 1993-95 biennium. Between December 1993 and 1994, step increases raised the average base salary by 1.46%.

The Union conducted benchmark surveys in the four contiguous states and the five largest counties. The benchmark surveys covered minimum and maximum compensation for 26 positions which the Union had identified as comparable to unit classifications. Appendix L shows the results of the 4-state and 5-county benchmark surveys, with and without weighting for the number of employees. The Union also surveyed the comparators for general salary increases. A simplified version of those results appears as Appendix M.

The Union also submitted 1993-95 salary increase data for 39 large Oregon school districts (3000 ADM or over). While some of the data was incomplete, it showed that all districts granted at least one salary increase in that period, and about half granted increases in both years. Of those districts for which data was available, raises averaged 4.1% in 1993-94 and 3.5% in 1994-95. The 1993-94 school district figures exceeded average national figures reported by the BLS. BLS data indicates that state and local government wage rate increases in units covering 1,000 employees or more averaged 2.8% in the second half of 1993 and 1% in the first half of 1994.

The Union argues unit employees were already undercompensated relative to comparable employees. This unit agreed to a wage freeze only because of the uncertainty in the State's finances arising out of Measure 5. By incorporating a second-year wage reopener, the Union sought to force a second look at the State's budget later in the biennium, to see whether funds were available to make up the shortfall. It also notes that other State bargaining units have received interim general wage increases. It argues the unspent Emergency Fund and the better-than-anticipated revenues keep this from being a "freeze" budget.

The Union argues the State selected unrepresentative private employers to survey, at least in part, in an attempt to change the "yardstick" by which to measure comparability. Some are disproportionately small outlying employers; further, much of the data does not account for differences in length of service. Those columns which do account for length of service--the minimum and maximum pay rates--show unit compensation lagging by 5-12%. The disparity is even greater if the more comparable public sector figures are used.

The Union argues that, even using the Towers-Perrin data, unit positions lagged 11% behind the market overall. The unreliability of the State's own salary survey is indicated by the fact that the State has said it will not conduct further surveys. However, even that survey showed that rank-and-file employees lag by 6%. The Legislative Fiscal Office also predicts that by mid-1995 State employees generally will be 12% behind the market.

F. Peter De Luca, Administrator of the Labor Relations Division, testified that, at one time, the State sought to be a leader on such issues as comparable worth.[1] However, election results in recent years have convinced State managers and political leaders that the public no longer wants the State to be a leader. De Luca testified the State's "rule of thumb" is that salaries should be roughly 95% of market, although there have been discussions of dropping the range to 90-95%. If salaries dipped below 90% of market, he predicts the State would find it difficult to hire qualified employees.

De Luca testified the then-Governor opposed general salary increases in any bargaining units for 1994-95. Because of the shift in State expenditures due to Measure 5, the State had begun the 1993-95 biennium opposing general salary increases. The Governor believed it was important to continue that position through the biennium. She expected general salary increases would be necessary in the 1995-97 biennium. She considered selective increases acceptable only where (1) the established salary showed a significant variation from the market salary for the position, and (2) the State had experienced difficulty with recruitment and retention.

The State Economist, Paul Warner, calculated that non-manufacturing private sector salaries increased by an average of 2.6% in 1993. He estimated they would increase by another 6.4% in 1994 and 4.2% in 1995. After adjusting for one-time income shifting between 1992 and 1993, the figures would be 4.8% in 1993, 5.3% in 1994, and 4.2% in 1995.

The Task Force Report projected that private sector compensation would increase by about 4% per year through fiscal year 1996-97. It predicted State employee salaries and wages would lag the market by 1996 unless there was a comparable increase in the State salary and wage structure.

In 1994, the Legislative Fiscal Office conducted a study of PERS benefits and total compensation. It concluded that, because of the generosity of PERS benefits, total compensation would be comparable if State employees were paid 11% less than in the private sector. It concluded, however, that average State salaries were only 4% less than the private sector in 1992. It predicted the salary freeze would reduce relative State salaries, so that they would be 12% less than the private sector by the end of 1995. After the passage of Measure 8, the Legislative Fiscal Office estimated that total compensation would be comparable to the private sector if salaries were 1% less than in the private sector. It found that as of October 1994, average State salaries were 11% less than the private sector. It predicted that State employees would be underpaid by 13% by the end of 1995.

The July 1994 Task Force Report concluded that total State compensation was generally market competitive, with some professional/technical and managerial positions slightly undercompensated and some office/clerical positions slightly overcompensated. It relied on five surveys covering small and medium-size employers as well as some public sector employers. One of those surveys covered 15 private-sector employers and three public-sector employers, representing a total workforce of 8,597 (excluding State employees). The second covered 71 Portland-area employers, averaging 993 employees. A third covered 67 hospitals, with no notation of the number of employees. The remaining two concerned only professional, management, and executive level employees. The report noted that salaries and wages were lower at small businesses (fewer than 100 employees) than in the public sector and medium and large private sector employers. However, no evidence exists that it adjusted the survey data for size of employer.

The Task Force Report, Towers Perrin, and Legislative Fiscal Office reports do not break out data for this unit, as opposed to State employees generally. This unit includes roughly 42% of the total authorized State positions.

Compensation Specialist Linda Vogue testified that, when compensation theory is correctly applied, benchmark surveys will show some classes above market and some below. She questioned whether the Union's benchmark survey selected appropriate benchmarks or made good matches with comparators. She also testified that one normally would find recruitment or retention problems where a particular class was substantially below market. The lack of such problems in some of the benchmark classifications suggested to her that the survey was flawed.

Vogue testified that most private sector employers do not have fixed wage progression steps. Many private employers, and the State of Idaho, use an open range with no fixed steps between the minimum and maximum. Progression within that range is then determined by performance.

The State submitted consolidated figures drawn from seven outside surveys of private- and public-sector employers, primarily in Oregon. Vogue was unaware of the mix of employer sizes represented by those surveys. Survey participants include a number of cities, including Portland at one end of the population spectrum and Condon at the other. Counties include Clackamas, Douglas, Harney, Hood River, Klamath, Lane, Linn, Marion, Multnomah, Polk, Tillamook, Wasco, Clark (Washington), and King (Washington). School districts include Gresham Grade School #4, Lake County #7, and McMinnville #40. One study included the State of Washington. Private-sector participants ranged from such national and international players as United Parcel Service and Hewlett Packard, down to such unlikely players as the Oregon School of Massage.

Among its surveys, the State found data for 165 comparable classes, accounting for 9,147 unit employees. The State calculated the weighted average wage received by all comparable employees (public and private), as well as the average minimum and maximum wages received by those employees. It compared those with the contractual minimum and maximum for the equivalent unit position, and also calculated the average base rate received by unit employees in each position. Appendix N summarizes the overall figures for the surveyed universe. The State argues the average market-weighted survey wages should be compared with the maximum base rate received in this unit. The State did not compare the average tenure of comparator employees to that in the unit.

Some of the classifications identified in the State survey also appear in the Union's benchmark survey. Appendix O compares the Union's "4 States #2" and "Weighted County" disparities for minimum and maximum salaries (from Appendix L) with the State's OPEU versus Market disparities for each of the matching classes.

The State submitted a list of unit classes which overlap classes represented by other unions, showing the minimum and maximum rates in each class. It has not compared the average compensation of unit and non-unit overlapping classes overall, but has done so for classes which overlap classes proposed for selective increases. Those figures will be addressed with other selectives issues.

In an attempt to demonstrate the "typical" unit experience, the State introduced the total compensation experience for a Highway Maintenance Worker at the top step of his Salary Range, from Fiscal Year 1985-86 through Fiscal Year 1993-94. Highway Maintenance Workers received a 1-range selective increase in Fiscal Year 1993-94, from Salary Range 13 to Salary Range 14. This raised the hypothetical employee's base salary at the top step by $96, or 5.1%. After also accounting for a smaller increase in insurance and flex contributions, the State estimated the hypothetical employee's total compensation increased by 4.94% in that one-year period. Approximately 1% of the unit received selective increases in this period. Without the selective increase, the Factfinder calculates the hypothetical employee's total compensation would have increased by 0.59%.

The State notes the proposed increase is more than double the rate of the past year's CPI. In its view, it is inappropriate to look at alleged loss in purchasing power over many years, based on negotiated Agreements. It argues the Union must have concluded the negotiated raises were fair at that time. The State argues that this unit is on par with other employee groups, with whom the recent wage freeze was consistent.

The State argues this unit should not receive an exception to the uniform position of a wage freeze for the 1993-95 biennium. In the State's view, nothing has changed since the outset of the Agreement to warrant a general wage increase. Both the increase in the cost of living and the unemployment rate have been consistent with projections at the time the parties settled the Agreement. The State argues the $52 million recommended for selective salary adjustments in the 1995-97 biennium will adequately compensate employees for the wage freeze.

The State notes that four of the five county comparators gave salary increases to offset Measure 8, whereas the State has not done so. Measure 8 prohibits "pick up" increases after December 31, 1994. Therefore, the county comparators have been skewed by 5.6 to 6%.

The State observes that the Union's benchmark comparability data omits any private sector employers. It argues this omission undermines the utility of the Union comparables.

ANALYSIS

The profile of the hypothetical "typical" worker submitted by the State sheds little light on the issue of cost of living. The position chosen is atypical in that it recently received a selective increase. Selective increases are exceptions to the general rule. They do not maintain typical employees' buying power, nor do they replace general wage increases. They are intended to remedy a below-market salary for that classification.

The fact that the hypothetical "typical" worker was assumed to be at the top step does not offset the inclusion of a selective increase in the wage history. Longevity or merit increases also are not intended to maintain employees' buying power.[2] Longevity increases compensate for increased experience, which makes the employee more valuable than a new hire. Merit increases are just that--a recognition that the value of the employee's work exceeds his/her previous compensation. The goal of cost-of-living adjustments is to make it possible to hire qualified people, as well as retain them. Counting on step increases to keep employees even with inflation has several possible effects, none of them consistent with the public good. Some of those effects are demonstrated by the evidence regarding the classifications proposed for selective increases,[3] discussed in more detail infra.

Finally, looking just at base salary without the selective increase, the hypothetical "typical" worker earned some $303 per month less than the average unit employee in fiscal year 1992-93. As demonstrated in Appendix K, the increase in insurance and flex payments had a proportionately larger impact on percentage total compensation gains than they would have had for an average unit employee. For all the above reasons, the hypothetical "typical" worker data is of little significance in evaluating the appropriateness of a general wage increase.

The State's desire for uniformity in settlements does not militate against a general wage increase. In the public sector, not all contracts come about through a settlement. If the State was firmly opposed to any general wage increase, regardless of the circumstances, then it should not have agreed to a wage reopener. Having agreed to a reopener, it must now look seriously at whether circumstances warrant raises. One relevant factor is the extent to which other employees have received a general raise--whether it came about through a settlement or an interest arbitration award.

Without question, the PERS pick-up permitted total compensation to rival that in the private sector even if cash wages lagged. Much of the evidence on this point, though, does not support the propositions for which it is cited. The Legislative Fiscal Office report, Towers Perrin, ECO Northwest, and the Task Force all looked at state employees as a whole, not this unit. If other State employee groups are compensated more or less generously for their work than are unit employees, then unit employees could be under- or over-compensated relative to the average figures used in the reports in evidence. Moreover, as noted, the commissioned reports reflect the priorities of their purchasers, not a neutral evaluation of data.

Looking at the results of the salary surveys, it is difficult to believe the parties are looking at the same unit, even as to those positions that overlap in their surveys. Indeed, a review of the survey participant lists reveals they were not looking at the same unit. The Union was looking at four states and the five largest counties in the state--that is, at large public employers, including the counties in which the bulk of State employees work. The State was looking at several surveys covering private and public employers of various sizes, some of whom appear in more than one survey. The mix of public-sector comparators was heavily skewed toward small towns and rural counties, particularly in comparison with the areas in which State employees actually work. Simply put, the mix of survey participants was not tailored to meet the suggestions of the State's own consultants.

Another major concern with the salary survey data is that the parties have not agreed on a methodology for identifying comparable positions. The Factfinder has grave doubts about the State's identification of classification matches. She is not much more optimistic about the Union's identification of matches. As will be discussed further regarding the proposed selective increases, some of the Union data supports Vogue's speculation that many comparator positions may not be close matches. In the Factfinder's experience, that is not unusual when comparing employee populations. The identification of close matches requires making a judgment with limited information. On the other hand, having many classifications come in under market is not as unexpected where salary progression has been blocked by wage freezes. Perhaps the best that can be said is that the survey data is a peek at some aspects of appropriate compensation.

It is useful to compare unit general salary increases with the increase in cost of living for prior years. Such a review indicates the parties picked up most inflation in pre-Measure 5 days, sometimes with a lag. Given the cost-of-living data, the obvious intent of the reopener was to review the impact of Measure 5 and the State's economic condition, then decide whether the parties could resume shadowing of the cost of living. Nothing in that agreement suggests an intention to incorporate a permanent drop in buying power.

The estimates suggest the inflation rate hovered just under 3% for the first year of the Agreement, and all forecasts predict annual rates around 4 to 6% for the near future. The Union's suggested increase of 6.5% over the term of the Agreement picks up less than the most conservatively-estimated inflation for the biennium. Over the life of the Agreement, it picks up less than the 4% annual increase in private sector compensation projected by the Task Force. It is close to the compounded effect of increases received in other State bargaining units, as well as the pre-Measure 8 increases in counties. Unlike County raises, it will not compensate for Measure 8, but it is not permitted to do so.

For all the above reasons, the Factfinder recommends a general salary increase of 6.5%, effective April 1, 1995, in this unit.

ISSUE 2: SELECTIVE SALARY INCREASES

The Union proposes selective salary increases retroactive to January 1, 1995. The current and proposed salary ranges, and the costs of the proposed selective salary increases through fiscal year 1997, are summarized in Appendix S.

EVIDENCE

The Union surveyed both external and internal public sector comparators for the disputed classifications. It also used surveys or other information to determine comparable wages in the private sector for some of the disputed classes. The Union used only the top step for comparison. It notes that roughly half its unit is at the top step. Appendix P summarizes the figures from the Union's surveys. In each of the comparisons, the salary figures for unit positions include the base salary at the top step, 6% PERS, and $38 flex pay.

The State's summary of its surveys included 10 of the job titles involved in this case. Appendix Q shows the figures from that summary for those job titles. The State also introduced evidence of the wages paid to employees in other bargaining units in the same classifications, as summarized in Appendix R.

Vogue testified there are adequate applicants on the list for most of the disputed classifications. The State surveyed its agency managers, none of whom reported problems recruiting or retaining employees. According to Corbin, the absence of applicants on the list for a particular classification does not necessarily indicate difficulty recruiting.

DENTAL ASSISTANT ("DA") 1, 2 AND DENTAL HYGIENIST ("DH")

The State currently employs 4.75 DA-2's and 2 DH's in this unit. One DA-2 took an intra-agency transfer during calendar year 1994. The State hired 2 new DA 2's during 1994. It has 59 DA-2 applicants and 5 DH applicants.

DA-2 Roberta Stergios gleaned salary information from the Marion Polk Yamhill Dental Society, from incoming employees who had recently worked in the private sector, and from ads in the newspaper. The Union incorporated that information in its estimate of private sector wages. Stergios has seen fellow employees leave for higher-paying jobs. She testified that, including flex benefits, unit DA salaries may be almost even with non-unit DA's at OHSU. She testified that additional duties have been added in the areas of sterilization techniques, material, and safety data regulations.

In a 1994 survey by the American Dental Assistants Association, Dental Assistants with four or more years of experience in the Pacific Census Region averaged $13.74 per hour. Insurance benefits commonly provided by employers included health (67%), life (71%), and dental (68%); 67% enjoyed benefits such as continuing education, uniforms, profit sharing, bonuses, and college tuition.

DH Mary Cyr gleaned salary information from colleagues and temporary services in private practice. Her figures indicate that an experienced private sector DH working 21 days monthly would earn $4,200 in salary alone; she did not attempt to calculate the value of benefits. With PERS and other benefits, she calculated the maximum total compensation for a unit DH was $3,354.70. During a four-month leave, the State secured a temporary DH to replace her. The replacement, a new graduate, received $25 per hour; Cyr earns less. A recent newspaper advertisement offered $200/day plus bonuses for an experienced DH to come to Clatskanie. Cyr testified her current job at OSH is more challenging than the DH positions she previously held at OHSU and in private practice because of the patient population and the greater amount of regulations in the public sector.

The state has DA positions at OSCI in the non-strikeable OPEU unit, but is not filling those positions. Such DA's would be classified in Salary Range 13 within a higher schedule applicable to OSCI. Range 13 on that schedule lies between Range 15B and Range 16 in the strikeable unit. OHSU Dental School DH's, represented by AFSCME, are at Range 20.

The Union identified comparable positions for both the DA-2 and the DH in public sector entities. The maximum pay received by each, in descending order within the group of comparators, is as follows:

ELECTRICIAN, CORRECTIONS ELECTRICIAN ("CE") AND ELECTRIC & CONTROL SYSTEMS TECH ("ECST")

The State employs 49.5 Electricians, one CE, and one ECST. During calendar year 1994, 11 Electricians resigned and another took an intra-agency transfer. The State hired 3 Electricians. It has no ECST applicants, and 27 Electrician applicants.

In September 1994, the Operations Manager for ODOT Region 1 sought to reclassify the Region's three Electricians to Traffic Signal Technician 2 or 3, at Salary Range 22. The supporting memo mentioned the job market within the region made it difficult to attract and retain employees.

In late 1994, the Employer had a severe recruitment and retention problem among ODOT Electricians. It successfully proposed a 15% salary differential for Electricians whose duties included traffic signal maintenance and repair on State highways or other duties requiring licensure for that work. The parties agreed this 15% would be offset against any future Salary Range increases, but not across-the-board or COLA increases.

Of nine authorized journeyman Electrician positions in ODOT Region 1, only one, Mike Pearson, is currently on the payroll. He testified ODOT tried to fill four openings, but got only two applicants. Pearson hired those applicants, then demoted from a supervisory position back into the unit to fill a third vacancy; the other two have since left. He testified ODOT had trained 22 employees since 1987, all of whom had left. Eight of those went to Oregon municipalities. Five apprentices left for better paying jobs after completing their training. In five years as a supervisor, starting in 1988, he has never had a full complement of employees to train. He is currently training three apprentices. As the sole journeyman, he limits himself to "putting out fires" rather than the full range of facilities work. He testified the State has been forced to put some unit work out to bid.

Pearson testified that Union scale in the private sector was about $4,000 per month, plus benefits. He estimated the average monthly salary for other government municipalities was $3,500, plus benefits. A recently-trained employee who left in January 1995 provided salary information for his new employer, Multnomah County. Step 1 Electricians for Multnomah County received $19.24 per hour in wages and $1.21 per hour in pension contributions in April 1993. Their hourly rate went to $21.46 effective November 26, 1994. Electricians working at Union scale receive $23.05 hourly.

ODOT recently purchased a list of all licensed electricians in the Portland Metropolitan Area, and sent 4,000 letters soliciting job applicants in Region 1. Pearson testified that, at the time of the hearing, ODOT had not received applications in response. Pearson testified fellow electricians had told him they did not intend to apply because the pay was still too low. OSU Electrician Richard Brooks received the solicitation. He testified the increase in pay was not enough to induce him to apply for the job.

The Union compared pay for these classifications to "prevailing wage" rates issued by the Bureau of Labor and Industries ("BOLI"). The Union calculates that total compensation for unit Electricians equals $21.42 per hour, whereas total compensation for Electricians working under the prevailing wage is $31.86 per hour.

Historically, ECST's were paid two ranges higher than Electricians. In December 1994, the Director of Physical Plant urged that this relationship be maintained in bargaining over selective increases. The sole ECST, Ken Kranenburg, has four people working under his supervising electrician license. State law prohibits him from using his license at more than one location. As a result, he is unable to be the supervising electrician for his own business. He therefore employs a supervising electrician in that business.

The Union identified comparators for Electricians in all four neighboring states, as well as Clackamas, Marion, and Multnomah Counties. All but Idaho and Washington receive higher wages.

The State employs 38.9 GMW-1's and 22.4 GMW-2's. During calendar year 1994, 2 GMW-1's resigned, one took an inter-agency transfer, and three took intra-agency transfers. The State hired 5 new GMW-1's, transferred another in laterally, and reassigned 3 into the unit; it promoted one GMW-2 in the unit. It has 104 GMW-1 applicants and 2 GMW-2 applicants. The Union bases the selective proposal for this class on the disparities found in looking at state and county comparators. The Union identified comparators for the GMW-1 in the following jurisdictions, in descending order of maximum salary:

The State employs 8.8 LA's, 9 LAT-1's, 12 LAT-2's, and 10 LAS's. One employee in each category took intra-agency transfers during 1994, and one LA resigned. The Union calculates the resignation rate for 1993-94 among LA's at 31% (out of 9.08 FTE's), and among LAT-1's at 10% (out of 9.5 LAT-1's). The State hired one LAT-1 and two LA's, re-hired an additional LAT-1, and promoted in one LA, one LAT-1, and one LAT-2. It has 2 LAT-2 applicants, 24 LAT-2 applicants, 9 LA applicants, and 79 LAS applicants. The Union bases its selective proposals on the disparities found in salary surveys, and also on the high resignation rate at the entry level.

The Union identified comparators for the LA's in all four neighboring states and in Multnomah County. The maximum salary, in descending order, was as follows:

The Department of Agriculture employs 14 MSS-2's and a Metrologist[4] in its Measurement Standards Division (the "Division"). The State's records show that no MSS-2's left during calendar year 1994. The State hired one MSS-2 in 1994, and currently has no applicants for this position. Three MSS-2's left in the 1992-93 fiscal year. Of those, one left for a higher paying position with the City of Salem, one left on disability, and one took early retirement. In the 1993-94 fiscal year, an additional two MSS-2's left for other positions, one of which was out of state. One plans to retire this year. Two relatively junior MSS-2's have announced plans to seek other employment.

MSS-2's inspect and test retail motor fuel measuring devices, large capacity fuel measuring devices, liquefied petroleum gas meters, and weighing devices of various sizes. Until 1993, they specialized in one or two program areas. For example, MSS-2 Christine Parks dealt only with quality control in packaged products; MSS-2 Clark Cooney dealt only with small scales, gas pumps, and packaged products labeling and weight; a recently-retired employee dealt only with bulk petroleum standards. In an effort to reduce travel costs, MSS's are now expected to maintain competence in all program areas, and are assigned geographically rather than by program. All must have a commercial drivers license and be capable of driving vehicles of up to 45,000 pounds gross weight. All must have training in all aspects of testing various hazardous materials.

Although the career ladder includes both MSS-1 and 2, the Division employs no MSS-1's because it is unable to attract qualified candidates at that level. The Metrologist testified to various adverse consequences from understaffing and delays in filling MSS positions. Those include the sale of substandard fuel, underweight products, and various problems with weights and measure in Oregon-produced products sold in and out of state.

The Union found comparable positions in California, Idaho, and Nevada for MSS-2's. All three received maximum wages at least $120/month higher than the $2,435 in the unit; California came in highest at $3,200.

MENTAL HEALTH THERAPY SHIFT COORDINATOR ("MHTSC") & MENTAL HEALTH THERAPIST COORDINATOR ("MHTC")

The State employs 3.5 MHTSC's and 2.7 MHTC's. During 1994, one MHTSC resigned, two took inter-agency transfers, and three took intra-agency transfers. The State has one MHTSC applicant. During 1994, one MHTC came into the unit through an intra-agency transfer, and two MHTC's were promoted in the unit. The State has 10 MHTC applicants.

An interest arbitration award granted the Mental Health Therapist series in the non-strikeable unit a 1% increase in salary effective September 1, 1993.[5] One unit MHTC has since gone to Fairview Training center for more money and similar responsibilities as an Information Specialist or Information Analyst. Within the past 18 months, one MHTC has left to go into private business, and another to go into real estate.

The Union found no county or private-sector comparators. It found MHTSC comparators in Idaho, Nevada, and Washington. The maximum salaries, in descending order, are as follows:

The State employs 64.4 PR-1's, 61.3 PR-2's, and 4 PMC's. During 1994, 5 PR-1's and 2 PR-2's resigned; 5 PR-1's and 7 PR-2's took intra-agency transfers; 2 PR-1's and 2 PR-2's were reassigned into the unit, and a PR-2 was promoted in the unit. The Union bases the selective proposal for this class on the disparities found in looking at state and county comparators. The Union identified comparators whose maximum salaries, in descending order, are as follows:

The State employs 14.3 unit Plumbers. During 1994, three Plumbers resigned and one took an intra-agency transfer. The State has one job applicant for this position, and did no hiring in 1994. The Union seeks a two-range increase, from 19T to 21T. This would raise the maximum wage from $2,576 to $2,828.

For June through September 1993, private sector journeyman plumbers earned $21.87 per hour under Plumbers Local 290's Master Labor Agreement. Their hourly pay increased by 47 cents in October 1993, 70 cents in April 1994, and 95 cents in October 1994, for a total of $23.99 currently. They will receive another 95 cents in April 1995. Total compensation for plumbers receiving prevailing wage under BOLI is $29.59 per hour. In contrast, total compensation for unit plumbers is $21.21 per hour. The Union alleges that two plumbers left the unit for positions represented by Local 290. The State then re-classified those two vacancies to Trade Maintenance Coordinators.

The Union identified comparators in all four neighboring states. The following were the maximum salary rates, in descending order:

The State employs 6 unit Pharmacists. During 1994, 3 Pharmacists resigned, one took an inter-agency transfer, and one took an intra-agency transfer. In that same period, the State hired one Pharmacist and did one lateral transfer into the unit. It currently has 29 job applicants. The Union bases the selective proposal for this class on the disparities found in looking at state and county comparators. In addition to public sector comparators, the Union used a private survey conducted by the Oregon Association of Hospitals and Health Services. It also found internal comparators at OHSU for this classification. It identified comparators in all four neighboring states, and in Multnomah County. The public sector data revealed the following maximum salaries, in descending order:

The State employs 11.7 PT-2's. No PT's left or were hired in 1994, and the State has 63 applicants for this position. The Union bases the selective proposal for this class on the disparities found in looking at state and county comparators. The Union also found disparities with internal comparators at Fairview Training Center and OHSU. The Union identified the following external public sector comparators, in descending order of salary:

The State employs 3 RT-1's and 2.4 RT-2's. It had no turnover in these classifications in 1994. It has 15 RT-1 applicants and 28 RT-2 applicants. The Union bases the selective proposal for this class on the disparities found in looking at state and county comparators. The Union also found disparities with comparators at OHSU and in a survey conducted by the Oregon Association of Hospitals and Health Services. In addition, unit employees conducted a survey of other state agencies, as well as private employers in Eugene, Salem, Corvallis, and Portland.

In August 1994, the X-Ray Department Manager at the University of Oregon wrote a memo describing hiring difficulties in her department. She noted that the department had been forced to hire RT's at the top step of the salary range because they could not get applicants at the lower steps.

The Union identified comparators at all four neighboring states. The following shows maximum salaries among these entities, in descending order:

The State employs 12.9 RM's. It had no turnover in this classification in 1994. It has 9 applicants. The Union bases the selective proposal for this class on the disparities found in looking at state and county comparators. The Union also found disparities with employees at OHSU, and a large disparity with rates for journeymen represented by Plumbers Local 290. The Union's Higher Education Chair, Jeff Seekatz, testified the Plumbers represent more RM's than any other private-sector union. The Union identified public sector comparators in all four neighboring states and in Multnomah County. The maximum salaries, in descending order, are as follows:

The State employs 1 Chief Engineer, 1.9 First Assistant Engineers, one First Mate, one Second Mate, 2.3 Able Mariners, 1 Boatswain, 1 Ship Assistant Cook, and 2 Ship Cooks. Only the Able Mariner classification had any turnover in 1994, with two resignations and three new hires. The State has 2 Able Mariner applicants, and no applicants for the other positions. Under the current Agreement, all of the Ship's classes at issue, including some with no current incumbents, received selective increases of one range effective January 1994.

Ship's classes in this unit work on board the R.V. WECOMA operated by Oregon State University. The WECOMA is funded by daily sailing fees and government grants. The most recent grant from the National Science Foundation was 20% below the amount requested. Other research vessels in other states have suffered similar reductions in NSF grants.

The State alleges the WECOMA is the most costly of three sister ships at $14,100 per day. Because of this, it has lost some business to commercial charter vessels and to reductions in sea days. According to the State's records, the Office of Naval Research cut back one researcher's sea days in 1994 from 32 to 26 days due to the high fees; a researcher hired a commercial vessel instead of the WECOMA for a 5-day effort; and another researcher was unable to afford the WECOMA's rates for a proposed 30-day effort. The Union's witness allege the WECOMA averages 260 sailing days per year, except for 1994 when it was in dry dock for at least two months.

At the outset of its exhibits, the Union identified comparators for two Ship's classes, with the following maximum rates:

In another exhibit, the Union listed the following comparisons of compensation, including 6% pick-up in the unit and 15% Sea Pay in the University of Washington classes:

The State has 6 TCST's. In 1994, it had no turnover in this classification. It has no job applicants for this class. TCST's received a one-range selective increase, from Salary Range 15 to Salary Range 16, effective January 1, 1994.

The State higher education system has its own telephone, cable TV, and computer systems, run out of OSU. TCST's install, maintain, and repair those systems. The Union submitted a written statement from a TCST. In it, he described various new technologies incorporated into their operations in the past two years. He also summarized private sector compensation data collected in a survey of wages at AT&T, U.S. West, and Hewlett-Packard. In addition, he noted that Technicians at OHSU, represented by AFSCME, performed the same work for higher pay. The Union identified public sector comparators, in descending order of maximum salaries, as follows:

The State employs 6.3 Weighmaster 1's, 72 Weighmaster 2's, and 52.9 Senior Weighmasters (also known as Public Service Representative 4's). During 1994, one Weighmaster 1, one Weighmaster 2, and five Senior Weighmasters resigned. Two Weighmaster 2's took intra-agency transfers. The State hired 9 Weighmaster 1's, and has 166 applicants for this position. It has no applicants for Weighmaster 2's, nor has it hired any in 1994. It hired one Senior Weighmaster, reemployed another, reassigned one and promoted five more. It has 5 applicants for this position.

In addition to their regular salary, Weighmaster 2's receive a 5% differential if they possess a certified vehicle inspection license. Senior Weighmasters who possess such a license receive a pay differential of 2.5%.

The Union identified the following public-sector comparators, in descending order of maximum salary, for the Weighmaster 2:

The Union argues that Electricians demonstrate the impact of ignoring wage gaps until employees began to leave. With the new 15% pay raise, ODOT is now recruiting Electricians from other State agencies. The Union argues the better course is to adjust wages before people start "voting with their feet" and create a staffing crisis. It argues that agencies where employees have not yet begun to leave are crises waiting to happen.

The State argues that selective adjustments are warranted only if the classification's wage is below market and the State is suffering significant recruitment or retention problems in the classification. It argues that a wage within 5% of market rates accomplishes the goal of making positions market competitive. It argues the Union has not demonstrated a recruitment or retention problem in any disputed classifications other than ODOT Electricians. It argues that the 15% increase for that class has addressed the recruitment and retention problem. The State further argues that, in some classifications that have shown turnover, employees have either gone to other agencies or left for reasons unrelated to pay, such as retirement or health problems. It argues that delays in filling some vacancies may occur because of contractual procedures for filling vacancies, not because of recruitment problems.

The State suggests the weaknesses Vogue identified in the Union's benchmark survey make the Union's comparability data suspect. It notes the lack of a mix of private and public sector employers, as well as the lack of evidence regarding what percentage of the private sector work force was actually compensated under the private sector rates quoted by the Union.

The Factfinder has previously discussed her reservations about the State's survey. The Union survey data for public-sector comparators is set forth to the point of tedium because the results are so unexpected. Nevada and Idaho, both of which are routinely characterized as low-wage states, repeatedly came in first or second in overall compensation. No evidence exists of a boom in government compensation in those states. It is more likely that the comparators are ill-chosen, consistent with Vogue's analysis. The nature of comparability data warns against making it too singular a basis for gauging the need for selective increases. Market data is the start, not the end, of the analysis.

The parties' use of data from their respective surveys implicitly recognizes that market data is not determinative. Both parties' surveys suggested large discrepancies from the market, in both directions, for various classifications (ironically, including the Highway Maintenance Worker in the State's case). Yet, neither side has proposed selective increases for most of the arguably underpaid positions, nor has the State suggested reducing compensation for classifications its own survey shows are overpaid by as much as 49%. Thus, neither party can be said to be wedded to the results of these surveys. They are, however, a significant factor in the analysis.

The Union relies almost entirely on its survey in urging selective increases for Grounds Maintenance Workers, the Park Ranger series, Pharmacy Techs, and the Weighmaster series. The remainder of the classifications involve additional criteria.

Dental Assistants receive the equivalent of two salary ranges less than the authorized rate for OSCI Dental Assistants in the non-strikeable unit; however, there are no OSCI DA's, and the two classes are not precise matches because of the patient populations involved. The Union's exhibit does not rely on that figure, and indeed shows DA's outpacing OHSU DA's by some 2.6% The state comparator data is unusual in that Washington substantially outpaces California--which, in turn, is very close to the figure for Idaho. DA's are slightly behind the county market, but will not remain so with a 6.5% general wage increase. The record does not support a selective increase for this position.

Matters are different for the Dental Hygienist. OHSU DH's exceed this unit's DH pay by almost twice the amount of the recommended general increase. The state and county comparator data is very quirky, with Washington and Idaho exceeding California's pay rates and Multnomah County topping all other comparators. Because the Factfinder has little faith in these survey results, she will rely primarily on the internal comparator. Accordingly, she recommends a two-range selective increase to supplement the recommended general increase.

The parties agree that Electricians should receive at least a two-range selective increase, a conclusion that is amply warranted by the recruitment and retention record alone. Interestingly enough, the State's survey suggests a greater wage discrepancy than the Union's four-state survey. With the hindsight offered by the recruitment and retention problem for ODOT Electricians, one could speculate that the inclusion of a substantial number of private sector employers gave a more realistic picture of the real world market in this instance. The most reliable figure on the State's survey[1] puts Electricians about 18.5% behind market. Even after the recommended general raise, they will be 12% behind market, if one adopts the State's survey; they will be 24-25% behind the Union's survey of the county market and 40% behind the prevailing wage.

The two-range increase offered by the State would not bring Electricians within the 95%-of-market rule-of-thumb, by its own survey. The lack of response to the 15% differential for ODOT Electricians also suggests that the current rate is substantially below market rate. At the other end of the spectrum, it seems unlikely that the full BOLI prevailing wage rate is the true market in the public sector, any more than it is in the private sector. On this record, the State's survey may well be a slightly low approximation of the appropriate wage. Taking into account the recommended general increase, a selective increase of five ranges will put Electricians between the State survey and the BOLI rate, near the Multnomah County rate that lured away one recent ODOT Electrician. The Factfinder so recommends.

In view of the ECST's more responsible role under state law as supervising electrician for State Electricians, the Factfinder recommends preservation of the current two-range difference. She therefore recommends a five-range selective increase for ECST's.

No evidence exists regarding historical relationships between the sole Correction Electrician and other State Electricians' pay scales. Frankly, the Factfinder is a bit uncomfortable leaving that employee behind the other two Electrician classes, particularly since the employee currently is roughly at the same pay scale as ECST's. However, there is simply no basis on this record for determining the appropriate wage treatment for that employee. Accordingly, the Factfinder recommends no selective increase for Corrections Electrician.

Grounds Maintenance Workers have fallen slightly behind their closest comparators, employees at OHSU. However, the general increase recommended for the unit will more than make up for that lag, as well as most of the discrepancy identified in the Union's state survey (and, for that matter, the 4.98% lag shown in the State's composite survey). They will continue to suffer in comparison with the generous (and perhaps Measure 8-driven) county figures. However, on this record, no additional selective increase is warranted.

The Laboratory Aide series has fallen behind its county comparators by only slightly more than the recommended general wage increase, and behind its state comparators by less than a salary range. Other record evidence does not support granting an increase that will put them above the market. Entry-level turnover is not as large a concern outside the skilled trades, where there is a heavy up-front investment in apprenticeship. It is difficulty in recruiting, or the loss of middle- and senior-level staff, that tends to suggest that wages may be inducing turnover. Accordingly, no selective increase is recommended.

Measure Standards Specialists have expanded the scope of their individual duties in recent years, and some evidence exists that this induced senior employees to retire early and may be prompting less senior employees to seek other employment. The fact that the State does no permanent hiring into what purports to be the entry-level class within this series suggests that the class structure for the series is below market. This conclusion is also supported by the Union's survey. After the recommended general increase, MSS-2's will remain nearly 20% below the 4 States #2 survey average. This discrepancy, the accelerated loss of senior staff, and the anticipated departure of mid-level staff, all point to a selective increase of four ranges, as sought by the Union. The Factfinder will so recommend.

The most compelling argument for a selective increase in the Mental Health Therapy series is the 1% selective increase in the non-strikeable unit. Even the interest arbitrator there noted the case was relatively weak for an increase. The Union's state survey figures are even less persuasive in this instance, because they are in inverse order to the history of relative wages among Northwest states. In any event, the recommended general increase more than offsets the internal comparator.

Turnover in the Park Ranger series is quite low. The state comparator data for the series is surprising. The Factfinder would be inclined to discount the matches for Idaho and Nevada, and possibly California, leaving only Washington and Washington County as strong matches. The general wage increase will bring Park Rangers roughly equal to Washington, but still behind the county figures. While the matter is not free from doubt, the Factfinder will not recommend a selective increase to supplement the general salary increase.

The Union's survey data indicates that the recommended general wage increase will remedy virtually all of the discrepancy revealed for Plumbers. No other evidence supports the requested selective increase. Accordingly, the Factfinder will recommend no selective increase.

Pharmacists have fallen behind their colleagues at OHSU by 13.2%. That figure is consistent with the Union's state and county survey data. Even the State's survey of maximum rates arrived at a similar conclusion. Consistent with those surveys, turnover has been substantial in this class. Assuming a 6.5% general increase, Pharmacists will continue to lag by the equivalent of at least one Salary Range. The record does not support the full three-range increase sought by the Union, but does support a one-range selective increase. The Factfinder so recommends.

Pharmacy Techs have fallen behind their State colleagues by almost exactly the amount of the recommended general wage increase. The Union's survey data for other comparators is suspect, as it has Nevada outstripping even California. While the matter is not free from doubt, the Factfinder will not recommend a selective increase to supplement the general salary increase.

The Union's public sector survey suggests that the recommended general wage increase will remedy any shortfall in Radiologic Technician pay. The State's survey suggests the series will remain 10-18% below market, a conclusion that is consistent with the upper end of the range of results from the Union's less formal private sector survey. In view of the recruiting experience, the Factfinder is inclined to lend more credence to the more pessimistic figure. Accordingly, the Factfinder will recommend the two-range selective increase sought by the Union for this series.

As with the other trades classifications, the Union's discrepancy arguments for Refrigerator Mechanics implicitly discount the BOLI data. Its internal and external state surveys suggest that the recommended general wage increase will put these employees close to market; the county survey suggests it will take them halfway to market. The selectives sought are more consistent with the county data than any other measure. Since the county data rests on a single county, the Factfinder is more inclined to credit the state survey. She therefore will not recommend a selective increase to supplement the recommended general wage increase.

The evidence regarding Ship's Classes was sketchy, at best. For most of the classes, the Factfinder has absolutely no data to indicate whether any selective increase is warranted. The data as to Able Mariner is somewhat in conflict. Many of the classes received a selective increase barely more than a year ago. Nothing on the record indicates the basis for that increase, or the reasons why another is sought so soon. In any event, these classes will share in the recommended general wage increase. On this record, the Union has not established an informed basis for granting the selective increases sought. The Factfinder therefore recommends no increase.

Like very few other unit classes, the Telecommunications Systems Technicians received a one-step selective increase last year. Both parties' survey data suggests they are substantially below market; indeed, they rank in the lowest handful of benchmark classifications in the State's survey. To date, this group of six has not suffered retention problems, and therefore has not had to address the recruitment issue. If the survey results are valid, the recommended general wage increase will go only a small way toward bringing them to market. The Factfinder recommends the four-range selective increase sought by the Union.

Weighmasters suffer in comparison with Lane County. Although state comparator data suggests they have fallen behind external state comparators by approximately the amount of the recommended general wage increase, even that figure is questionable because of the unexpectedly high pay for the Idaho comparator. This unit recently received a differential. For all the above reasons, the Factfinder will not recommend a selective increase for this series.

Currently, an employee who receives a selective salary increase gets an immediate one-step increase, and moves through any remaining steps in the range on the regular annual salary eligibility date ("SED"). The State's proposal would eliminate automatic step increases for employees affected by a selective salary increase. Instead, employee pay would increase immediately only if the employee's current step was below the bottom of the new range. Otherwise, employees would be placed at the step within the new range that corresponds most closely to their existing rate of pay. They would then move up through the steps annually on their SED. Employees would realize the gain from a selective increase insofar as they would have greater potential for future step increases. The vast majority of the affected employees are at or near the top step of their range.

The State notes this change would minimize the financial impact of implementing new ranges, by deferring the step increase until the employees SED. The State argues most affected employees have chosen to remain with the State regardless of the perceived lower pay scale. It suggests that such factors as job security, just cause standards, benefits, and job satisfaction could account for this behavior. The opportunity for additional step increases gives them an incentive to remain longer.

The Union argues the existing contract language has worked in the past. It describes the language as a compromise between full immediate implementation of higher ranges and a "least cost" approach. It notes that, under the State's proposal, any employee who has not already topped out in the range will get no pay increase. It argues this will not aid in retention.

Selective salary increases serve two interrelated purposes. The first is to bring particular classifications' pay in line with appropriate rates under the statutory criteria. The second, and underlying, purpose is to make it easier to retain and recruit employees in those classifications.

In the Factfinder's view, it is counter-intuitive to give selective salary increases to bring employee compensation in line with market rates and reduce turnover, but then to structure it so that many existing employees will not see any actual increase in pay at the time, or for years. The Factfinder will not recommend the State's proposed new language.

De Luca testified the principal aim of the "sunset" language was to avoid perpetual salary increases that bore no relationship to the market. The State sought a mechanism to recapture selective increases that were no longer warranted, without having to trade another concession in return.

De Luca testified the concern over recapturing obsolete selective increases was prompted, at least in part, by criticism from the State Auditor. The Auditor studied "payline exceptions" to the salary schedules established through the Hay system. The Auditor found most payline exceptions occurred through collective bargaining. He noted the State's files did not reveal the reasons for many of those payline exceptions. He also commented that, once in place, payline exceptions tended to remain forever, without regard to market conditions or other factors. He suggested that, once the factors justifying the payline exceptions ended, the payline exception should end as well.

De Luca testified that part of the reason for the concerns noted by the Auditor was the inherent conflict in the values expressed by the various laws bearing on state employee compensation. The Legislature grafted a collective bargaining system onto a merit pay system, then later added comparable worth criteria.

De Luca acknowledged the proposed "sunset" language was not perfect, and expressed a willingness to discuss other language to achieve the State's purpose. He is unaware of any similar language in other jurisdictions.

De Luca testified that in negotiations over the next five years, the State would not propose reductions for the selectives at issue here. He anticipated that the reversion to lower salary ranges would occur automatically at the end of five years unless the specified factors warranted continuing them. If the Union disagreed with the State's assessment of the impact of market factors, De Luca expected the matter would be subject to the grievance procedure rather than bargaining. He also acknowledged that the Union would be free to argue the selective increases should remain despite market and recruitment/retention data, but based on other statutory criteria. If the Union and the State did not agree whether the market and recruitment/retention factors continued to justify a particular increase, De Luca expected the matter to be resolved in arbitration.

The Union argues the Hay system is not dispositive of appropriate wages. It notes the Hay system sought internal pay equity based on job content, without regard to market factors. PECBA, however, explicitly makes market factors a part of the equation. Two conflicting goals thus factor into the resulting pay scale. Given this inherent conflict, it is hard to say whether there should be more or fewer payline exceptions.

The Union argues that bargaining reconciles the conflicting Hay and market systems. It argues that the parties knew, or should have known, what they were doing when they bargained selective increases. The State's failure to maintain files showing the reasons for those increases is not a reason for eliminating those increases.

The Union argues the proposed sunset clause is illogical. After suggesting in this proceeding that employees cannot receive selective increases unless the compensation disparity has led them to begin quitting, the State now seeks to remove those increases after five years unless employees continue to quit despite the selective increases. The Union questions whether the State wants to encourage some employees to quit in five years simply to allow their fellow workers to maintain their selective increases. It suggests that if a "medicine" is keeping a patient well, it makes more sense to keep the patient on that medicine.

The Union notes that salaries can be re-bargained in any Agreement. It suggests that this is the solution to the State's concern over selective increases that become obsolete.

As De Luca's testimony made evident, the State's sunset proposal was a rough cut at dealing with the perceived problem. Upon closer inspection, that proposal needs to be re-thought.

Initially, the recruitment/retention factor would be a peculiar means of determining whether a particular selective should sunset. If, in the year 2000, the State was experiencing no retention or recruitment problem in a particular classification that had received a selective increase in 1995, that does not necessarily suggest the selective should be ended. On the contrary, dropping the selective could simply re-create the recruitment and retention problem that led to the selective in the first place. The parties would then have to repeat the process of negotiating the selective increase.

Further, the enforcement mechanism for sunsetting selectives is one likely to lead to increased discord between the parties. As these proceedings demonstrate, reasonable minds can differ regarding the market rate for any given job classification. In assessing whether a selective should sunset, the State's fiscal interest will support concluding that a job classification is ahead of market; the Union's representative interest will support concluding that the classification is at or below market. Yet the proposal would allow the State to take unilateral action to reduce salaries based solely on its views. Union disagreement with the State's assessment could lead to an unfair labor practice charge or a grievance. Either option would place the parties in a highly adversarial mode. The least disruptive outcome would be negotiations--possibly leading to factfinding--to regain the same selectives based on all the statutory criteria rather than just the two in the State's proposal.[2] However, this outcome could be achieved with less rancor in the context of overall negotiations.

It does not contribute to the public interest to engender grievances or ERB charges. That is a foreseeable consequence of adopting the State's proposal. Certainly, the parties are free to agree to try new means of dealing with old problems. However, factfinding would be of little practical use to the parties were it to result in a recommendation for such a disruptive provision. Accordingly, the Factfinder recommends that the Agreement contain no sunset provision.

(1) There should be an across-the-board salary increase, effective April 1, 1995, in the amount of 6.5%.

(a) There should be increases in the following classifications for which the parties have agreed to selective salary adjustments, as follows:

(c) Corrections Electrician : None; Electrician and Electric & Control Systems Tech: 5 salary ranges (including the 2 ranges proposed by the State)

(g) Mental Health Therapy Shift Coordinator & Mental Health Therapist Coordinator: None

(3) The implementation provision for the selective salary increases should not be modified from the current contract provision.

[1] The "market maximum" figure for Electricians in the State's survey report is mathematically impossible, since it is smaller than the "market weighted average."

[2] In this regard, any decrease in the discomfort level for State negotiators would be offset by an increase in the discomfort level for Union negotiators.

[1] In contrast, a 1987 factfinding report by Timothy Williams involving these parties noted, "it is clear that the State is not a leader in the wages that it pays its employees."

[2] In this regard, at least, the Factfinder agrees with the recommendation of the Towers Perrin to use general increases to maintain a competitive salary structure. See p. 4.

[3] One possible outcome is the hiring pattern shown for Measurement Standard Specialists--hiring at higher classification levels. This flattens out the career ladder, defeating the purpose of having such a ladder in the first place. Another possible outcome is hiring at the top step of the salary range for a particular classification, as occurs with Radiologic Technicians. This hastens the point at which employees "top out," eliminating their ability to keep pace with inflation. A third possible outcome is the pattern among ODOT Electricians, where employees complete their apprenticeship, then leave for higher-paying positions elsewhere.

[4] Metrology is the science of measurement.

[5] The interest arbitrator noted the case was relatively weak for an increase, and questioned the county comparators and one of three state comparators. He nonetheless granted a smaller increase than requested, based on the remaining two state comparators.

[1] An accompanying graph showed that including California increased the pay of comparator employees relative to state employees. The Report did not chart the effect of removing Nevada from the mix, or suggest that it be removed.

[2] As Factfinder Stratton observed in a 1989 proceeding involving these parties, this group represents a blend of large and small states, with a similar variety of income sources (agriculture, natural resources, manufacturing, and services).

[3] One might predict that, as with the private sector, adding smaller counties would tend to move the average downward. On the other hand, use of weighted data would minimize this effect. It may well be that the time and tedium involved in including those counties would more than outweigh the benefit of any marginal refinement of the results.

[4] In drawing this conclusion, the Factfinder places only partial reliance on the list of top 50 private-sector employers submitted by the Union. That list is based on the number of Oregon metropolitan area employees. The Factfinder recognizes some of the participants in the State's surveys as larger than the "top 50" if considered regionally, nationally, or internationally. Even if such entities do not have a large local presence, one would expect the large employer factor to affect their salary structure. Others may be sited mostly outside metropolitan areas (such as natural resource and agricultural product processing concerns).

[5] The BLS now uses 1982-84 = 100 as the standard reference base. As a convenience to users, it continues to publish indexes using the former reference base of 1967 = 100.

[1] Those State employees represented by the Union who are prohibited from striking by ORS 243.736 (the "non-strikeable" employees) will go to interest arbitration pursuant to ORS 243.742.

[2] It noted the effect of Measures 5 and 20 on the tax structure; in addition, Measures 8, 11 and 15 were described as addressing expenditure issues.