The Sacramento Police Officers Association (SPOA) obtained an Interest Arbitration Award from Arbitrator John LaRocco effective August 8, 2025, adopting SPOA's last best offer on a 5% salary adjustment for all members retroactive to January 25, 2025. The Award runs through April 17, 2026, and also provides all unit members additional longevity at 10 years and 17 years of service, and well as an additional 4% increase for Dispatcher IIIs.
Binding under the Sacramento City Charter, this Award provides SPOA members substantial and immediate increases, while also allowing the parties to promptly return to negations to bargain over a long-term agreement. The City had initially refused to bargain, forcing the SPOA to file an unfair labor practice in December of 2024 and ultimately resulting in members working for over six (6) months without a contract. Unable to reach a long-term agreement, the SPOA and the City agreed to an expedited arbitration process of over a limited number of proposals. The issuance of this Award and its immediate financial relief illustrates the value of interest arbitration in resolving difficult negotiations.
The Interest Arbitration Process: Binding Impasse Resolution Under the City Charter
The Sacramento City Charter, Article XVIII, Section 503, mandates interest arbitration to break deadlocks in negotiations over wages, hours, benefits, and terms of employment. Unlike the advisory fact-finding under the Meyers-Milias-Brown Act (MMBA), which often leaves disputes unresolved due to its advisory nature, impasse arbitration provides for a neutral arbitrator to select from the last best offer of each party that best matches traditional factors: consumer price changes, comparable compensation in similar classifications (based on the local market and similarly sized cities throughout the state), the City's financial condition and ability to pay, staffing/recruitment/retention data, and other relevant information.
Here, the parties stipulated to an expedited mediation-arbitration (med-arb) process before a single arbitrator, limiting the issues to salary, pay differentials for Dispatcher III, longevity pay, and term. This strategic move narrowed the scope of proposals and relaxed the arbitration procedures to allow for a swift award while preserving the ability to quickly return to formal negotiations to address additional proposals and seek a longer-term contract.
The Award
Arbitrator LaRocco selected a blend of proposals, favoring SPOA on core economic issues:
Salary Adjustments: Adopted SPOA's proposal for a 5% increase across all classifications, effective retroactively to January 25, 2025 (the expiration of the prior contract). The Award rejected the City's 2.5% offer without retroactivity, based on the parties' history of retroactive increases and SPOA's evidence showing City police salaries lagging below market comparators. Even the City's compensation survey (which used a controversial ERI cost-of-living adjustment for comparator cities) showed officers fell below market means and medians, as well as below Sacramento County deputies for the first time.
Dispatcher III Differential: Adopted SPOA's proposal to raise the salary benchmark from 17% to 21% above Dispatcher II top step, effective upon Award implementation. This proposal brings Dispatcher IIIs up to the sergeant-officer differentials and addresses chronic staffing problems within the dispatcher classifications.
Longevity Pay: Established new 1.5% incentive at 10 years of service and increasing the existing 3% at 17 years to 4.5%, effective July 1, 2025. Although the Award selected the City's Longevity proposal due primarily to the overall cost of the increases provided by the Award over a short amount of time, the arbitrator noted importance of increasing retention incentives for mid-career officers. The arbitrator suggested that future contracts should both increase longevity pays and provide them sooner.
Demonstrating the importance of interest arbitration, the City's submitted its first formal proposal to increase longevity in arbitration when faced with the prospect of the arbitrator adopting the SPOA proposal for a 3% increase at 10 and 17 years of service. Because the arbitrator selects the most reasonable offer, the City had to increase its proposals or risk losing on this issue.
Contract Term: The arbitrator selected the City's proposed term from January 25, 2025, to April 17, 2026, over the SPOA proposed term to January 24, 2026. The arbitrator reasoned that the City's proposal provided more breathing room for comprehensive negotiations on unresolved issues.
The award also incorporates four tentative agreements reached pre-arbitration and retains jurisdiction for implementation disputes.
City's Budget Deficit Claims
The City argued inability to pay, citing a structural deficit projected at $50 million for FY 2025-2026, escalating to $130 million by FY 2028-2029, driven by past policy decisions like expanded services funded by temporary revenues. The arbitrator acknowledged the deficit's ongoing nature but distinguished it from external shocks like recessions. The City admitted that its revenues were growing at a healthy rate, but argued that spending priorities were outpacing the revenue growth.
As detailed in the award, the City's Finance Director testified that "the City is experiencing a severe structural budget deficit of an ongoing nature" originating several years ago, with an initial February 2025 projection of "$62 million for fiscal year 2025-2026" updated to "$50 million" by July. The director acknowledged that "the structural budget deficit was caused by past City and voter decisions," including "long-run expenditure commitments based on one-time or two-time funding," resulting in a "continuing imbalance between revenues and expenditures." While "economic externalities, like inflation, contributed to the deficit," they "did not play a major role in causing the severe structural deficit."
Future projections included "$93.6 million for fiscal year 2026-2027; $110.1 million for fiscal year 2027-2028; and, $130.3 million for fiscal year 2028-2029." The City noted that "about 50% of City expenditures go toward employee salaries" and "every 1% salary increase for City employees costs $4.8 million," alongside unfunded liabilities like PERS contribution increases.
SPOA countered with expert analyses challenging these claims. Beacon Economics forecasted higher tax revenues, concluding "the City remains fiscally healthy because City employment, real estate transactions and business activities continue to thrive," with "property taxes will rise 4% to 8% over the next three fiscal years." Harvey M. Rose Associates reviewed historical data, finding that "for the past four fiscal years, the City projected General Fund deficits of $78.8 million to $160.5 million while the actual deficits were $5.6 million to $21.4 million." Applying this pattern, Rose estimated the FY 2025-2026 deficit at "approximately $34 million" and noted "the City has sufficient reserves to absorb the shortfall." Rose further observed that "the City's General Fund balance rose from $225.4 million to $326.4 million between fiscal year 2019-2020 and fiscal year 2023-2024," concluding "the General Fund is relatively healthy" and criticizing the City's "history of grossly overstating expected budget deficits."
The arbitrator acknowledged the deficits but found they did not preclude funding reasonable increases given the City's healthy reserves and the need for public safety. The arbitrator stated, "the City is experiencing a structural budget deficit and unfortunately, the evidence does not disclose how long the deficit might endure. It cannot be indefinite." However, he found the City's projections "exaggerated" even if SPOA's predictions were "overly optimistic," emphasizing that "if the City's projections are accurate, City inaction could prolong the deficit, which would precipitate fiscal chaos." Critically, he distinguished policy-driven shortfalls from external factors, holding that "a 5% wage increase cannot be nullified by diverse and contradictory evidence concerning the City's ability to pay." Employees "were not responsible for causing the deficit," and public safety "should be a top priority." With tax revenues expected to rise, the City "has the ability to fund a 5% salary increase."
Vacancies and Retention Challenges
The arbitrator noted the significance of the City's police officer vacancies, which were directly relevant to the parties proposals. The arbitrator noted, "the evidence reveals that the City's Police Department is confronted with a retention problem." The data presented revealed stark declines. "In June, 2025, there were 619 budgeted police officer positions, but only 470.5 were filled and only 373 were working. The number of working officers was just 60% of the budget positions." For context, "as of January, 2021, 94% (533.5) of the 569 budget positions were filled and 84% (479) of the positions were working." The arbitrator observed that "the percent of officers working as compared to budget positions had not been at or below 60% since 2015-2017" and that "except for a short upward bump in early 2022, the percentage of budgeted positions filled and working has steadily declined since 2021 indicating that police officer retention is a problem which must be addressed albeit, it cannot be cured in this agreement."
The arbitrator emphasized the importance of early longevity steps and competitive salaries. "Commencing longevity pay at 10 years will begin to alleviate the problem" by establishing "a foundation for possible greater longevity pay in future contracts, especially if the parties collect more data about the reasons for the retention problem and where the departing officers are landing." He suggested flexibility for future adjustments, noting "during their upcoming negotiations, the parties may find that it might be more beneficial to start longevity pay before 10 years of service as opposed to raising longevity pay at 17 years of service."
Future Impacts
This Award strengthens SPOA's position and provides the parties guidance to address the growing problem of officer vacancies by enhancing mid-term longevity as a retention tool. The arbitrator noted growing vacancies of 20% of authorized positions and declining fill rates of working officers from 84% in 2021 to 60% by June of 2025. He noted that starting longevity at 10 years lays the groundwork for expansions, potentially before 10 years if data shows earlier incentives curb attrition more effectively.
This Award also demonstrates the power of interest arbitration to provide binding decisions based on data-driven evidence and prevents endless stalemates. The analysis highlights the importance of comparable data, recruitment and retention data, and ability to pay evidence in any negotiations or impasse proceedings. Further, it provides insights regarding differences in how arbitrators view budget deficits cited as a basis to deny raises depending upon whether the deficit is policy driven , e.g. other spending priorities, or caused by external factors, e.g. recessions.
Mastagni Labor Representative Jose Cuervo was SPOA's lead negotiator during these negotiations and David E. Mastagni represented the SPOA during the Interest Arbitration.
