In a victory for Buffalo’s police, firefighters, teachers and school administrators unions, an appellate court Friday unanimously upheld a ruling ordering the city and its school system to give employees the salary steps they lost during a three-year wage freeze.

While the employee unions cheered, the decision would force the city and its schools to shell out more than $130 million, hitting the school system particularly hard.

“We don’t know the full ramifications of the ruling just yet and will review it with our attorneys to determine what the city will do,” said Peter K. Cutler, spokesman for Mayor Byron W. Brown.

But A. Vincent Buzard, the attorney for the city’s control board, said he will appeal Friday’s decision by the Appellate Division of State Supreme Court in Rochester to the State Court of Appeals.

“This is just one step along the way,” Buzard said. “It’s always been my opinion this case would be decided in the Court of Appeals, the highest court. We still intend to go to the court, and we expect them to take it.

“This is such an important issue,” Buzard said Friday night. “It involves a lot of money for the school district and the city.”

After Buffalo’s 38-month wage freeze was lifted in July 2007, the city and control board argued employees were entitled to move up only one step on the salary ladder, even if the wage freeze had caused them to miss several negotiated pay increases based on years of service.

In November 2007, State Supreme Court Justice John A. Michalek ruled that thousands of city and school employees must be placed on the salary steps they would have attained had the control board not imposed a wage freeze.

Friday, the appellate court concurred.

“The city’s obligation to make payment of the type of wage increases in question was suspended until the wage freeze was terminated,” the appellate court ruled.

“The city cannot ignore the fact that the employees have continued to accrue service credit and have climbed the ladder of salary and career increments set forth in the collective bargaining agreements,” the ruling stated.

Those covered by the ruling would be entitled to retroactive pay from July 1, 2007, when the freeze was lifted.

The ruling, if it stands, could cost the city an extra $40 million over four years.

W. James Schwan, chief attorney for the Buffalo Police Benevolent Association, called the decision “great.”

The decision, he said, would mean a 10.2 percent wage increase for police, who only would recoup the pay agreed upon in their contract.

Philip Rumore, president of the Buffalo Teachers Federation, called on the school system, city and control board to end their “fruitless” court challenges.

“We understand that we are not entitled to the thousands of dollars in back pay we lost during the wage freeze,” Rumore said, “However, to continue to have employees lose thousands in wages after we have already lost thousands is wrong.”

The decision would cost the Board of Education about $90 million over four years.

In anticipation of the ruling, the school system has set aside $37 million in reserves to absorb the retroactive employee wages for last school year and the school year about to end, said Gary M. Crosby, chief financial and operations officer for the Buffalo schools.

The school system also budgeted $18.5 million for those costs in the coming school year.

But, Crosby said, the decision would increase an already substantial deficit for the 2010-11 school year.

In a presentation last month, deficits were projected to reach $33.6 million in 2010-11, $46.4 million in 2011-12 and $56.5 million in 2012-13.

“The projected deficits, if realized, would mean substantial layoffs,” Crosby said. “It’s unfortunate the economic impact of this court ruling will no doubt impact both the budget and classroom in the years to come.”