Teachers and other City of Buffalo employees are not due the salary step increases they lost during a 38-month wage freeze that the state control board imposed, the state's highest court ruled Tuesday in a decision expected to have wide-ranging implications, especially for the school system.
Mayor Byron W. Brown hailed the long-awaited court ruling as a "big win" for city taxpayers.
School Superintendent James A. Williams called it a victory that takes children's well-being into account.
But Buffalo Teachers Federation President Philip Rumore said the decision "borders on being immoral" and vowed to launch a new challenge in federal court.
Had the Court of Appeals ruled in favor of the employees, the school system would have faced $111 million in additional costs by 2013 and $148 million by 2015. The city would have faced at least $10 million in additional expenses.
The school system had set aside $74 million in the event it lost the court case and had to pay thousands of teachers and administrators for salary steps that were suspended when a wage freeze took effect in 2004.
Williams refused to comment on whether Tuesday's victory leaves the Buffalo schools -- with its bulging reserves -- among the most fiscally healthy large school systems in the state.
"I can't speak for other school districts, because I don't know their budgets," Williams said. "But what it will do, it's giving us a little leverage to have a serious conversation about improving the quality of education in the school district."
Still, Williams repeatedly warned that the school system faces troubling fiscal challenges that range from escalating health insurance and pension costs to increased payments to charter schools. It is trying to close a $43 million projected deficit, officials stressed.
"I don't want you leaving here thinking that because of the $74 million that everything is dandy," Williams said, warning that structural problems could wipe out reserves within a year and a half.
R. Nils Olsen Jr., chairman of the Buffalo Fiscal Stability Authority, said he views the decision as one of the most important court rulings to be handed down since the control board was created in 2003, triggering numerous legal battles.
"This is a very important day for the taxpayers of Buffalo," Olsen said. "This ruling will save taxpayers over $100 million."
But the president of the teachers union expressed grave disappointment over the ruling.
"It borders on being immoral," Rumore said. "We're stunned."
He said the typical teacher who spends 20 years in the system would lose more than $100,000 over the course of a career.
Rumore said the union intends to pursue a challenge in federal court using a "contract impairment" argument. It lost a legal fight in federal court five years ago when it failed to overturn the wage freeze.
The private attorney who represented the city in this court battle said he is confident the Court of Appeals ruling will prevail.
"This is a decision by the highest court in the State of New York. This matter is over," said Matthew C. VanVessem, an attorney with the law firm of Goldberg Segalla.
Williams said he hopes the ruling will spur "two-way conversation" between school administrators and all nine unions in the school system, including the teachers union. Most of the unions have not had new contracts in seven years.
Does the superintendent believe Tuesday's developments could jump-start negotiations?
"Oh, yes," Williams replied. "If you had $74 million, don't you think it could jump-start [talks]?"
While the school system faced the biggest fiscal impact in this legal duel, the city also would have faced $10 million in additional personnel costs, said Budget Director Donna Estrich.
"This ruling by the highest court in the State of New York is a big win for the taxpayers of the City of Buffalo," Brown said. "It says that in lifting the wage freeze, the city followed the control board law."
The high-profile court case has been dragging on for years. In 2007, State Supreme Court Justice John A. Michalek ruled that thousands of school and city employees must be placed on the salary steps they would have reached had the control board not imposed a wage freeze. A state appellate court upheld Michalek's ruling in 2009.
But in a unanimous decision, the Court of Appeals unanimously overturned the rulings of the lower courts. In a seven-page decision, the court determined that the state law creating the control board stated that "no retroactive pay adjustments of any kind shall accrue or be deemed to accrue during the period of wage freeze." The court said this definition must be treated "broadly."
"Thus, the Legislature's use of the term 'accrue ' provides further evidence of its intent that step increases and increments were suspended and did not accrue during the wage freeze," the court stated.
Olsen contended that if employees had been placed on the salary steps they lost, it would have just "deferred the poison pill" that would have triggered fiscal instability.
A. Vincent Buzard, a private attorney in Rochester who has been handling the court case on behalf of the control board, said that if the court had ruled in favor of the unions representing school and city employees, it would have had a "huge" fiscal impact.
"If we had lost, there would have been massive closings of schools and massive layoffs of teachers," Buzard said.
"That's almost a baldfaced lie," Rumore shot back. "The district has set aside $75 million in anticipation of not being successful."
Meanwhile, 90 seasonal city workers were more successful Tuesday as a state appellate court upheld their right to three years of back pay.
In a unanimous ruling, the five-judge Appellate Division of State Supreme Court upheld Justice Timothy J. Drury's Oct. 16, 2009, ruling that the Buffalo Fiscal Stability Authority erred in freezing the wages of the seasonal workers during the city wage freeze it imposed from April 2004 to June 2007.
The appellate court, which heard the case a month ago, agreed with attorneys John M. Lichtenthal and Robert L. Boreanaz that Drury correctly ruled the wage freeze did not negate the city government's Living Wage Law, which set minimum hourly salaries for the city's lowest-paid employees.
Allison Duwe, executive director of the Coalition for Economic Justice social welfare group, which has been working with the seasonal workers seeking pay equality, said they have been "frustrated by the slow pace" of the court action but remain "eager to work out a financial settlement with the city."
An exact figure on a back-pay settlement to the workers, many of whom have worked for the city for most of the past decade, could not be obtained Tuesday.
News Staff Reporter Matt Gryta contributed to this report.