Would Maine's LD 537 (extending binding arbitration to municipal labor disputes over salaries, pensions, and insurance) be an unfunded mandate?

Plain-English summary

Under 26 M.R.S.A. § 965(4), Maine's Municipal Public Employee Labor Relations Law, controversies that do not relate to "salaries, pensions and insurance" were already subject to binding arbitration at either party's request. Controversies that did relate to those subjects could be sent to arbitration, but the arbitrators' recommendations were only advisory. LD 537 in the 117th Legislature would have flipped the rule: binding arbitration would also apply to disputes about salaries, pensions, and insurance, putting the most expensive items on the bargaining table into the binding column. The Labor Committee asked the AG whether that change would be a mandate under Me. Const. art. IX, § 21 (the unfunded-mandates clause).

The AG concluded it would. The two-part test under § 21 is whether the Legislature requires a local unit to "modify its activities" and whether that modification "necessitates additional expenditures from local revenues." LD 537 clearly required modification: municipalities would now have to submit salary, pension, and insurance disputes to binding arbitration whenever employees demanded it. The "additional expenditures" prong was nearly automatic too. The only way municipalities could avoid additional spending would be if arbitrators ruled in favor of the municipality in every case, which the AG dryly characterized as "exceedingly unlikely." In practice, some municipalities would owe more for salaries, pensions, or insurance under binding awards than they would have absorbed in voluntary bargaining.

That mandate finding does not by itself doom the bill. Article IX, § 21 just requires the State to pay 90 percent of the cost annually or pass the bill by a 2/3 vote. The AG's role was to flag the procedural trigger so the Legislature could make an informed decision.

Currency note

This opinion was issued in 1995. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What is binding arbitration in the municipal labor-relations context?

A dispute-resolution procedure where the arbitrator's decision binds both sides. The municipality must implement the award; the union must accept it. By contrast, advisory arbitration produces a recommendation that either side can reject.

Why are salaries, pensions, and insurance the high-stakes items?

Because they are the most expensive items in a public-employee contract. Other items (work rules, grievance procedures, layoff rules) can be costly too, but the dollar figures attached to salaries, pensions, and insurance dwarf the rest. A binding-arbitration regime over these items effectively delegates the municipality's compensation budget to an arbitrator.

Did the AG say LD 537 was unconstitutional?

No. The AG only addressed whether LD 537 was a mandate under § 21. § 21 is a process requirement, not a substantive bar. The Legislature could enact LD 537 if it paid the 90 percent State subsidy or passed it by a 2/3 vote.

Could the State have funded the 90 percent of LD 537?

Possibly, but the AG opinion does not address that. The fiscal-impact calculation depends on assumptions about how often unions would invoke binding arbitration, how often arbitrators would side with unions, and how much the awards would exceed voluntary bargaining outcomes. The Office of Fiscal and Program Review would have to estimate the magnitude.

Background and statutory framework

Me. Const. art. IX, § 21 (the unfunded-mandates clause, added in 1992) bars the State from requiring local governments to expand or modify their activities so as to necessitate additional local expenditures, unless the State annually funds 90 percent of the cost or the Legislature acts by a 2/3 vote.

26 M.R.S.A. § 965(4) is the Municipal Public Employee Labor Relations Law's procedural section. It splits arbitration into binding and advisory, with salaries, pensions, and insurance in the advisory column. LD 537 would have moved those items into the binding column.

Citations

• Me. Const. art. IX, § 21 (unfunded-mandates clause)
• 26 M.R.S.A. § 965(4) (Municipal Public Employee Labor Relations Law arbitration provision)
• LD 537, 117th Legislature (binding arbitration extended to salaries, pensions, and insurance)

Source

• Landing page: https://www.maine.gov/legis/lawlib/lldl/agops/agops.htm
• Original PDF: https://lldc.mainelegislature.org/Open/AG/Opinions/1995/ag_19950427.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

95-5

ANDREW KETTERER
ATTORNEY GENERAL

STATE OF MAINE
DEPARTMENT OF THE ATTORNEY GENERAL
STATE HOUSE STATION 6
AUGUSTA, MAINE 04333

April 27, 1995

Senator Charles M. Begley
Representative Pamela H. Hatch
Chairs, Joint Standing Committee on Labor
State House Station #115
Augusta, ME 04333

Dear Senator Begley and Representative Hatch:

I am writing in response to your inquiry of April 12, 1995, concerning whether Legislative Document 537, "AN ACT to Include Salaries, Pensions and Insurance for Binding Arbitration under the Municipal Public Employee Labor Relations Laws," would, if enacted, constitute a "mandate" within the meaning of Article IX, Section 21 of the Maine Constitution. For the reasons which follow, it is the Opinion of this Department that the bill, if enacted, would constitute a mandate.

Article IX, Section 21 of the Maine Constitution provides, in pertinent part:

... the State may not require a local unit of government to expand or modify that unit's activities so as to necessitate additional expenditures from local revenues [unless the State provides 90 percent of the cost of the expenditures or the Legislature approves legislation in question by a 2/3 vote].

Thus, in order to qualify as a "mandate" under this provision, an action of the Legislature must not only require that local units of government modify their activities, but that modification must "necessitate" additional expenditures from local revenues to occur.

LD 537 would amend 26 M.R.S.A. § 965(4). That subsection already requires that, with regard to municipal labor disputes covered by it, controversies that do not relate to "salaries, pensions and insurance" are subject to binding arbitration at the request of either party to the dispute. However, although controversies relating to "salaries, pensions and insurance" may be sent to arbitration, the recommendations of the arbitrators with regard to these subjects are advisory only. LD 537 would amend this latter provision and make controversies related to "salaries, pensions and insurance" also subject to binding arbitration. Thus, if LD 537 were enacted, municipal workers would, for the first time, be able to force binding arbitration with regard to disputes which they might be having with a particular municipality over "salaries, pensions and insurance." Your question is whether, in providing such a remedy, the Legislature would be "requiring municipalities to modify their activities" so as to "necessitate additional expenditures," thereby imposing a "mandate" on them within the meaning of the constitutional provision.

In the view of this Department, however, the passage of LD 537 would constitute such a "mandate." It is clear, first of all, that the proposed amendment to Section 965(4) would require local units of government to modify their activities in that they would now be required to submit disputes relating to salaries, pensions and insurance to binding arbitration. The question then becomes whether such a requirement would "necessitate" additional expenditures to be made. On this score, the only way in which additional expenditures would not be required would be if the arbitrators were to rule in favor of the municipality in every case, an exceedingly unlikely possibility. Thus, since it is very likely that the effect of the amendment would be that some municipalities of the State would incur additional financial obligations in the future, the measure satisfies the requirement that it would "necessitate" additional expenditures, and would therefore constitute a mandate.

I hope the foregoing answers your question. Please feel free to reinquire if further clarification is necessary.

Sincerely,

ANDREW KETTERER
Attorney General

AK:sw

cc: John D. Wakefield, Director
Office of Fiscal and Program Review
Representative Hugh A. Morrison
Sponsor, Legislative Document 537