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Buffalo's police officers received an early Christmas present Wednesday -- a two-year, 7 percent pay raise.

The raise, part of an arbitration award, will cost the city about $6.6 million and create a gap in the current budget, City Hall officials said. The city budgeted for about half that amount.

The budget shortfall could grow to as high as $9.5 million, city officials said, if the same pay raise is awarded to city firefighters. The firefighters' union informed the city this week that it intends to declare an impasse in current negotiations and eventually go to arbitration. Historically, firefighters often receive the same wage increases as police officers.

The city, as part of the arbitration award, won some health-care concessions and the right to avoid overtime pay when assigning officers to specific duties.

The award is viewed by the Masiello administration as one more indication that the binding-arbitration process hurts local governments.

Buffalo has lobbied unsuccessfully for reforms in the state laws governing public employees, contending that they favor unions at the expense of taxpayers.

"We believe there's a better way to do this," said Eva M. Hassett, commissioner of administration and finance. "These awards are big-ticket items."

Union officials don't buy the argument.

"They complain about the process," said Lt. Robert L. Meegan Jr., president of the police union. "Why did they sign the award?"

Meegan also thinks the city has overestimated the financial impact of the award.

The award is retroactive to June 1996 and expires next June, so the city and the police union will be back at the bargaining table in the near future.

The health-care concessions the city did succeed in winning will mean that police officers who choose the highest-priced health insurance plan will pay 15 or 25 percent of the difference between the cost of their plan and the next-cheapest insurance plan.

The percentage depends on whether the officer is covered by single or family coverage.

In either case, the changes fall far short of the health-care concessions agreed to by other city unions.

The city also won the right to assign officers to certain duties without paying overtime. Those duties include special events, education and training seminars and filling in for officers who are sick or on leave.

The city estimates its savings at about $200,000 a year.

"It's a big gain for us in terms of putting the manpower where its needed," said Ms. Hassett.

In contrast, the arbitrator did not order changes in the police department's seniority guidelines.

"To me, that just says (the arbitrator) he didn't want to deal with the problem," Police Commissioner R. Gil Kerlikowske said.

For years the city has complained that the police contracts' seniority provisions often prohibit the best police officers from getting key positions.

At this point, the city is faced with finding the money to finance the pay raise.

Ms. Hassett does not expect the budget shortfall to result in layoffs or drastic service cuts but it may result in some internal belt-tightening by all city departments.,

The city, in its current budget, put aside money for a two-year pay raise totaling 3 percent, less than half of the award. The city was hoping the arbitrator would freeze police salaries for one of the two years.

The arbitrator also awarded police officers an increase in holiday pay and improved vision coverage.

Under the award, the starting, annual salary for a patrol officer will increase from $31,792 to $34,056.

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