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Saturday, March 5, 2011; 6:35 PM

MONTGOMERY COUNTY has dug itself a budgetary hole so deep that it will take major structural and systemic reforms for it to climb out. Even after severe spending cuts for the past several years, the county still has to slash $300 million this year to balance its $4.3 billion budget. The obvious place to start a major rethink is in the county’s relationship with its public-employee unions.

More than three-quarters of Montgomery’s spending goes to employee wages and benefits, including more than 80 percent of all spending by the school system. Compensation for most employees rose much faster in the past decade in Montgomery than in other localities in this region. Those increases were nice for hardworking government employees but also unsustainable.

Still, local elected officials, who owed their jobs largely to the political support and donations from unions representing public employees, continued to treat workers to sharp raises and Cadillac retirement and health plans until the recession hit and the bottom fell out.

Now a County Council once incapable of saying no is grappling with new realities. One is that the council must end the collective bargaining practices that granted county employees annual pay increases of 8 percent and benefits unmatched in the private sector.

Since 1983, the county and one of its main unions (representing police, firefighters and general employees) have turned to arbitration 20 times after negotiations ended in an impasse – including three in the past few weeks. Arbitrators have sided with unions all but four times, suggesting they, and the process itself, are tilted heavily against the county and taxpayers.

For years the council rubber-stamped arbitrators’ rulings, even though it was not bound by them (unlike the county executive, who is). But recently the council has begun ignoring the pro-union rulings, which would cost the county millions of dollars, and no wonder: When arbitrators grant unaffordable victories to unions, why should elected officials comply?

A commission appointed by the council last year has made some possibly useful recommendations to reengineer the way the system works by making collective bargaining more evenhanded and transparent. The commission would require that both sides publish their opening proposals and that the arbitrator hold a public hearing on the evidence before ruling in favor of either side’s last best offer. The idea is that public input would make the council less likely to rubber-stamp irresponsible contracts.

The commission also recommended that impasses be adjudicated by a panel of three arbitrators modeled after systems in New York and Pennsylvania. One member would be named by each side, and the decisive third drawn from a list approved by the council, adding accountability.

There’s no guarantee these proposals would fix a broken system, but they’re worth trying. It makes no sense to stick with a process that has contributed so heavily to bloated budgets.