Why Are Contract Negotiations Taking So Long? and, Other Questions You Wanted to Ask

Teacher: Why are the negotiations taking so long?

Me: Because the guy on the other side of the table, Bob Linn, the Director of Labor Relations for NYC is vigorously opposing the demands of the union, that’s his job.

Teacher: Other unions received 4% increases in 2008 – why don’t teachers receive the same increases?

Me: The City is undoubtedly arguing that the Union chose not to accept offers from the City which were well below 4% and should not benefit retroactively – that being said the PERB principles of “ability to pay” and “pattern bargaining” will eventually play the major role in determining salary – both retroactively and going forward.

Teacher: If the City and Union agree to a rate that teachers should have received on November 1, 2009 would we receive that rate each year up until the new contract is negotiated?

Me: Probably not. As the 2008 fiscal crisis deepened the City offers in negotiations with unions decreased sharply as well as asking for give backs, analyzing the fiscal situation of the City, the mayor’s budget in 2011 and 2012 contained substantial teachers layoffs which the City Council restored. Where did the money come from to avert the layoffs? The City will argue the funds used to avoid layoffs should be “credited” against potential salary increases, the Union will vigorously disagree.

Teacher: Once the parties agree on the total amount of retroactive pay will all teachers receive the same rate?

Me: This is another matter for negotiations – should teachers who have resigned receive retroactive pay? Should the retroactive pay be pensionable for teachers who have already retired?

Teacher: Will receive the retroactive pay be paid in a lump sum?

Me: Highly unlikely – we’re talking about billions of dollars, the City and the Union will probably agree on a number of payments over several budget cycles.

Teacher: The Mayor has mentioned that contracts must include cost savings – what does he mean?

Me: Each year the Comptroller determines how much the city has to pay to fund the pension system: New York City has a defined benefit pension system – a pension is the result of years of service and the salary at retirement and actuarial calculations determine the required city payments. The calculations are significantly impacted by the fluctuations in the stock market.

… the taxpayer-financed pension contribution rate payable in the fall of 2015 will rise to 17.53 percent of teacher payrolls, or 1.28 percent above the contribution payable this coming September.

In the early 80’s the city contribution rate was 20% of teacher payrolls; by the late 90’s the rate decreased to less than 1% and over the last 12 years contribution rate has sharply increased.

In New York City, over the past 12 years our pension costs have gone from $1.5 billion to $8.2 billion. That’s almost a 500 percent increase — when inflation totaled only 35 percent.

Tier 6 will be a less costly pension plan, although it will take decades for the impact to be reflected in the city contribution rate. If the stock market jumps the city contribution rate will decline over time, and, visa versa.

The negotiations do not impact pensions – pensions are legislative – however, with the default in Detroit and the federal courts deciding that federal bankruptcy laws trump state constitutions, unions are concerned with the viability of pension plans.

Teacher: Does the teacher union negotiate health plans?

Me: No, the Municipal Labor Committee (MLC) negotiates health plans for all city employees; however, UFT President Mulgrew and Bob Linn, the City labor guy will play major roles – the current contract negotiations will not specifically impact health plans, the MLC and the City will be negotiating health plans later.

Health plan costs have been sky rocketing over the last decade,

… health insurance costs [over the four years] are projected to grow about 40 percent, outpacing the next highest expenditure, debt service, at 30 percent. Health insurance will rise to nearly $7 billion in 2016, when it will equal 80 percent of the city’s projected budget deficit.

The Citizens’ Budget Commission argues

… that the current health plan costs for both active and retired employees are not sustainable,

The city’s policies are most generous with respect to retirees. It’s extremely rare for public employers to pay the full cost of the premium for family coverage for retirees under age 65. For those over age 65, no other government surveyed reimbursed all retirees and their spouses for the premium cost of Medicare Part B; most offer no reimbursement at all.

There’s no getting around the reality that the taxpayers’ obligations for health insurance for city employees and retirees will have to be controlled through premium-sharing. The CBC estimates that annual savings of $1.7 billion can be achieved by requiring contributions of up to 25 percent from employees and 50 percent from retirees, and eliminating the Medicare Part B reimbursement.

Teachers: So, the contract could give us a raise and the increased health plan costs can erode some of the increase?

Me: It’s possible.

Teacher: Would we lose some health plan coverage?

Me: In the past the health plan co-pays were increased and the benefits, the coverage, was not reduced; however, the plans could offer a wider range of choices at different price points.

Teacher: Will the just announced MTA-TWU labor agreement, 8% over 5 years impact the teacher negotiations?

Me: The Mayor announced the agreement will not impact the current negotiations.

Teacher: Do you have any idea of the rate going forward?

Me: No, since all the unions in the City are without contracts the “pattern bargaining” principle is difficult – the Union will argue the higher rates in the suburbs attract NYC teachers and the City will point to small increases in the suburbs in the last few years.

Teacher: What happens if negotiations stall?

Me: The fact-finders will issue their report – while the report is non-binding in the past they were the basis for settlements.

Teacher: Who gets to vote on the contract?

Me: Active teachers vote – not retirees – in the past the votes have taken place in school and each bargaining unit voted separately, for example, teachers vote for the teacher contract, secretaries for the secretary contract, etc.

Teacher: Will we have the contract before we vote?

Me: You will have the Memorandum of Agreement (MOA), the legal document signed by the parties.

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4 responses to “Why Are Contract Negotiations Taking So Long? and, Other Questions You Wanted to Ask

  1. Peter — here’s a question I just posed on Chalkbeat. Would be interested in your response:

    “I wonder if there’s any incentive to make a deal before the arbitration decision is issued. I would think the union would take an agreement with BDB over the recommendations of a panel that’s splitting the difference between the parties’ positions as of last year. And I would think that BDB would prefer to reach an agreement that can’t be unfavorably compared to the panel’s recommendations.”

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  2. In any arbitration-fact-finding it is always preferable for the parties to resolve the issue themselves, frequently the arbitrators also function as mediators; however, in spite of the best of intentions sometimes there are unresolveable issues that the parties leave to the arbitrator. Until both parties sign the MOA the process is not over – 95% can be agreed to – that last 5% can become an unresolveable stumbling block.

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  3. Madame deFarge

    Please check facts, retirees under age 65 do pay a premium for their health plan. The cost for the high option rider and basic coverage is about $235. a month for a couple. There is the additional cost of SHIP, so add $20. a month. The prescription coverage for retirees is lousy, plain and simple.

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  4. Retirees under 65 receive the same basic coverage as active members,high option riders are voluntary … SHIP is a union program … the bottom line is the cost of health plans for the city are increasing at unsustainable rates … the choices are reducing benefits, increasing members costs or the city picking up the additional costs … someone has to pay for the increasing cost of health plans.

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