Source: http://ny.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20050818_0000160.WNY.htm/qx
Timestamp: 2017-05-29 04:13:36
Document Index: 347232260

Matched Legal Cases: ['§ 3850', '§ 3850', '§\n3857', '§ 3857', '§ 3858', '§ 3857', '§ 3857', '§ 3858', '§ 3858', '§ 3858']

| BUFFALO TEACHERS FEDERATION v. TOBE
RICHARD TOBE, THOMAS E. BAKER, ALAIR TOWNSEND, H. CARL McCALL, JOHN J. FASO, JOEL A. GIAMBRA, MAYOR ANTHONY MASIELLO, RICHARD A. STENHOUSE and ROBERT G. WILMERS, in their official capacities as directors/members of the Buffalo Fiscal Stability Authority, Defendants.
On July 3, 2003, the legislature of the State of New York
created the Buffalo Fiscal Stability Authority ("the Control
Board") to stabilize and improve the city of Buffalo's failing
financial health.*fn1 One of the powers the legislature
vested in the Control Board is the discretion to freeze wages. On
April 21, 2004, the Control Board exercised that discretion and
enacted a Wage Freeze Resolution, which for purposes of this
case, had the effect of eliminating contractual salary increases that Plaintiffs had
negotiated with the city of Buffalo school district.
Plaintiffs filed suit in this court challenging the Buffalo
Fiscal Stability Authority Act (the "BFSA") and the Wage Freeze
Resolution as violative of the Contract and Takings Clauses of
the United States Constitution. Presently before me are the
parties' competing Motions for Summary Judgment.*fn2 Having
reviewed the motion papers and the applicable law, I find that
the Wage Freeze Resolution is not unconstitutional. Rather, the
state has acted properly within its police power to address the
city of Buffalo's dire financial situation. The Wage Freeze
Resolution is a reasonable and necessary means to remedy the
city's economic inviability and secure the welfare of its
residents. It serves the ultimate goal of restoring the city's
fiscal independence. Accordingly, Plaintiffs' motion will be
denied and Defendants' motion will be granted.
A. The Parties and the Collective Bargaining Agreements
Plaintiffs are employee organizations that serve as the
exclusive bargaining representatives for their respective
employee units.*fn3 (Plaintiffs' Rule 56 Statement of Undisputed Facts ("Plaintiffs' Statement"), ¶ 1; Defendants' Rule
56 Statement of Undisputed Facts ("Defendants' Statement"), ¶¶
1-8.) Defendants are directors/members of the Control Board,
which is a public benefit corporation. (Defendants' Statement, ¶¶
Each Plaintiff employee organization is a party to a collective
bargaining agreement with the city of Buffalo school district.
(Plaintiffs' Statement, ¶ 2; Defendants' Statement, ¶¶ 1-8; 11,
13, 15, 17, 19, 21, 23, 25.) These agreements provide for
periodic step increases and/or other types of salary increases,
such as longevity payments, to be paid to the covered
employees.*fn4 (Plaintiffs' Statement, ¶¶ 3-4; Defendants'
Statement, ¶¶ 27, 29.) On average, the covered employees are
contractually entitled to receive salary increases of roughly 2%
per year. (Plaintiffs' Statement, ¶ 5.)
B. The City of Buffalo's Fiscal Crisis
In May of 2003, the Speaker of the New York State Assembly
requested that the State Comptroller's Office conduct a review of
the city of Buffalo's finances. (Defendants' Statement, ¶ 58;
Johnson Declaration, Exhibit D.) This review was intended to
assist lawmakers in determining whether the city would need
financial assistance from the state to close current and future
budget gaps. (Defendants' Statement, ¶ 59; Johnson Decl., Exhibit
C, p. 1.)
The State Comptroller's ensuing report detailed the city of
Buffalo's desperate fiscal straits. (Johnson Decl., Exhibit C.) Among others, the State
Comptroller made the following findings:
 The city of Buffalo had been operating with a
structural deficit for several years, and was only
able to fund its operations with increasing state aid
and the use of its reserves. (Johnson Decl., Exhibit
 The city of Buffalo's budget increases since
1997-1998 were funded through increasing state aid,
which grew from $67 million in 1997-1998 to $123
million in the city's 2002-2003 fiscal year. (Johnson
Decl., Exhibit C, p. 12.)
 The city had a combined deficit for the fiscal
years 2000-2001 and 2001-2002 of $23.8 million, and
the 2002-2003 budget as initially adopted was
balanced only by exhausting the city's reserves.
(Johnson Decl., Exhibit C, pp. 1, 12.)
 The city of Buffalo's estimated budget deficit for
2002-2003 was $7.5 million. The city also faced a
2004-2005 estimated budget deficit ranging from
$30-$48 million up to $60-$78 million, depending on
the Board of Education's budget. The city faced
increased estimated deficits of $76-$107 and $93-$127
million in 2005-2006 and 2006-2007, respectively.
(Johnson Decl., Exhibit C, pp. 1-2, 12, 20-22.)
The State Comptroller concluded that due to these continuing
and serious structural imbalances, the city of Buffalo was not in
a position to rectify its budget on its own. (Defendants'
Statement, ¶ 62; Johnson Decl., Exhibit C, pp. 2, 30.) He also
concluded that a new approach must be adopted by the city to
restore its fiscal integrity. (Johnson Decl., Exhibit C, p. 30.)
In the State Comptroller's view, it was incumbent upon the city
to adopt financial plans and practices that would bring its
recurring expenses in line with its recurring revenue. (Johnson
Decl., Exhibit C, p. 30.) To that end, one of the State
Comptroller's recommendations was that the state legislature
create a control board to oversee and administer Buffalo's
finances "to ensure that effective long-term restructuring takes
place in Buffalo." (Defendants' Statement, ¶ 60; Johnson Decl.,
Exhibit C, p. 2.) The State Comptroller also recommended that the control
board be given the power to freeze wages in the event of a
declared fiscal crisis. (Johnson Decl., Exhibit C, p. 31.) The
state legislature accepted both recommendations.
C. Enactment of the BFSA
On July 3, 2003, the New York State legislature enacted the
BFSA. See N.Y. PUB. AUTH. LAW § 3850, et seq. (McKinney Supp.
2005). As indicated in the legislative declaration of need, the
impetus of the BFSA was the city of Buffalo's crumbling finances,
as evidenced in the State Comptroller's report:
city of Buffalo is facing a severe fiscal crisis, and
that the crisis cannot be resolved absent assistance
from the state. The legislature finds that the city
has repeatedly relied on annual extraordinary
increases in state aid to balance its budget, and
that the state cannot continue to take such
extraordinary actions on the city's behalf. The
legislature further finds and declares the
maintenance of a balanced budget by the city of
Buffalo is a matter of overriding state concern,
requiring the legislature to intervene to provide a
means whereby: the long-term fiscal stability of the
city will be assured, the confidence of investors in
the city's bonds and notes is preserved, and the
economy of both the region and the state as a whole
N.Y. PUB. AUTH. LAW § 3850-a.
In general, the BFSA requires the Control Board to monitor the
city of Buffalo's financial plans on an ongoing basis to ensure
that the city is adhering to the detailed fiscal requirements set
forth in the BFSA. (Defendants' Statement, ¶ 56.) For example,
the BFSA requires that the city prepare and submit to the Control
Board a four-year (2004-2007) financial plan demonstrating, among
other things, that annual operating expenses will not exceed annual operating revenues. N.Y. PUB. AUTH. LAW §
3857(1). The goal is for the city to steadily balance its budget
gaps with less and less outside financial assistance until it can
independently balance its budget in 2008-2009. N.Y. PUB. AUTH.
LAW § 3857(1).
The city's financial plans must be approved by the Control
Board. N.Y. PUB. AUTH. LAW §§ 3858(2)(a). The BFSA provides a
mechanism by which the Control Board may review and modify the
city's financial plans. N.Y. PUB. AUTH. LAW § 3857. If the city
fails to modify its financial plans or fails to demonstrate that
it is closing its budget gaps according to the requirements of
the BFSA, the Control Board is vested with the authority to act
to ensure that the city takes all necessary corrective actions.
N.Y. PUB. AUTH. LAW §§ 3857(2), 3858(2). For example, the BFSA
specifically authorizes the Control Board to impose a "wage
and/or hiring freeze" upon a finding that such a freeze is
"essential to the adoption or maintenance of a city budget or a
financial plan that is in compliance with [the BFSA]." N.Y. PUB.
AUTH. LAW § 3858(2)(c)(i). The BFSA specifically provides that
the [Control Board] shall be empowered to order that
all increases in salary or wages of employees of the
city and the employees of covered organizations which
will take effect after the date of the order pursuant
to collective bargaining agreements, other analogous
contracts, or interest arbitration awards, now in
existence or hereafter entered into, requiring such
salary or wage increases as of any date thereafter
N.Y. PUB. AUTH. LAW § 3858(2)(c)(i).
The BFSA further provides that the frozen wages shall not be
paid retroactively:
no retroactive pay adjustments of any kind shall
accrue or be deemed to accrue during the period of
wage freeze, and no such additional amounts shall be paid at the time a
wage freeze is lifted, or at any time thereafter.
N.Y. PUB. AUTH. LAW § 3858(2)(c)(iii).
D. Implementation of the Wage Freeze
On October 21, 2003, the Control Board approved a four-year
financial plan for the city. (Johnson Decl., Exh. A.) The Control
Board continued to review and monitor the economic conditions of
the city and the viability of the four-year plan as it is
required to do under the BFSA. (Johnson Decl., Exh. A.) In doing
so, the Control Board discovered that the immediate financial
plan was out of balance, and that the city was projecting
multiple increases in recurring expenditures, primarily related
to personnel costs. (Johnson Decl., Exh. A.) Specifically, the
Control Board determined that the city was projecting an increase
in the 2004-2005 budget gap of more than $20 million above the
$26 million gap projected in the financial plan, and that the
projected cumulative gap over the next financial plan would
exceed $250 million. (Johnson Decl., Exh. A.)
Consequently, on April 21, 2004, the Control Board enacted
Resolution No. 04-35, otherwise known as the Wage Freeze
Resolution. (Defendants' Statement, ¶ 37; Johnson Decl., Exh. A.)
This resolution was enacted based on the Control Board's finding
that a wage freeze was "essential to the maintenance of the
Revised Financial Plan and to the adoption and maintenance of
future financial plans and budgets that are now in compliance
with the [BFSA]." (Johnson Decl., Exh. A.) In pertinent part, the
Control Board resolved as follows:
RESOLVED AND ORDERED, that a wage freeze, with
respect to the City and all Covered Organizations, is
essential to the maintenance of the Revised Financial
Plan and to the adoption and maintenance of future
budgets and financial plans that are in compliance
with the Act; and be it further
RESOLVED AND ORDERED, that effective immediately,
there shall be a freeze with respect to all wages,
wage rates, and salary amounts for all employees of
the City and all Non-exempt Covered Organizations, to
the full extent authorized by the Act (the "Wage
Freeze"), and be it further
RESOLVED AND ORDERED, that this Wage Freeze shall
apply to prevent and prohibit any increase in wage
rates, wages or salaries for any employee of the City
or a Non-exempt Covered Organization, including, but
not limited to, any increased payments for holiday
and vacation differentials, shift differentials,
salary adjustments according to plan and step-ups or
increments; and including increases in wage rates,
wages or salaries pursuant to any plan or schedule
for advancement or promotion; and including any
increases in wage rates, wages or salaries provided
for under collective bargaining agreements, interest
arbitration awards, employment agreements, or
discretionary increases to non-represented employees,
provided that such suspended salary or wage increase
shall not be considered as part of compensation or
final compensation or annual salary earned or
earnable for the purpose of computing the pension
base of any retirement allowances; and be it further
ORDERED AND RESOLVED, that the foregoing Wage Freeze
shall apply to prevent and prohibit any increase in
wage rates, wages or salaries that is scheduled to
commence or otherwise take effect on or after the
effective date of the Wage Freeze, notwithstanding
that (a) the increase was bargained for, provided for
in an existing collective bargaining agreement, or
otherwise planned prior to the effective date of the
Wage Freeze, and/or; (b) the increase is designated
as retroactive, or otherwise purports to relate to
work performed prior to the effective date of the Wage Freeze.
The wage freeze took effect immediately, on April 21, 2004.
(Johnson Decl., Exh. A.)
On June 17, 2004, Plaintiffs commenced this action by filing a
Complaint in the United States District Court for the Western
District of New York. Defendants filed their Answer on July 27,
2004. On February 28, 2005, the parties filed Cross-Motions for
Summary Judgment. After full briefing on the motions, this Court
held oral argument on May 24, 2005, and reserved decision at that
&nbsp; Rule 56 of the Federal Rules of Civil Procedure provides that
summary judgment is warranted where the "pleadings, depositions,
judgment as a matter of law." FED. R. CIV. P. 56(c). A "genuine
issue" exists "if the evidence is such that a reasonable jury
Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510,
91 L.Ed.2d 202 (1986). A fact is "material" if it "might affect the
outcome of the suit under governing law." Id. In deciding a motion for summary judgment, the evidence and the
inferences drawn from the evidence must be "viewed in the light
most favorable to the party opposing the motion." Addickes v.
S.H. Kress and Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 1609,
26 L.Ed.2d 142 (1970). "Only when reasonable minds could not
differ as to the import of evidence is ...