[ v48 p1198 ]
The decision of the Authority follows:
48 FLRA No. 128
FEDERAL LABOR RELATIONS AUTHORITY
NATIONAL ASSOCIATION OF GOVERNMENT EMPLOYEES
U.S. DEPARTMENT OF THE ARMY
RED RIVER DEPOT
(41 FLRA 1057 (1991))
DECISION AND ORDER ON REMAND
December 27, 1993
Before Chairman McKee and Members Talkin and Armendariz.
I. Statement of the Case
This matter is before the Authority pursuant to a remand from the United States Court of Appeals for the District of Columbia Circuit in U.S. Department of the Army, Red River Depot, Texarkana, Texas v. FLRA, 977 F.2d 1490 (D.C. Cir. 1992) (Red River Depot v. FLRA).
In our earlier decision in this case, we rejected, among others, the Agency's claim that the proposal at issue, which concerns the establishment of a gainsharing program, directly interferes with its management right to determine its budget under section 7106(a)(1) of the Federal Service Labor-Management Relations Statute (the Statute). In reaching this conclusion, we applied the budget test that was first set forth in American Federation of Government Employees, AFL-CIO and Air Force Logistics Command, Wright-Patterson Air Force Base, Ohio, 2 FLRA 604, 607-8 (1980) (Wright-Patterson). Viewing the proposal against that test, we found that the record in the case did not establish that the proposal directly interfered with management's right to determine its budget because the record did not show that the proposal prescribed a program or an amount to be included in the Agency's budget as is required in order to meet the first part of the Wright-Patterson test.
On review of our decision, the court stated that the decision had not "squarely addressed what it means to 'include' something in a budget[.]" Red River Depot v. FLRA, 977 F.2d at 1492. Additionally, the court expressed its view that regardless of the approach adopted with respect to that issue, whether the Union's proposal would "pass muster under the Wright-Patterson test almost certainly depends upon how 'gains' are to be calculated[.]" Id. More specifically, the court stated that a conclusion with regard to whether the proposal requires the inclusion in the budget of a particular program or amount might be dependent upon whether or not the Agency retained the ability to adjust the baseline productivity level each year to reflect prior productivity gains. The court remanded the case to the Authority "to clarify what it means to require 'inclusion of a particular program or amount in [a federal employer's] budget.'" Id. at 1493.
Following the court's remand, we issued an order to the parties that stated in relevant part:
[T]he parties are directed to file supplemental statements setting forth their respective positions as to how the proposed gainsharing program would operate within the context of the Agency's budget process. In particular, those statements should provide an explanation as to whether and to what extent the Agency retains the ability to unilaterally adjust the baseline productivity level each year that the gainsharing program would be in effect.
In response to this order, both parties submitted supplemental statements. Subsequent to the submission of those statements, the Agency submitted a clarification of its statement and the Union responded to the clarification. In view of the fact that the parties' clarifying statements address the specific question posed by the court concerning the adjustment of the baseline productivity level, we will consider these additional submissions from the parties.
II. The Proposal
Man[-]hours saved X Labor rate = Savings
Coverage - All Civilian Employees
Eligibility - 320 hours duty status quarterly (excludes overtime and leave) and a Depot employee at the end of the quarter
Sharing - 50/50 split employee and depot
Reserve Pool - 5% Contingency Pool, from employee share, paid to employees at the end of the year
Payouts - Equal for everyone, quarterly separate payroll checks, $25 minimum
Data - Audited, disciplined for fraud
Payouts depend on performance of three factors: Quality, Schedule, Cost
III. Positions of the Parties
In its supplemental submission, the Agency included a copy of the Agency's plan for the productivity gainsharing program. The Agency states that under the proposed program, the "Agency adjusts the baseline from year to year based on a fixed formula and that, therefore, the program is not negotiable." Agency's supplemental statement at 1. In clarifying its supplemental statement, the Agency states that under the gainsharing program addressed by the Union's proposal, "the baseline for any particular year is set as '. . . the average quarterly performance for the previous fiscal year.'" Clarification at 2 (emphasis in original). The Agency contends that as the adjustment to the baseline from year to year is dependent on the employees' performance, management has no discretion to rely on any other factors to modify the baseline. Moreover, the Agency claims that under this fixed formula the determination of the baseline following the first year of the gainsharing program is within the control of the employees and not the Agency. Thus, the Agency argues that the proposed gainsharing program does not permit unilateral adjustment of the baseline by management.
The Union states that under the proposal, the Agency retains the ability to unilaterally adjust the baseline productivity level to reflect prior productivity gains and that "[e]ach successive year's gains would form a new baseline of productivity." Union's supplemental statement at 1. The Union asserts that because "gains" would be based on the Agency's unilaterally established baseline productivity level, the proposal "would not, nor could it impact the budget." Id. In responding to the Agency's clarification the Union states that:
[T]he Union has nothing to do with the [Agency's] formula for determining the baseline and the Union has not requested negotiations on the formula the [A]gency will use as its baseline formula. The baseline formula is left entirely up to the discretion of the [A]gency. . . . The Union's proposal deals entirely with the profits which flow as a result of a more productive workforce.
Union's response at 1. The Union emphasizes that the baseline is determined by the Agency pursuant to its own formula and that, while "[p]resumably" the prior year's gains will be considered in establishing a new baseline, the Agency can determine the extent to which productivity increases from the previous year are considered in establishing a new baseline. Id. at 2.
IV. Analysis and Conclusions
1. The Meaning of the Proposal
The proposal itself is silent concerning one of the issues raised by the court: namely, how the baseline productivity level will be adjusted each year under the gainsharing program. Some of the Union's statements in its supplemental statement and response to the Agency's clarification concerning the method used to adjust the productivity baseline level in implementing the gainsharing program are confusing. Specifically, the Union makes conflicting representations concerning the existence of a specific formula for making those calculations. At one point the Union states, "[e]ach successive year's gains would form a new baseline of productivity." Supplemental statement at 1-2. Elsewhere, the Union states, "In fact, the Union is completely unaware of the baseline formula the [A]gency has used or will use in the future." Union's response at 1. Nonetheless, the Union emphatically states that under its proposal the Agency retains unilateral authority to adjust the baseline figure used to determine profits.
We find that although it is unclear whether the Union is aware of the specific formula for adjusting the baseline that is contemplated by the Agency, it is clear that the Union disavows any intention of seeking to negotiate either the baseline itself or a formula for determining it. This statement of intent is consistent with the language of the proposal. Thus, for purposes of this decision, we interpret the proposal as not extending to that aspect of the gainsharing program that entails determination of the baseline on which gains will be calculated but, rather, as leaving such determination to the discretion of the Agency.
2. The Budget Test
In view of the court's remand in this case, we take this opportunity to clarify our treatment of the management right to determine budget that is set forth in section 7106(a)(1) of the Statute. As the Supreme Court has remarked, an agency's right to determine its budget can "only be understood to refer to the allocation of funds within the agency." Fort Stewart Schools v. FLRA, 465 U.S. 641, 653 (1990) (Fort Stewart Schools). Early in its history, in its decision in Wright-Patterson, the Authority set forth a two-part test for determining whether a proposal directly interferes with an agency's right to determine its budget that reflects this understanding. The test also reflects an effort to strike a balance between the obligation to engage in collective bargaining over conditions of employment and the preservation of an agency's right to determine its budget, both of which are among the expressed purposes of the Statute.
In Wright-Patterson, the Authority rejected an agency's suggestion that it should accord an expansive meaning to this particular management right based on the Authority's view that a broad interpretation would result in proposals being rendered nonnegotiable simply because they impose a cost on an agency that requires the expenditure of funds. 2 FLRA at 607. In rejecting an expansive meaning in favor of a more limited one, the Authority noted that to one extent or another, most proposals would have the effect of imposing costs on the agency so as to require the expenditure of appropriated agency funds. In its analysis, the Authority observed that the definition of the term "budget" was pivotal to determining whether proposals directly interfered with that particular management right. In the absence of any definition in either the Statute or its legislative history, the Authority concluded that it was appropriate to give the term its common or dictionary definition. The dictionary definition that the Authority relied on was "a statement of the financial position of a body for a definite period of time based on detailed estimates of planned or expected expenditures during the period and proposals for financing them." Id. at 608. The Authority concluded that under section 7106(a)(1) of the Statute, an agency's authority to determine its budget extends to the determination of the programs and operations that will be included in the estimate of proposed expenditures and the determination of the amounts required to fund them. Thus, under the first part of the test, a proposal that prescribes the particular programs or operations that an agency would include in its budget or prescribes the amount to be allocated in the budget for them would infringe upon the agency's right to determine its budget.
The Authority included a second part in the test for the purpose of addressing proposals that do not by their terms prescribe particular programs, operations, or amounts to be included in an agency's budget, but that are alleged to interfere with an agency's right to determine its budget because of increased costs. The Authority rejected an approach that would base a determination of negotiability on increased cost alone, and adopted instead an approach that would weigh that factor against "such factors as the potential for improved employee performance, increased productivity, reduced turnover, fewer grievances, and the like." Id. Under the second part of the test that was set forth in Wright-Patterson, only where an agency makes a substantial demonstration that an increase in costs is significant and unavoidable and is not offset by compensating benefits will the Authority find that an otherwise negotiable proposal interferes with an Agency's right to determine its budget.(1)
Under Wright-Patterson, the first part of the budget test was designed to bar from negotiations those proposals that determine directly what the agency's budget will be. See International Federation of Professional and Technical Engineers, Local No. 1 and U.S. Department of the Navy, Norfolk Naval Shipyard, 38 FLRA 1589, 1595 (1991) (Norfolk Naval Shipyard). The second part of the test concerns proposals that establish conditions of employment that would impose costs on the agency, but do not determine how those costs will be funded in the agency's budget. Id.
The first part of the budget test, which is at issue in this case, is a narrow one. It withdraws from bargaining only those proposals that are addressed to the budget per se, not those that would result in expenditures by an agency and, consequently, would have an impact on the budget process. See, for example, Fort Stewart Schools, 495 F.2d at 657-59 (Marshall, J., concurring); American Federation of Government Employees, Local 1857 and U.S. Department of the Air Force, Air Logistics Center, Sacramento, California, 36 FLRA 894, 904 (1990) (Air Logistics Center, Sacramento). As indicated above and as recognized by the court in this case, we adhere to a dictionary definition of "budget." That is, for purposes of applying section 7106(a)(1) of the Statute, a budget is an agency's plan as to how it proposes to finance programs and operations during a specified period. We acknowledge that most costs to an agency will have an effect on the agency's budget as they will necessitate the use of funds, which is the focus of a budget. However, the first part of the budget test is limited in scope to the formal process of setting forth programs, operations, and amounts in a financial plan to fulfill the agency's mission.
We turn for a moment to the context in which this particular management right applies. Budgets are a common fiscal practice in organizations. In the Federal Government, the President is required by law to prepare budgets of the United States Government and to submit a budget of the United States Government to Congress each year. 31 U.S.C. §§ 1104-1105. The President is also responsible for proposing appropriations. 31 U.S.C. § 1104. The head of each agency is responsible for preparing and submitting to the President each appropriation request for the agency. 31 U.S.C. § 1108. Under law, agency appropriation requests must be developed from cost-based budgets. Id. Thus, the determination of agency budgets generally is conducted in conjunction with the centralized budget and appropriations process.(2)
The Office of Management and Budget (OMB) has issued OMB Circular No. A-11, which contains instructions addressing the preparation and submission of budget estimates and applies to all agencies of the Government and Government-sponsored enterprises. OMB Circular No. A-11, § 11.1. Pursuant to that Circular, agencies are required to submit various materials to OMB for use in preparing the budget of the United States for submission to Congress. See OMB Circular No. A-11, § 10.4. From this material OMB generates data that is reported at the appropriations or fund account level in the budget and aggregated to provide the totals in the President's budget. OMB Circular No. A-11, § 11.4. The President's budget, or the budget of the United States Government, sets forth the President's comprehensive financial plan and indicates the President's priorities for the Federal Government. The President's budget is submitted to Congress, which then enacts appropriations bills that provide authority to spend for specified purposes and other legislation that affects outlays or receipts, such as legislation to amend eligibility requirements for benefit payments or to amend revenue laws. See Office of Management and Budget, The Budget System and Concepts of the United States Government, 2 (Jan. 1992). The President's budget, as approved or modified through appropriations acts and other laws, "becomes the basis for the financial plan for the operations of each agency during the fiscal year." Id. at 6.
The President's budget includes, among other things, individual agency budget estimates that set forth, for each account within the overall agency, appropriations language, various budget schedules, and narrative statements of program and performance. An examination of the budget of the United States Government reveals that the appropriations language and the budget schedules for individual agencies that are presented therein are expressed in relatively gross terms and represent the aggregation of financial estimates for constituent parts such as the organizational components covered by an account and the various goods and services financed. That is, the budget estimate for an agency and the accompanying appropriations language that are incorporated in the overall budget of the United States represent a condensation of more detailed and specific financial planning for that agency that is associated with the development of that estimate. It follows that the determination of the programs, operations, and amounts that will be aggregated and condensed to form the budget estimate contained in the President's budget is an integral part of the budget process. Also, in view of the condensed nature of the budget estimate that is included in the President's budget, it follows that subsequent to the approval of the President's budget, a more detailed statement of the underlying programs, operations, and amounts is necessary in order to provide the agency with a useful plan for funding its operations during the applicable fiscal year.
We find that the first part of the budget test encompasses the specific process that is dedicated to formulating: (1) the budget estimate for an agency that is incorporated in the budget of the United States Government; (2) estimates for funding the operations and programs of an agency that are produced within the agency to provide the groundwork for the budget estimate that is incorporated in the budget of the United States Government; and (3) an agency's plan for allocating funds among its operations and programs once presidential and congressional action on the budget of the United States Government has occurred. Thus, the first part of the budget test removes from bargaining any mandated inclusion of programs, operations, and amounts in the estimates and plans that comprise an agency's budget process. As a practical matter, the first part of the test includes the prescription of the "line items" that will be contained in the budget estimates that are incorporated in the budget of the United States.(3) It also encompasses the prescription of the items and amounts that will be included in the funding estimates and plans that are developed by the agency in conjunction with formulating and executing the budget of the United States.
Before the court, the Agency urged adoption of an expansive view of the first part of this test. Specifically, the Agency contended that any "'proposal specifying dollar amounts [must be included in the budget because it] leaves management without any choice as to how to use available resources.'" Red River Depot v. FLRA, 977 F.2d at 1492. A review of the briefs that were filed with the court in this case shows that the Agency argued that a proposal, although not phrased in terms of an actual dollar amount, nonetheless would directly interfere with management's right to determine its budget if it ultimately would dictate a specific dollar amount, thereby divesting the Agency of discretion and control over its funding decisions. A similar approach has been adopted by the United States Court of Appeals for the Fourth Circuit. See, for example, U.S. Department of Health and Human Services v. FLRA, 983 F.2d 578 (4th Cir. 1992) (DHHS v. FLRA) (holding that a proposal that would have the effect of prescribing the use of agency funds directly interferes with the right to determine budget). We decline to adopt an expansive view of the right to determine the budget of an agency that would bring proposals within the scope of that right simply because they translate into "dollar amounts" of agency financial resources. As we previously have pointed out, most bargaining proposals are subject to analysis for the purpose of determining their "cost" to an agency. If we were to rely on the fact that a proposal entails a cost to the agency or the use of agency funds, without more, as a basis for finding that proposals directly interfere with management's right to determine its budget, the scope of collective bargaining would be sharply curtailed. See Air Force Logistics Center, Sacramento, 36 FLRA at 903. See also Fort Stewart (the Court's action in upholding the Authority's decision that a proposal calling for a 13.5 percent salary increase was negotiable suggests that the Court does not view a proposal as inconsistent with management's right to determine its budget simply because it entails some cost to the agency).
There is a relationship between establishing conditions of employment that result in a cost to an agency and the determination of its budget in that, as we have noted, budgets by their nature are an exercise in determining how costs will be handled. However, for purposes of the first part of the budget test, negotiating a proposal relating to conditions of employment that could result in a cost to an agency does not equate to the inclusion of a program, operation, or amount in the budget if the proposal, standing alone, does not prescribe that action. Rather, it is only when a proposal, by its terms, directly prescribes the substantive composition of the estimates and plans that constitute the budget process that the proposal comes within the ambit of the first part of the budget test. As an illustration of this distinction, a proposal requiring that an agency pay a specified amount toward health benefits premiums for bargaining unit employees would not be inconsistent with the first part of the budget test. However, a proposal requiring that the agency place a specified amount in its budget for the purpose of funding health benefits premiums for bargaining unit employees would. Compare Air Logistics Center, Sacramento, (proposals that agency would bear the entire burden of an increase in health benefits premiums and reimburse employees who had paid the increased premiums was not inconsistent with the first part of the budget test) with National Association of Government Employees, Local R1-144, Federal Union of Scientists and Engineers and U.S. Department of the Navy, Naval Underwater Systems Center, Newport, Rhode Island, 38 FLRA 456, 477-80 (1990), remanded as to other matters without decision, No. 91-1045 (D.C. Cir. July 23, 1991) (proposal requiring that 1.5 percent of base aggregate payroll be allocated in the budget for awards directly interfered with management's right to determine its budget based on the first part of the budget test) and Norfolk Naval Shipyard, 38 FLRA at 1594-96 (proposal prescribing the maximum amount that could be included in the budget to fund performance awards directly interfered with management's right to determine its budget). In sum, under this part of the test, a proposal that directly prescribes the items or amounts that will be specified in an agency's plan to fund its programs and operations during a fiscal year interferes with the agency's right to determine its budget.
3. Application of the Test
Now we turn to the question of whether the proposal in this case directly interferes with management's right to determine its budget based on the first part of the budget test. As we have discussed above, the proposal does not attempt to determine the baseline figure the Agency will use to calculate the gains to be shared (4) and is silent concerning what, if any, actions must be taken with respect to the budget itself to accommodate the contemplated gainsharing program. Thus, although the proposal defines various details of the gainsharing program, it does not extend to mandating the inclusion of any items or amounts in the Agency's budget. That is, the proposal does not mandate programs, operations, or amounts for inclusion in the Agency's budget estimate that is incorporated in the budget of the United States Government or the estimates and plans that are developed by the Agency in conjunction with formulating and executing the budget of the United States Government.
Accordingly, this proposal does not prescribe programs, operations, or amounts to be included in the Agency's budget within the meaning of the first part of the Wright-Patterson budget test. In reaching this conclusion, we have considered the Agency's contention that because it no longer has a gainsharing program, the proposal would require the establishment of one. While the proposal would require the Agency to reestablish gainsharing as an administrative program, the proposal does not, by its terms, mandate any budgetary action. In this regard, the establishment of an administrative or operational program does not equate to the establishment of a program within the budget itself. While an agency may choose to structure its budget so that the programs and operations set forth in its budget exactly mirror its administrative and operational programs, it may also choose to structure its budget differently. For example, it may choose to combine funding for several administrative or operational programs into one budgetary program or to divide funding for one administrative or operational program among several budgetary programs. As long as a proposal that entails the establishment of an administrative or operational program leaves the agency with the discretion to determine how any necessary funding will be addressed in its budget, such a proposal is not inconsistent with the first part of the budget test. In any event, as was pointed out in our original decision in this case, the proposal at issue herein operates based on a budget that already has been established and simply involves the distribution of savings that accrue from productivity increases. 41 FLRA at 1066. See DHHS v. FLRA, 983 F.2d at 585 (Murnaghan, J. dissenting) ("The first prong focuses on the budget process, not the mere use of agency funds already budgeted." [Emphasis in original]).
We find that the proposal does not prescribe the particular programs or operations that the Agency will include in its budget or prescribe the amount to be allocated in the budget for them. Thus, we conclude that this proposal does not directly interfere with management's right to determine its budget under section 7106(a)(1) of the Statute and we reaffirm our earlier order in this case.
The Agency shall upon request, or as otherwise agreed to by the parties, bargain over the proposal.(5)
(If blank, the decision does not have footnotes.)
1. This portion of this test is not at issue in this case. See Red River Depot v. FLRA, 977 F.2d at 1492. However, in a recent decision the Authority rejected a union's suggestion that the second part of the budget test be discarded. National Treasury Employees Union and U.S. Nuclear Regulatory Commission, 47 FLRA 980 (1993) (Chairman McKee dissenting), petition for review filed, No. 93-1422 (D.C. Cir. July 1, 1993). In finding that retention of the second part of the test was warranted, the majority stated, "We conclude that the balance struck by the Wright-Patterson budget tests continues to offer a reasonable solution to the tension that exists between the management rights provisions of the Statute and the promotion of genuine collective bargaining over meaningful issues." Id. at 998. In that decision, the majority stated that while it was retaining the second part of the test, it would no longer consider nonmonetary "intangible" benefits such as positive effects on employee morale in determining whether a proposal met the test. Id.
2. It appears that most agencies in the Federal Government that are covered by the Statute are subject to this process; however, we do not rule out the likelihood that there are exceptions. For example, it is not clear to us to what extent individual agencies that operate on nonappropriated funds are subject to the same procedures as agencies that are dependent on appropriated funds. Where agencies are not subject to the particular process that is described here, it will be incumbent on them, in cases where management's right to determine its budget is an issue, to provide a full record describing their budget process in order to enable us to make a judgment concerning the applicability of the budget test to the fiscal context in which they operate. In this case, there is nothing in the record that indicates that the Agency is not subject to the budget and appropriation process described. In the absence of any indication to the contrary, we assume for purposes of this decision that it is.
3. "Line item" is a term that is used in the context of the Federal budget process. It is defined by the General Accounting Office as follows:
In executive budgeting, a particular expenditure, such as program, subprogram, or travel costs and equipment. . . . In appropriations acts, it usually refers to an individual account or part of an account for which a specific amount is available.
United States General Accounting Office, Accounting and Financial Management Division, A Glossary of Terms Used in the Federal Budget Process, Exposure Draft, 54 (Revised Jan. 1993).
4. This is not to suggest that determination of a baseline for purposes of a gainsharing program in all cases necessarily will equate to a baseline for budgetary purposes. In future cases, the parties are responsible for providing a record that is sufficient to establish the relationship between such aspects of a gainsharing program and the budget itself.
5. In finding that this proposal is negotiable, we make no judgment as to its merits.