Illinois ’ Climate Is Changing: How to Negotiate Successfully

1. Illinois’ Climate Is Changing: How to Negotiate Successfully Moderator: Sheila Peckler, Business Manager, Gurnee SD 56 Barney R. Mundorf, Attorney, Guin, Martin & Mundorf, LLC Kevin B. Gordon, Partner, Himes, & Petrarca, CHTD Susan L. Birkenmaier, Director of Operations, LaGrange Highlands SD 106 Barry A. Bolek, Asst. Supt./Finance, THSD #113

2. Goal of this presentation • Give ideas on future negotiation's strategies • There is not a single solution • Share two districts strategies that may provide ideas or potential strategies for your district • Create your own vision and long range plan • Don’t get discouraged with a baby step • Make a plan now and pace yourself • Look with a vision of the future with changes

3. The Changes of Negotiations with a Stagflation economy Reduced revenue sources State and Federal Funding Reduced tax levies due to PTAB appeals Increased expenditures beyond CPI Goal is to have Expenditures NOT exceed Revenues

4. Previous variables used in negotiations • Contract language Employees and Employers want to add sometimes cost money • Comparable of districts must be accurate • Adjusting to retirement(TRS) and system changes • CPI used for base and steps ignored • Extra-curricular stipends and others were minimal • Medical, Dental, Life were minimal costs

5. New Variables since 2004 • CPI lower than before • Multiple changes in TRS and rules with Tier II • Pension publicity and increases prior to retirement • Insurance costs for retirees increased substantially • TRS Penalties added for 6% cap • Al Gore’s Internet makes information easier to obtain • FOIA’s became part of the job description for business managers • GASB opens more accounting requirements • PTABs and falling EAV in taxing formula

6. Can one use Logic and Reasoning with all of the changes? • Expenditures should not exceed Revenues • If additional funding becomes available, the focus should be on one time expenditures and not reoccurring costs (capital not personnel) • Static costs/benefits need to be used • Fund balance is usually used by negotiating teams. Salary and employees are NOT A ONE TIME expenditure

7. Issues of Interest • Re-examination of salary schedule structure (Board) • Increasing “non-economic” benefits / conditions (Union) • Promoting salary lane changes (Union) • Increasing employee participation in health insurance costs/risks (Board)

8. Issues of Interest • Re-examination of longevity and retirement incentives (Board) • Preservation of longevity and retirement incentives (Union) • Increasing instructional time (Board) • Focus on job descriptions (Union)

9. Demise of Seniority • Vacancy / transfer language (Board) • Job descriptions (Union) • Preservation of salary schedules (Union)

10. Negotiating Salary:Strategies to Consider • Provide financial information – early and often • Complete negotiations, then address administrator and non-union salary • Projections and model building

11. Negotiating Salary:Strategies to Consider Scattergram Issues: • Negotiating Salary v. Payroll Budget • Union targets savings from retired teachers – how do you respond? What can you afford? – know the end point

12. Negotiating Salary:Strategies to Consider • Percentage of what (base, cell, total payroll) • Referendums and contingent funding • Salary Re-Opener

13. How can you slow down the cost of steps? • Freeze the step movement • Change the schedule • Totally new or elimination • Add half steps (grandfather or not of current teachers) • Change the lane increase or number of lanes • Different requirements for a lane change • Get rid of the schedule • Merit pay (how is it awarded) • Zone raises with groups of years of experience getting different raises

14. THSD #113 Deerfield and Highland Park High Schools • THSD 113 had a 20 step schedule that had a top salary of $ 130,000 • We had 60 teachers in the “pipeline” to retire over the next 5 years • PMA developed a “toggle” schedule that could show savings with a second schedule of half steps for new hires • Half steps for NEW hires showed significant savings with retirees and then staff that leaves each year

15. Schedule modification with steps has variables • With the change of Tier II versus Tier I • Tier I has an employee maxing at 33 years of service with 2 years Sick • Tier II have an employee maxing at age 67 • 2.2 is still the multiplier • Keeping a 20 step schedule has the person on top for 25 years • Is there a “first penalty free year” that makes sense with Tier II? • There is a max salary of $106,800, and a cost-of-living annuity adjustment of the lesser of 3 percent or ½ of the annual increase in the CPI, not compounded.

16. Steps 0-4 Same for hiring purposesHalf Steps only for those hired AFTER 7/1/2011Now 37 Years to get to TOP Salary

17. LaGrange Highlands 106Eliminated step and lane salary schedule Rationale: Board desire to put money behind professional growth. Lack of confidence that longevity proportionately improved instruction. Provides immediate benefit upon completion of coursework. Salary schedule is established to set entry level rate only to ensure competitive pay rates; thereafter each salary is unique to the teacher.

18. LaGrange Highlands 106Eliminated step and lane salary schedule How it works: • Upon hiring the teacher is placed on the entry salary schedule reflecting level of education and years of experience. • Each time a teachers completes a grad level course, salary credit is given. • If completion is mid-year a lump sum pro-rated payment is made until full credit is given the next year. • Each summer grad credit value is calculated and added to the annual base salary. • The adjusted base salary is then increased by the negotiated pay increase.

19. LaGrange Highlands 106Eliminated step and lane salary schedule

20. LaGrange Highlands 106Eliminated step and lane salary schedule Some safeguards for consideration: • Classes must be pre-approved. • Salary is frozen at certain benchmarks if less than 10 grad credit hours are completed within designated time periods. • Tuition reimbursement is not offered. • Hours awarded are limited.

21. What other variables have changed in recent negotiations with D 113? • Tied retirement incentives to Years in the District and not TRS credit • To be eligible for incentives, one MUST retire at the “First Non-Penalty” year • Percentage of Family medical percentage was increased for employees (81% to 76%) • Will there be a “Cadillac Plan” for health insurance

22. Why do districts offer retirement incentives and how do you explain it to your board? • Veteran teacher pay is higher than a rookie • ERO penalty can be avoided if contract is tied to first Non-Penalty year • ROI (return on investment) should be tied between penalty and incentive with savings on salary • District ERO Penalty is 23.5 X # service years below 35 or age below 60 whichever is MORE • Teacher ERO Penalty is 11.5% x # service years below 35 or below age 60 whichever is LESS • Penalties for adding sick days and pay over 6%

23. Health Care costs and variables • The employee cost versus employer cost share can change • Static costs/reimbursements can be a solution • Formulas for increase cost share can be tied to CPI or increases • Changing providers, co-pays, deductibles

24. Potential issues of the future • Can you stay competitive in the market place with the salary and benefit packages that you offer? • Will the market place/education field change with the changing economy? • Will the pension complaints of the public go away ? • Will the state start increasing their funding and find new funding mechanisms? • Will legislation change how the Tax Levy works? • Will local taxing bodies take TRS payments over? • Will law changes in TRS/IMRF change causing more penalties for employers and employees?

25. Performance Evaluation Reform Act and how can/does that fit into negotiations? • The one main issue on the supervision side of the world that is missing is the impact of PERA (Performance Evaluation Reform Act) and the inclusion of student growth as an evaluative tool. Some are discussing moving toward merit pay and making those issues work in concert with one another. • PERA riffing rules make it a bit more unlikely for tenured people to shift districts—they no longer will merely look at pay scales; they will be more concerned with what “group” they are in as it relates to the riffing sequence.

26. So how do we adjust the negotiation strategy? • Work closer with business managers to get valid comparable data • Focus on keeping year to year budgets tied to CPI/Levy increases • Adjust retirement to be a win-win with employees and employers • ERO penalties should be more than incentives cost • First “Non-Penalty” year is a required retirement date

27. Reminders from Lawyers • Make your parameters with your lawyers ahead of time to avoid legal issues • Guard yourself with language for future TRS and other law changes • Agreements are a two way street, be fair to both sides of the table • One can make incremental changes in a multiyear agreement

28. Share your ideas on P2P • Peer to Peer with IASBO is an excellent way to share ideas and successes with one another • We are all looking for new ideas and ways to keep fair and equitable agreements while being fiscally responsible to taxpayers • Thanks for sharing YOUR ideas