By: Benjamin Lynch and Natasha Reese

Background

New York City teachers have been working under an expired contract since 2009. Although teachers have yet not threatened to strike, it is always an option. In New York City where less than two-thirds of students graduate on time and only 20 percent of students of color are at grade level by 3rd grade, fewer days in the classroom would not help improve educational outcomes – a top priority in Mayor Bill de Blasio’s administration. Furthermore, the teacher’s union is the largest in the City, creating the opportunity to establish a precedent – good or bad – for other municipal labor negotiations.

As contract negotiations heat up again, Mayor Bill de Blasio hopes to successfully resolve negotiations – unlike former Mayor Michael Bloomberg. Discussions between the Mayor’s Office are being held with Michael Mulgrew, president of the United Federation of Teachers (UFT), which represents roughly 116,000 educators, and Robert Linn, the City’s Labor Commissioner. Issues being discussed include salaries, school day schedules, performance evaluations, teacher pools, and working conditions.

According to Mulgrew, however, the “very large issue” is back pay. Ever since contract negotiations stalled five years ago, teacher salaries have been frozen. UFT insists that teachers should be paid the 4 percent in annual raises they missed from 2009-2011. For Mulgrew, such a demand is completely justified as nearly every other municipal union received pay increases in 2009 and 2010, before their own contracts expired. The union is looking to de Blasio’s negotiations with the Law Enforcement Employees Benevolent Association, which ended with a retroactive 5 percent raise for 2005 and 4 percent for fiscal year 2006-7.

If agreed upon, retroactive teacher pay is estimated to cost the city $3.4 billion. Potential salary increases would further add to the tab. City Hall stresses that such an agreement is financially infeasible especially as the city’s Independent Budget Office (IBO) is already projecting a budget deficit for NYC as early as fiscal year 2016. Mulgrew disputes this claim, countering that “there’s more money than the city is saying.” While the Mayor’s Office does not project a surplus over the next two years, the IBO and Controller’s Office project a surplus in 2014 and 2015 – before the 2016 deficit.

Of particular concern for City Hall is the precedent the UFT negotiations may set. One hundred and fifty one other municipal unions are set to begin contract negotiations in the next few months. IBO estimates these unions could demand on the (unlikely) low end of $500 million to a high end of $8 billion in back pay. If all negotiations end with back pay agreements it could cost City Hall billions of dollars. In turn, UFT faces pressure from other municipal unions to not to set a pattern of “modest pay increases.”

Further complicating matters, unlike Bloomberg, who was often at odds with municipal unions, de Blasio was elected with substantial labor support. As the progressive candidate de Blasio has a vested interest in maintaining good relations with this special interest group.

Additionally, de Blasio has made it his “personal crusade” to help the city attract and retain good teachers. A major challenge NYC faces is that good city-trained teachers are leaving to teach in the suburbs, creating a level of instability in NYC’s teaching force. From 2002-2012, an estimated 4,600 teachers left NYC to teach in the surrounding suburbs, whose school districts pay more. This is particularly concerning for Mulgrew who insists that “the best school systems in the US have high teacher retention rates.”

While City Hall believes the city cannot afford to back pay its teachers, Mulgrew argues that they “cannot afford not to” pay teachers better. There is also a history between de Blasio and Mulgrew, as the UFT endorsed de Blasio’s mayoral competitor early in 2013 race. Some commentators, however, note that Unions seem to be discounting the future. By focusing heavily on back pay, UFT may get small raises now at the expense of future pay increases.

Despite securing expansive pre-K and after school funding from the state, de Blasio’s anti-charter school position puts him at odds with influential education reformers. With a decreasing approval rating, de Blasio cannot afford to further antagonize this group.

Reasons for Previous Negotiation Impasses

The last round of negotiations failed for a variety of reasons. For UFT, there is a sense that with every negotiation they end up with making too many concessions. For example, the failed 2009 agreement was considered mediocre. by union members as it did not win back “anything [UFT] had lost in the last awful contract.”

UFT-City Hall negotiations are characterized by a certain degree of information asymmetry. Only City Hall knows what it can honestly afford to pay teachers, and UFT alone knows whether or not striking is truly an option. This asymmetry leads to a certain level of self-serving bias, or the tendency of each group to conflate what is fair with what benefits themselves. As demonstrated by Lowenstein, Thomas, and Bazerman, negotiators are strongly averse to settling even slightly below the point they view is fair.

Offer on the Table

One way to address back pay issues is to have a long contract, allowing the city to spread the $3.4 billion in costs out over several years. UFT is seeking a 6-year contract, guaranteeing teachers a certain level of professional security. City Hall wants a 9-year, which would be the longest-ever contract between the city and teacher unions. de Blasio chose 9 years as it ensures that the contract would not expire before election day in 2018. For de Blasio, a 9-year contract gives budget predictability and years of labor peace. Mulgrew is hesitant, however, as a it would deprive UFT any leverage when it comes to endorsing a candidate in the next mayoral election. Contract length and back pay issues have led to an impasse in previous negotiations.

A way forward: A workable proposal for NYC and UFT

Based on our analysis, the union’s want to maximize future influence and represent their membership by negotiating the best benefits package. The Mayor’s office is focused on maintaining financial solvency and continued school operations without the possibility of a strike. Since there are so many issues currently being collectively bargained, we feel that the following proposal may meet the needs of both parties:

Phase out pay to Absent Teacher Reserve (ATR) program over 2 years, saving over $144 million in salary and benefits

○ ⅔ salary would be funded in Year 1

○ ⅓ salary would be funded in Year 2 to ATR teachers still unemployed

○ After two years, remaining teachers are bumped off the list if they are still unemployed (precedent Chicago and Washington, DC),

Use 10 percent in savings (roughly $115 million over 9 years) for an emergency teacher fund,

Use remaining savings to pay back pay based on following schedule:

○ 2009 – 3.25 percent (paid out over year 1, 2, and 3 of contract)

○ 2010 – 3 percent (paid out over year 4, 5, and 6 of contract)

○ 2011 – 3 percent (paid out over year 7, 8, and 9 of contract)

○ Total nominal increase in pay (approximately $6,933)

9- year contract with a rollover extension so if a new deal is not reached, the City and union honor the existing contract

Union agrees to suspend pay increases under the Triborough Agreement after this collective bargaining agreement expires; pay increase would then only come from if contracts are renegotiated

Maintain 4 percent annual salary increase from previous collective bargaining agreement

One-time increase base salary by $1,500 (a $112.5 million cost, paid by remaining ATR funds)

Employee contributions to health insurance premiums indexed to rate of State of New York employees to offset salary increases

Table 2. Proposal Scorecard.

Mayor’s Office gets: Union gets: – Contract length does not interrupt political cycle- Shared health care premium costs- Contract longer than 6 years- Elimination of the ATR- No automatic pay increases through Triborough Agreement if the next contract is not agreed upon – Retroactive pay increase of 3-3.25 percent for 2009-2011- Maintain 4 percent annual salary increase- Maintain health care coverage- Creation of an emergency teacher fund

Both Sides Win

First of all, the union receives back pay for years 2009-2011 at between 3-3.25 percent, addressing their top concern. While the union agrees to abolish the Absent Teacher Reserve, the union does score a two year protection of some salary for those non-classroom teachers. Other union teachers gain by redistributing those funds in the form of salary increases. The union also maintains health care coverage, but must begin contributing toward their health care insurance premium.

Meanwhile, the City will find this agreement appealing because they can get a larger return on investment for each dollar they spend on classroom teachers. Furthermore, de Blasio can substantially reduce healthcare costs. City employee contributions to health care insurance premiums should be indexed at New York state employee contribution levels, which have seen a reduction in overall health care costs. Mayor de Blasio can also keep his campaign promise of restoring prestige to teachers through an increase in salary. Finally, by doing away with Triborough Amendment pay increases, that occur when collective bargaining agreements expire, the Mayor’s Office is assured that unions have a greater incentive to come to the table and avoid working without a contract in the future.

Overcoming Biases

This agreement helps both sides overcome certain biases. First, the “our loss is their gain” bias is overcome as the City increases teacher pay and pays retroactively salary increases while the union agrees to contribute to reducing the City’s health care costs. By ensuring the City’s health care costs do not spiral out of control, the union shows that they also gain in the City’s financial fortune. The City, on the other hand, increases teacher salary, hopefully decreasing teacher attrition and increasing educator happiness – two factors that could help the City make educational gains. The City can also gain through increased payroll, income, and sales tax revenue.

Both sides show a willingness to overcome “status quo” bias, as they look for ways to move beyond the expired collective bargaining agreement. Simply because an Absent Teacher Reserve exists does not mean that it should continue, much like maintaining teacher salaries should not perpetuate if there is a need for higher compensation. If union and Mayor’s Office agreed to this proposal, it would signal that both sides are unwilling to continue unworkable programs just because it is familiar.

Remaining issues

Mayor de Blasio and the union will also discuss teacher evaluations, but neither may be a strong advocate to tie them to student performance. In DC, when former Chancellor Michelle Rhee negotiated with the DC teacher’s unions, she offered increased teacher base salary (through public and private sources) in exchange for 50 percent of an evaluation on student performance results in teacher evaluations and to provide a performance-based pay option. In NYC, private funding has not been presented as an option. Our proposal calls for increased base salary to be traded for lower healthcare costs, eliminating a potential tradeoff for changes to current teacher evaluation policies. Although he has made few related public comments, Mayor de Blasio’s opposition to popular education reform policies suggest that his administration will not prioritize student performance teacher evaluations and performance based pay.