Salaries, health care often sticking points in teacher contracts

(Editor’s note: This story was updated at noon Tuesday to correct an incorrect quote.)

Not wanting to drag out negotiations any longer, Altoona Area teachers and school board jointly filed for the state Labor Relations Board to intervene so that a fair contract can be reached.

Tyrone Area, having recently gone through the labor board’s fact-finding process, had its long overdue contract approved on Tuesday with both parties accepting the labor board’s recommendations for wages. Health care was another major issue.

Like Hollidaysburg Area – a third Blair County school district where negotiations ran past the July expiration of the previous contract – the Tyrone board negotiated away health care benefits that teachers have been accustomed to receiving. In Blair County districts and across the state, teachers have agreed to help districts save money by paying more out of pocket for health care.

And as Legislature mulls over proposed solutions to the state’s $120 billion pension liability, retirement funds for future teachers are uncertain.

“A lot of aspects that helped people gravitate toward teaching today are in danger of going away,” Altoona Area teacher Jim Krug said. “It will only hurt students and the community and Pennsylvania as a leader on the whole.”

Krug graduated summa cum laude from Juniata College in 2002 and was headed to be a public servant, which meant a lower salary than his friends in the private sector were making.

“My friends were making a lot more money than I, but I could make a difference,” he said of his choice to be a teacher.

The expired 2013 Altoona Area contract shows it takes 12 years to reach a $50,000 salary. A doctorate degree with 34 years of teaching will place a teacher at the top of the pay scale at $75,000. But with a state pension, teachers would be able to provide for their families and have a safety net so their children don’t have to take care of them.

“That was one of the biggest reasons I got into teaching,” Krug said.

At the same time Krug was entering his career, legislators were making decisions that would set up the the paradigm shift that Krug said will affect future teachers, a shift that current legislators like Rep. John McGinnis, R-Altoona, are encouraging.

The state’s pension liability is $120 billion, generated from more than a decade marred by poor legislative choices and financial markets.

“These are past due debts,” McGinnis said. “It has to be paid now.”

To McGinnis, a certified financial analyst for investment management, the way to pay the debt fairly is to close the state’s pension system to new employees.

He said new public sector employees should be offered 401(k) retirement funds, which he does not deny would require twice as much contributions from employees and current taxpayers to realize the same benefits that current teachers’ defined benefit pension plans produce.

But that’s the fairest course of action, McGinnis said, to deal with the state’s underfunded system. Of a switch to a 401(k) system for new teachers, McGinnis said: “It’s what everyone in the private sector does. [Without the switch] we are creating two classes of people. People in the public sector are supposed to be servants but are being economically exalted with these pensions. It’s frustrating to me,” he said.

However, enrolling new employees in a 401(k) ends new funds coming into the current underfunded system.

Taxes have risen in West Virginia, Alaska and Michigan, where defined benefit plans were closed to new employees.

“You still have a price to pay. Taxes will go up,” McGinnis said of Pennsylvania’s situation. “The debt needs to be paid and not at the expense of new employees or future taxpayers,” he said. “It has to be paid now.”

McGinnis’ and teachers’ views on pension reform greatly differ on another point that will affect taxpayers.

Decrying mismanagement of Public School Employees’ Retirement System, McGinnis proposes moving current pension funds from high-risk stocks that have caused losses to low-risk U.S. Treasury securities. The problem that teachers like Krug see is that U.S. Treasury securities are sure to produce less on returns. Teachers and their employers – taxpayers will have to pay more to fund current teacher benefits that have been guaranteed under the state constitution.

“All I’m saying is put more money into the plans because people have earned it,” McGinnis said. “Why isn’t he [Krug] agreeing with me 100 percent?”

Krug said is concerned for working class families whose taxes will rise if new teachers are no longer enrolled in the current system and pension funds are moved to U.S. Treasury securities.

“It is going to get the public upset enough that it comes to abolishing the pension system on the whole,” he said.

McGinnis said state and local districts must cut expenses to ease burdens on taxpayers who’ve already seen school budgets’ annual pension contributions increase by millions of dollars.

A majority of school budgets is salary and benefits, leaving little room to cut without affecting staff.

Teacher contract negotiations have become increasingly tense.

Attorney David Andrews, school district solicitor for central Pennyslvania districts including Altoona Area, said the state labor board is increasingly stepping into stalled teacher contract negotiations.

“The economic climate is part of it. Districts all have different reasons, but it’s happening more and more,” he said.

Of the 259 Pennsylvania school districts that had teacher contracts expire in 2013, 119 of them are still negotiating new contracts, according to the Pennsylvania School Boards Association.

Tyrone Area’s labor board hearing involved recommendations for Tyrone Area teacher wage increases.

Both parties accepted the findings. The district’s contract beginning retroactively for this year includes increases for each year, beginning with a 3.15 percent raise this year, 2.54 percent next year and 2.34 percent in the last year.

A health care change was settled without the labor board.

“It’s a pretty significant change for them,” district Business Manager John E. Clark said.

With an IRS qualified plan to kick in for the next two school years, Tyrone Area teachers’ family deductibles will increase from $700 to $2,500. Teachers will pay all of the cost until they satisify the deductible. However, a health savings account offsets part of the cost. The changes save the district 6 percent on health care costs from last year, Clark said.

Hollidaysburg Area teachers earlier this school year accepted a contract with the same high deductible changes. For them however, out-of-pocket payments rose from $200 last year for a family deductible to $2,500 with the new contract.

Neither the Altoona Area board nor teacher union representation spoke of the issues that must be negotiated.

Beginning Tuesday, the Pennsylvania Labor Relations Board will have 40 days to take testimony from both parties and make a report. The report will be issued to the parties who will have 10 days to vote yes or no on the report. If one party votes against the findings, the report becomes public, Andrews said, and another vote will take place within five to 10 days of the report’s public disclosure.

“Fact finding is preferable to have, because it eliminates the risk of work stoppage. By law, strikes are not permitted when parties agree to fact finding process,” Andrews said when asked whether there is a possibility of a strike.

“It is a prudent decision by both parties,” he said. “It ensures education will continue in the district.”