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Fact finder, complete report

Anyone reading the complete report of the fact-finder (hereafter referred to as the arbitrator) in the dispute between the Chicago Teachers Union and the Chicago Board of Education would first be struck by the losses suffered by the Board — and not as yet generally reported in the corporate media of Chicago. Many of these were reportedly shared with CTU delegates at the House of Delegates meeting on July 18, 2012 (this reporter, although a delegate, was not present at that meeting because he was covering the Chicago Board of Education "Special Meeting" at that time).

Chicago Teachers Union Vice President Jesse Sharkey (at podium) explaining to reporters the union's position on the fact finder's report during the July 18 press conference following the unanimous vote of the House of Delegates to reject the report. Substance photo by George N. Schmidt.For members of the Chicago Teachers Union (of which this reporter is one), CPS parents (of which this reporter is one), Chicago homeowners and taxpaying citizens (of which this reporter is one), and public school students, the arbitrator's report gives the public an unprecedented window into the way in which collective bargaining between a union and a public school system operates, at least on the questions relating to wages, hours and benefits. (Working conditions, including class size, rehire rights, and other issues also raised by the union are discussed by not in the precise detail as the financial questions).

[img=5216]Take the straightforward issue of pay. The Board (backed by the mayor and the ideologues behind the mayor) claimed that SB7, the latest law restricting the rights of Chicago teachers (alone in Illinois, and now called "apartheid" by many) gave Mayor Rahm Emanuel the power to extend the elementary school day to 7.5 hours. Emanuel and his Board took the position that they didn't have to pay teachers more for those extra hours worked. The Board had also proposed abolishing the 35-year-old systems of Lanes (for degrees and university training) and Steps (for years of servicing) and collapsing teacher pay into a flat pay scale with additional merit pay.

The Board — and its "Astroturf" supporters (Stand for Children, Advance Illinois, Democrats for Education Reform, and Education Reform Now) along with the centiury-old Civic Federation of the Commercial Club of Chicago (which consists of Chicago's corporate Chief Executive Officers) — had been claiming, since the school reform hearings in Aurora in December 2010, what became obviously absurd to anyone who was paying attention. The Board position was that inexperienced novice teachers were better teachers than veteran teachers, and that advanced degrees and training at the college or university level did not make public school teachers (at least in Chicago) better. Despite the fact that these same talking points have been put forward by corporate "school reform" across the USA, they never made sense to the majority of people, and only the dismal state of the corporate media in the USA today kept them alive as long as they lived.

The "Longer School Day" was also in a similar position. It was slogan rather than a plan, a talking point that Rahm Emanuel used to teacher bash (and attempted to use to union bust) for more than one year. With SB7, the absurdity of the Board's positions became law, and the mayor moved ahead to promulgate the longer school day without additional pay and to propose the abolition of the "Lanes" (for degrees) and "Steps" (for years worked) that had been part of teacher compensation for decades (not only in Chicago, but across the USA). As with most claims by the mayor and his supporters, the claims were made public as talking points and repeated over and over, while most of the corporate media ignored the facts and simply repeated Emanuel's statements as if they were self-evident. There was almost no public scrutiny of the bases for the claims, and most were proved, repeatedly, to be false.

These claims were proposed and sustained since the beginning of negotiations despite the almost complete failure of merit pay in public service jobs, including public school teaching. The arbitrator was unequivocal in his report: "(b) The Board’s request to freeze step increases is not recommended. (c) The Board’s request to establish a differentiated compensation plan for merit pay in lieu of percentage wage increases is not recommended. If they choose, the parties can establish a committee to look into differentiated compensation — and it may well be that such a plan could prove more beneficial to many employees. However, the Board’s request to establish merit pay is not recommended... The Steps should be kept, and merit pay demands dropped by CPS..."

A few weeks after his administration authorized a massive propaganda campaign against the strike authorization vote of the Chicago Teachers Union's members claiming that everyone should "wait for the fact-finder's report," Chicago Board of Education President David Vitale stood before reporters (above) at the Board of Education and tried to explain why the Board had just voted unanimously to reject the same report he had so recently demanded. Substance photo by David Vance. A thorough reading of the complete 70-page document reveals that the Board was repeatedly exposed and rebuffed, ironically after the Board and its corporate and Astroturf allies had publicly stated that the union (in its strike authorization vote of June 6 - 8) should "wait for the arbitrator."

BELOW IS THE COMPLETE TEXT OF THE FACT FINDER REPORT. SUBSTANCE HAS REFORMATTED IT FROM THE PDF AVAILABLE TO MOST READERS FOR PRESENTATION AND READING HERE, BUT THE TEXT IS PRECISELY WHAT THE FACT FINDER REPORTED. Some of the formatting (such as the Table of Contents) presented special problems. The page numbers presented below in the Table of Contents are for the original PDF and do not reflect what is published below. Footnotes from the original are included between parentheses hereunder in conformity with Substance style and to make them easier for our readers to follow.

In the Matter of the Fact-finding between THE BOARD OF EDUCATION OF THE CITY OF CHICAGO and THE CHICAGO TEACHERS UNION, LOCAL 1, AMERICAN FEDERATION OF TEACHERS, AFL-CIO

CASE NO.: Arb. Ref. 12.178 (Fact-Finding) FACT-FINDING REPORT

CONTENTS

I. SUMMARY, Page 3

II. BACKGROUND, Page 10

III. THE REALITIES, Page 11

IV. THE STATUTORY FACTORS, Page 17

V. THE IMPASSE RESOLUTION PROCESS — A GENERAL OVERVIEW, Page 18

VI. THE PRECEDENTIAL VALUE OF THIS REPORT, Page 20

VII. THE PARTIES’ OFFERS, Page 22

VIII. DISCUSSION, Page 22

A. Lengthening The School Day And Year, Page 22

B. Duration, Page 22

C. Wages, Page 23

1. General Wage Increases, Page 23

2. Compensation For The Longer School Day And Year, Page 36

a. The Computation, Page 36

b. Alternatives Available To The Board, Page 44

D. Health Insurance, Page 44

E. Sick Leave And Short-Term Disability Leave, Page 51

F. Job Security/Reassignment and Appointment, Page 53

G. Other Issues Raised By The Union, Page 55

H. Conformity With Law, Page 55

I. Tentative Agreements, Page 56

IX. CONCLUSION, Page 56

X. APPENDICES, Page 62

APPENDIX “A” — BOARD ISSUES, Page 63

APPENDIX “B” — UNION ISSUES, Page 64

APPENDIX “C” — BOARD FINAL OFFER, Page 65

APPENDIX “D” — UNION FINAL OFFER, Page 68

XI. ENDNOTES, Page 70

I. SUMMARY

As more fully set forth in this Report (which issues under authority of the Illinois Educational Labor Relations Act (“Act”) and further issues on a non- precedential basis), the following is a summary of the recommendations for the new collective bargaining agreement (“Agreement”) between the Board of Education of the City of Chicago (“Board”) and Chicago Teachers Union, Local 1, American Federation of Teachers, AFL-CIO (“Union” or “CTU”) for employees represented by the Union working for the Chicago Public Schools (“CPS”):

1. Duration

Four years - July 1, 2012 to June 30, 2016.

2. General wage increases

(a) To be applied to all lanes and steps (and based upon projected increases in the cost of living):

Effective July 1, 2012: 2.25%.

Effective July 1, 2013: 2.25%.

Effective July 1, 2014: 2.50% (subject to reopening if health insurance is reopened, with any impasse re- solved through expedited interest arbitration).

Effective July 1, 2015: 2.50% (subject to reopening if health insurance is reopened, with any impasse re- solved through expedited interest arbitration).

(b) The Board’s request to freeze step increases is not recommended.

(c) The Board’s request to establish a differentiated compensation plan for merit pay in lieu of percentage wage increases is not recommended. If they choose, the parties can establish a committee to look into differentiated compensation — and it may well be that such a plan could prove more beneficial to many employees. However, the Board’s request to establish merit pay is not recommended.

(d) To guarantee that the Board does not withhold contractually called-for pay increases as it did for 2011-2012, the provisions of Section 47-2.2 of the 2007-2012 Agreement which allowed the Board to withhold the 2011-2012 4% wage increase should not be operable for the term of this Agreement. As a further guarantee that wage increases are paid as ultimately provided and because of recent litigation between the State of Illinois and AFSCME where a court found that a public employer does not have to pay wage increases which were agreed upon if appropriations are not made for those agreed-upon wage increases (and even after an arbitrator ordered the payment of those wage increases and finding a violation of the collective bargaining agreement for failure to pay the wage increases), in the event the Board does not pay a wage increase called for in the new Agreement, the Union should be relieved of its no-strike obligation as found in Section 47-1 of the 2007-2012 Agreement and the Union may (with 10 days notice to the Board) strike over that failure to pay. In such a case, the Union could strike without first having to go through the impasse resolution procedures found in the Act.

3. Heath insurance: Currently, employees pay percentages of their salaries for single coverage ranging from 1.3% to 2.2%; for couples coverage ranging from 1.5% to 2.5%; and for family coverage ranging from 1.8% to 2.8%. Effective January 1, 2013 (and with a “trigger” requiring corresponding increases in employee contributions caused by higher health insurance costs to the Board if 5% or above), the Board seeks to change the contribution rate (depending upon the plan selected by an employee) to be capped at 2.2% for single coverage, 1.7% to 2.8% for couples coverage, and 2.3% to 3.5% for family coverage; institution of a Wellness Program; and an increase in co-payments for emergency room visits from $125 to $150 per visit. The Board also seeks to require employees on extended leaves of absence to pay COBRA rates instead of ordinary contribution rates paid by active employees. The Union seeks to maintain the status quo by freezing current premiums and co-pays and removing any triggers for higher employee costs.

Given the uncertainties in the next few years concerning the economy and how the insurance industry will react to efforts to implement health insurance at the national level (as well as the impact of the U. S. Supreme Court’s decision in National Federation of Independent Business, et al. v. Sebelius, et al., No. 11-393, 567 U.S. ___ (June 28, 2012) upholding the constitutionality of the Affordable Care Act), health insurance should not be set for the entire length of the Agreement, but, if they desire to do so, the parties should have the opportunity to address changes mid-term. Because of the three year freeze on employee contributions during the 2007-2012 Agreement with modest increases which followed for the duration of that Agreement and because of the substantial increases in salaries achieved by the employees over the life of the 2007-2012 Agreement (attributable to compounded percentage increases and step movements) and because the Board has experienced increased health insurance costs from $250,765,000 in FY 2007 to $353,878,000 in FY 2011, the Board’s proposal should be adopted. However, there should be no triggers for further contribution increases. To address any changed conditions in health care, heath insurance may be reopened for the last two years of the Agreement by either side. If health insurance is reopened, then wages for the same period should be reopened.

Should there be an impasse between the parties after negotiations for any reopener for health insurance and/or wages, that impasse should be resolved through an expedited interest arbitration proceeding to set the new rates or conditions utilizing the factors set forth in Section 12(a-10)(4) of the Act.

Employees who go on extended leaves of absence should not have to pay COBRA rates as proposed by the Board, but should be allowed to continue to pay the ordinary contributions as do other active employees as called for in the Agreement.

4. Compensation for the longer school day and year. The Board has exercised its statutory right to lengthen the school day and year. The lengthening of the school day and year as presently announced increases the employees’ work by a weighted average of 19.4%. While the Board has the statutory right to lengthen the school day and year, employees cannot be expected to work those additional hours and days for free or without fair compensation for the added hours and days. If required to work longer, employees must be fairly compensated for that addi- tional time.

There are several alternatives available to the Board which will dictate compensation for the longer school day and year:

a. Alternative 1. Like bank accounts, wage increases in collective bargaining agreements compound over years. Even with the 4% wage increase withheld by the Board for 2011-2012, employees still received four, 4% wage increases over the life of the 2007-2012 Agreement and the salary lanes therefore received a compounded wage increase of 16.98%. The 2007- 2012 Agreement was entered into and then spanned the Great Recession and the cost of living only increased 10.33% during that period. (1) Even with the withheld 4% wage increase for 2011-2012, the employees were therefore still 6.65% ahead of the cost of living (16.98% - 10.33% = 6.65%).

If the Board chooses to require non-hourly paid employees to work the longer school day and year schedule as presently announced, to fairly compute what non-hourly paid employees should receive for additional hours and days imposed by the Board, the following formula should be used:

1. The employees’ last contractual wage rates for the salary lanes and steps in the salary schedules at the expiration of the 2003-2007 Agreement should be increased by the actual cost of living increase for the same period covered by the 2007-2012 Agreement (presently, 10.33%) and not by the compounded wage increase actually received (16.98%). This reduction (for computational purposes only) brings the employees’ salaries in line with actual changes in the economy during the life of the 2007- 2012 Agreement.

2. The rate computed in paragraph 1 should then be increased by the percentage of additional time caused by the Board’s requirement that employees work a longer school day and year (here, 19.4%) yielding the wage adjustment for the longer school day and year;

3. The wage increase for 2012-2013 recommended by this Report (2.25%) should then be applied to the wage adjustment for the longer school day and year to yield the wage rate for the first year of the new Agreement.

Example: As of June 30, 2007 (the expiration of the 2003- 2007 Agreement) a Lane II, step 8 Master’s teacher had an annual salary of $57,721. Based on the Union’s cal- culations showing a 21.4% increase in work at the ele- mentary school level (with 70% of teachers working in elementary schools) and a 14.6% increase in work at the high school level (with 30% of teachers working in high schools) yielding a weighted average of 19.4%, the Board’s movement to the longer school day and year calculates as follows:

• $57,721 increased by 10.33% for the actual increase in the cost of living during the pe- riod of the 2007-2012 Agreement (rather than by the compounded 16.98% increase actually received during that period) = $63,683.58.

• $63,683.58 + 19.4% = $76,038.19 (the wage adjustment for the longer school day and year).

• $76,038.19 + 2.25% = $77,749.05 (the wage rate for the first year of the new Agreement).

This formula and example make a realistic wage adjust- ment which factors out gains achieved by the employees ex- ceeding the lower cost of living during the life of the 2007- 2012 Agreement resulting from the Great Recession and are based on the realities of the economy during the period of the 2007-2012 Agreement.

In simple terms for comparison purposes, the adjustment for movement to the longer school day and year as an- nounced by the Board amounts to a weighted average of a 19.4% increase in hours. The Union seeks that proportion- ate increase in pay to be added to the last wage rate earned in the 2007-2012 Agreement. Using this example of the Lane II, step 8 Master’s teacher, the Union’s formula would move that employee from $67,526 (the last wage rate under the 2007-2012 Agreement) to $80,626.04 ($67,526 + 19.4%). The formula used in this example takes into account the economic conditions caused by the Great Recession and the actual increase in the cost of living during the life of the 2007-2012 Agreement (10.33%) and begins its calculation with what the employee earned just prior to the beginning of the 2007-2012 Agreement ($57,721) and moves that em- ployee on the basis of the actual cost of living (10.33%) to $63,683.58 ($57,721 + 10.33%) and then applies the 19.4% increase in hours, bringing that employee’s wage rate to $76,038.19. Looking at what that means in terms of an in- crease over the last wage earned by this employee under the 2007-2012 Agreement, this employee’s last wage earned un- der the 2007-2012 Agreement is adjusted by 12.6% (($76,038.19 - $67,526) / $67,526) = 12.6%) — and not 19.4% as sought by the Union.

In short, in this example, the Union seeks to adjust the last wage rate in direct proportion to the 19.4% increase in hours. This example takes into account the realities of the economy as well as the actual increase in work hours of 19.4% and, in the end, increases the last wage rate for this employee by 12.6% for the increase in hours announced by the Board.

The recommended wage increase for 2012-2013 (2.25%) should then be added to the wage adjustment for the longer school day and year imposed by the Board to be the first year rate for the new Agreement.

Hourly paid employees should receive no additional compensation for having to work a longer school day and year. Their additional compensation will be directly paid as a result of working more hours.

b. Alternative 2. Alternative 1 is no doubt very costly to the Board and, given its budget problems and the substantial increase attributable to the longer school day and year, is an option the Board likely cannot afford. However, the Board caused this problem by lengthening the school day and year to the extent it did when it was having serious budget problems and the Board cannot realistically expect that it should not have to compensate the employees for the problem it caused by an almost 20% increase for the employees’ work time. Because the Board has the authority to set the length of the school day and year, as an alternative, the Board can reduce its costs by correspondingly reducing the length of the school day and/or year. That reduced percentage will then be applied in the formula in Alternative 1 to compute the wage ad justment for the longer school day and year.

There may be other ways for the parties to resolve the compensation issue caused by the Board’s imposition of the longer school day and year. However, those other ways must come through col- lective bargaining and not through the impasse resolution process.

5. Sick leave and short-term disability leave

Employees currently receive 10 sick days and three personal days per year which can be accumulated up to a maximum of 325 days over the course of their career. Upon separation, those accumulated days are paid out to certain senior employees at the rate existing upon separation (up to 100% of their value) even though the accumulated days were earned in previous years at lesser rates. In FY 2012, CPS projects having to pay out $52 million in accumulated leave for departing employees and the Board estimates that CPS has $459 million on its books for accumulated leave.

The Board proposes that it will continue to keep leave banks for current employees in that days in those banks will remain available for use and payout upon separation, but will be frozen; going forward, and all employees will continue to receive 10 paid sick and three personal days per year, but those days not utilized in a year will not be eligible for carry over and, after July 1, 2012, will not be added to the employees’ banks of days accumulated for payout upon separation (i.e., a yearly “use or lose” system). In place of the present system, the Board proposes to add (at no-cost to the employee) a short-term disability benefit which activates af- ter 10 days of illness (including maternity leave days) and will pay 100% of the employee’s regular salary during the first 30 calendar days of illness, disability (or maternity leave); 80% of salary for the next 30 calendar days; and 60% for the third 30 calendar day pe- riod (with long-term employees having the option of taking short- term disability benefits at the sliding scale rates or drawing down from their accumulated sick leave banks at 100% salary).

The Board’s proposal provides a substantial no-cost benefit to the employees (particularly for those who do not have sufficient accumulated days in their leave banks, thereby providing, for those who need it, paid disability leave benefits including a paid maternity leave benefit they presently do not have); to a great degree maintains the existing benefit for employees with accumulated days for payout upon separation; and, in the long-term, provides a substantial cost reduction for the Board because leave banks will no longer be accumulating.

Paid sick days are typically designed to compensate employees when they are too ill to work. Here, with its carry over, banking and payout provisions, the sick leave benefit has become a costly retirement benefit unrelated to an employee being incapable of working due to illness. That benefit has now caused CPS potential substantial liabilities. In light of the Board’s offer for a short-term disability benefit, maintenance of certain aspects of the sick leave benefit and the gradual phase out of the payout provisions of benefit over time and given how costly the sick leave benefit has become, that benefit should now be modified, but in a way that does not harm long-term employees who have planned their retirements based upon the prior promises of the Board to compensate them for banked sick leave.

The Board’s proposal is recommended, with the condition that the parties are able to agree upon a method to compensate (monetarily or otherwise) long-term employees who exceed a specified number of years of service to be agreed upon by the parties. If the parties can agree upon how to treat those long-term employees, the Board’s proposal is recommended. Otherwise, no change is recommended.

6. Job security/reassignment and appointment

Under current conditions, school closings, consolidations and other actions often leave senior and highly-qualified teachers with few opportunities to move to other schools. As a result, the teachers lose their positions and the students lose the ability to benefit from the experience and talent of those teachers.

The Union proposes establishment of a pool of displaced teachers from which principals must first hire for vacancies before hiring from other sources. Perhaps the current system is in need of repair and is not functioning well. However, the current system is not broken to be corrected through the impasse resolution process. Any changes to the provisions of the Agreement governing job security/reassignment and appointment must be negotiated. The Union’s proposal is not recommended.

7. All other issues raised by the Union

No changes from current contract language.

8. All other issues raised by the Board

No changes from current contract language.

9. Conformity with law

A number of the provisions of the Agreement may be inconsistent with present legal requirements. The parties should establish a committee to examine the 2007-2012 Agreement and change provisions not in conformity with current laws.

10. Tentative Agreements

All other agreements not addressed by this Report and reached by the parties during negotiations should be incorporated into the Agreement.

II. BACKGROUND

This Report issues pursuant to authority under the Act to give “... advisory findings of fact and recommended terms of a settlement for all disputed issues ...” for the new Agreement between the Board and the Union. (2).

The Panel issued a Scheduling Order dated May 1, 2012 (“Scheduling Order”) which established procedures for mediation, hearing and issuance of this Report. Those procedures have been followed by the parties.

The undersigned is the “Neutral Chair” or “Fact-Finder” selected by the parties. The Board’s appointee to the Panel as the Board Member is Joseph T. Moriarty. The Union’s appointee to the Panel as the Union Member is Jesse J. Sharkey.

My findings and recommendations constitute the Panel’s Report for requirements of the Act, with the other Panel Members having the right to dissent or concur (as may also be filed by them), with any dissents not constituting a rejection of the Report, but only constituting stated differences of opinion on issues ruled upon by me. If there are any differences of opinion amongst panel Members on any issues covered by the Report, my findings and recom- mendations take precedence. (3)

Unless rejected by either side, for the next 15 days this Report is “... private ... to the parties.” (4) If this Report is not rejected by either side within that 15-day period, then the recommendations contained in this Report become the terms of the parties’ new Agreement. (5) All proposals have been considered and the applicable statutory factors have been weighed and applied. Should the parties not reject this Report, no further bargaining is required by the parties on any proposals. However, the parties are obviously free to voluntarily engage in further bargaining after issuance of this Report. If either side rejects the Report, the Report will be made public and then, after certain waiting periods and other procedures are followed and because the Union has obtained a strike authorization from the necessary 75% vote (actually 90%) of the bargaining unit employees who are members of the Union, the Union can strike. (6)

III. THE REALITIES

Before getting into the merits of this case, there are several realities about this dispute which must first be discussed.

First, this is a highly-charged, volatile labor dispute with profound implications as up to 25,000 teachers and other staff and employees are poised to strike putting 400,000 children out of school. Public scrutiny of what happens here is obviously very high.

Second, although the Panel Members, negotiators and participants in the fact-finding and mediation process before me have conducted themselves in a highly professional, courteous, cooperative and civil manner, the collective bar- gaining relationship between the parties — i.e., the Board and Union — is toxic. The fact that the Union achieved a strike authorization vote of 90% of the bargaining unit employees who are members of the Union (not just 90% of those voting) speaks volumes and underscores the disconnect in the relationship between the Board and the Union. (7)

Third, the Union chafes at the fact that during the 2007-2012 Agreement, the Board withheld a scheduled 4% wage increase for 2011-2012 that was to be applied to the salary lanes and steps in the last year of the 2007- 2012 Agreement. Coupled with the Board’s move to the longer school day and year without fair compensation from the Union’s view, the Union sees the Board’s wage offers in this matter as salt on that wound. With just those considerations, the Union’s rage is understandable.

However, although it may not have seemed so at the time to the Union and its members, the 2007-2012 Agreement proved to be very lucrative for the employees — even with the Board’s withholding the 4% wage increase for 2011- 2012.

The 2007-2012 Agreement called for five, 4% wage increases. (8)

At the end of the 2007-2012 Agreement, 16% of the scheduled 20% in wage increases — i.e., four of the five scheduled 4% wage increases — were applied to the sal- ary lanes and steps in the Agreement for the first four years of the 2007-2012 Agreement.

Moreover, no employees who were employed for the duration of the 2007- 2012 Agreement received 16% for a wage increase. The employees received more — in most instances, much more.

Like savings accounts paying interest, percentage wage increases in collective bargaining agreements compound. Due to compounding, over the duration of the 2007-2012 Agreement and even with the withheld 4% increase in 2011-2012, the salary lanes on the salary schedules actually received a 16.98% salary increase. (9)

Further, the 2007-2012 Agreement was negotiated and signed on September 26, 2007. (10)

The 2007-2012 Agreement was therefore negotiated and signed before — and then overlapped — the “Great Recession” which “... has been characterized as the greatest recession experienced by this country since the Great Depression of 1929.” (11). Citation is no longer necessary to the facts that since the Great Recession effectively reared its head in 2008, this U.S. economy has been jolted by high unemployment, a housing crisis with record foreclosures, government bailout actions, drying up of revenue streams, budget deficits, mass layoffs and concession bargaining.

Because the Agreement spanned the term of the Great Recession, the cost of living during the same period covered by the 2007-2012 Agreement increased by only 10.33%. (12)

However, even with the 4% increase which was withheld for 2011-2012, in the end, the employees received 16% in wage in- creases (compounded to 16.98%) over the life of the 2017-2012 Agreement. Just in terms of the wage increases applied to the salary lanes — and even with the 4% withheld by the Board for 2011-2012 — the employees were therefore 6.65% ahead of the cost of living for the same period (16.98% - 10.33% = 6.65%). Considering what happened to so much of the workforce in the rest of the country during the Great Recession, the employees covered by the 2007- 2012 Agreement did quite well during the Great Recession.

Fourth, in addition to percentage increases in the 2007-2012 Agreement, employees also received step increases. (13)

While the Board withheld the 4% wage increase for 2011-2012, the Board states that employees nevertheless continued to receive step increases for all years of the Agreement, including 2011-2012. (14)

According to the Board, step increases average an additional 3.41% increase over any general across-the-board increase to salary lanes. (15)

With step increases occurring every year for the first 13 steps following the first year and with approximately 91% of teachers now in steps 1 through 15, dur- ing the life of the 2007-2012 Agreement and in addition to the four, 4% in- creases they actually received, a very substantial number of employees received additional wage increases attributable to multiple step increases.16 Indeed, be- cause they were eligible for yearly step increases during the 2007-2012 Agree- ment, many employees (7,914 according to an analysis of the Board’s census) received five step increases during the life of the 2007-2012 Agreement.17 Many employees (19,761 according to an analysis of the Board’s census) re- ceived more than one step increase during the life of the 2007-2012 Agree- ment.18 And all employees received at least one step increase during that pe- riod (due to the phasing in of higher steps on the salary schedules).19 For many employees, combining the four, 4% increases actually received along with the multiple step increases during the 2007-2012 Agreement, resulted in em- ployees actually receiving, in real money, wage increases ranging in the area from 19% to 46%.20

Fifth, the Bureau of Labor Statistics maintains an “Inflation Calculator” which can be used show how inflation impacted salaries over the life of the 2007-2012 Agreement.21 Again, given the four, 4% increases actually received along with the step movements, the employees did very well when their buying

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 15

power based on wages earned at the beginning of the 2007-2012 Agreement is compared with what they actually received at the end of the 2007-2012 Agree- ment.22

Thus, given the percentage increases actually received by employees un- der the 2007-2012 Agreement and further considering the additional increases due to step movements over the life of that Agreement actually received, under the 2007-2012 Agreement, the employees did very well — indeed, they did ex- tremely well. And those monetary successes actually achieved by the employ- ees during the 2007-2012 Agreement occurred at a time when the U. S. econ- omy nearly went over the cliff.

The bottom line here is that the 2007-2012 Agreement overlapped the Great Recession; during the Great Recession, the cost of living only increased by 10.33%; notwithstanding the havoc inflicted upon the economy during the Great Recession — and even though the Board withheld the 4% increase for 2011-2012 — employees under the 2007-2012 Agreement nevertheless re- ceived 16% in wage increases, which compounded to 16.98%; with step move- ments built into the contract, the employees further received between one and five step increases (with most receiving more than one step increase) which translated into actual percentage wage increases between approximately 19% and 46% during the life of the 2007-2012 Agreement.

Sixth, the Board is exercising its statutory right to increase the school day and year — an action that the Union does not (and cannot) challenge. The Union sees that action as causing a 19.4% increase in work time for the em- ployees.23 Particularly given the additional time that teachers spend working outside of the classroom, it is simply unrealistic for the Board to expect the employees to work the substantial additional hours and days imposed by the

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Board for free or without fair compensation. But, with the offer it made in this case (2% per year for four years), that is what the Board appears to be doing.24

Seventh, as much as the Act now provides for deference to the Board’s decisions, the Act is not a license for the Board to unilaterally restructure the Union’s contract to remove benefits which were put in place through decades of collective bargaining between the parties (which included prior strikes).

Finally, if the parties do not settle this contract, the reality of a crippling strike looms — an action that will be caused by the parties’ inability to reach a settlement and which will keep 400,000 students out of school. Chicago’s streets have not been kind to CPS students. According to the Chicago Tribune (June 26, 2012):25

Number of CPS students shot rises, as does fear of more to come

***

The number of Chicago Public Schools students killed in gun violence this past school year dipped slightly from the previ- ous year, but the total number of students who were shot was up sharply, according to figures from Chicago police. ...

Over the past several months, I have attempted to mediate a settlement in this dispute. Thus far, my efforts have failed. At this point in the statutory scheme and with the issuance of this Report, my participation in this matter as the Neutral Chair and Fact-Finder is now over. Every possible effort must still be made by the parties to make certain the students are back in school for the start of the 2012-2013 school year and not on the streets because of a strike resulting from the parties’ inability to come to terms.

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 17

IV. THE STATUTORY FACTORS

Section 12(a-10)(4) of the Act provides that for issuing this Report, the Panel:

... shall base its findings and recommendations upon the following criteria as ap- plicable:

(A) the lawful authority of the employer;

(B) the federal and State statutes or local ordinances and resolutions applicable to the employer;

(C) prior collective bargaining agreements and the bargaining history between the parties;

(D) stipulations of the parties;

(E) the interests and welfare of the public and the students and families served by the employer;

(F) the employer’s financial ability to fund the proposals based on exist- ing available resources, provided that such ability is not predicated on an assumption that lines of credit or reserve funds are available or that the employer may or will receive or develop new sources of revenue or increase existing sources of revenue;

(G) the impact of any economic adjustments on the employer’s ability to pursue its educational mission;

(H) the present and future general economic conditions in the locality and State;

(I) a comparison of the wages, hours, and conditions of employment of the employees involved in the dispute with the wages, hours, and conditions of employment of employees performing similar services in public education in the 10 largest U.S. cities;

(J) the average consumer prices in urban areas for goods and services, which is commonly known as the cost of living;

(K) the overall compensation presently received by the employees in- volved in the dispute, including direct wage compensation; vaca- tions, holidays, and other excused time; insurance and pensions; medical and hospitalization benefits; the continuity and stability of employment and all other benefits received; and how each party’s proposed compensation structure supports the educational goals of the district;

(L) changes in any of the circumstances listed in items (A) through (K) of this paragraph (4) during the fact-finding proceedings;

(M) the effect that any term the parties are at impasse on has or may have on the overall educational environment, learning conditions, and working conditions with the school district; and

(N) the effect that any term the parties are at impasse on has or may have in promoting the public policy of this State.

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V. THE IMPASSE RESOLUTION PROCESS — A GENERAL OVERVIEW

This is an impasse resolution proceeding. As a general proposition, im- passe resolution for collective bargaining agreements is a very conservative process.

There are a number of general concepts that are followed in impasse resolution cases:

• No “breakthroughs”;

• In order to change a working condition, it must be shown that the condition is broken;

• A working condition that is not functioning well is not bro- ken;

• “Good ideas” are not reasons to change working conditions that are not broken;

• The party seeking a change in a working condition has the burden to show the condition is broken; and

• If a working condition is not broken, changes must be bar- gained.

The reason for this very conservative approach is because the emphasis for setting the terms of collective bargaining agreements is properly placed upon the parties through the give and take of the collective bargaining process and not on some third party to arbitrarily impose terms when the parties could not do so.26

The Board’s view of the impasse resolution process under the Act is more narrow than the above. According the Board, under the Act great deference must be given to the Board’s decisions and the statutory factors are geared to furthering the Board’s educational mission within the Board’s economic con- straints. The Board asserts that for purposes of these proceedings:27

... [E]very habit of thought the Neutral Chair and the parties bring to this proceeding drawn from the IPLRA [the Illinois Public Labor Relations Act,

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5 ILCS 315/14, governing security employee, peace officer and fire fighter] interest arbitrations must be jettisoned. Every custom and every reflexive mode of analysis utilized in attempting to resolve public sector labor disputes has to be re-evaluated. Unlike virtually any other legal action or matter labor professionals encounter, any rule or principle that is usual and customary, that has become “the common law of the work- place”, is almost certainly inappropriate here.

In support of that more narrow view of the fact-finding process, the Board cites to several of the factors in Section 12(a-10)(4) of the Act — i.e., Fac- tors “(E) the interests and welfare of the public and the students and families served by the employer ... (G) the impact of any economic adjustments on the employer’s ability to pursue its educational mission ... (K) ... how each party’s proposed compensation structure supports the educational goals of the district ... (M) the effect that any term the parties are at impasse on has or may have on the overall educational environment, learning conditions, and working con- ditions with the school district; and (N) the effect that any term the parties are at impasse on has or may have in promoting the public policy of this State.”

I do not disagree with the Board’s general view of the fact-finding process under the Act. The fact-finding process is indeed more narrow than the inter- est arbitration process found under Section 14(h) of the IPLRA for impasse resolutions for police, security and fire employees. However, when one reads Section 4.5(a)(4) of the Act which provides that the Board is not required to bargain over “[d]ecisions to determine class size, class staffing and assignment, class schedules, academic calendar, length of the work and school day ... length of the work and school year ... hours and places of instruction, or pupil assessment policies” and those topics are, pursuant to Section 4.5(b) of the Act “... permissive subjects of bargaining” (although the Board must bargain over the impact of those decisions per Section 4.5(b) of the Act), the Board’s argu- ment really comes down to an assertion that because it sets the educational

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mission and goals of the CPS and formulates the budget for CPS, whatever the Board determines is appropriate must be found appropriate by this Panel.

If that unfettered discretion for the Board to unilaterally determine and set (or change) terms of collective bargaining agreements was intended by the Legislature, such a conclusion would have been very easy to draft — one that essentially completely removes the kinds of disputes in this matter from the collective bargaining and impasse resolution process. But that was not the case. Section 12(a-10)(4) of the Act makes all of the factors to be applied “as applicable”. Further, there are other factors to be considered aside from those relied upon by the Board — i.e., “(C) prior collective bargaining agreements and the bargaining history between the parties ... ; (I) a comparison of the wages, hours, and conditions of employment of the employees involved in the dispute with the wages, hours, and conditions of employment of employees performing similar services in public education in the 10 largest U.S. cities; [and] (J) the average consumer prices in urban areas for goods and services, which is com- monly known as the cost of living”.

This remains an impasse resolution proceeding. The statutory factors in the Act may give more deference to the Board’s positions because the factors encompass educational missions and goals as well as the budget to be deter- mined solely by the Board. But nevertheless, the traditional impasse resolu- tion factors remain in the mix to be balanced and given weight “as applicable”. Even under the Act, these disputes are case-by-case calls. VI. THE PRECEDENTIAL VALUE OF THIS REPORT

Aside from its impact on the current dispute between the parties, this Report can have no precedential value for future disputes.

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The Board observes “[t]hese proceedings are historic from an educational, economic, legal and labor perspective.”28 I agree.

This proceeding comes at a time when the Board is facing very difficult budget problems; CPS will begin to implement Common Core State Standards requiring students to complete more rigorous, critical thinking tasks that in- volve writing, research and group work; curriculum changes will be imple- mented; a new teacher evaluation system (“REACH Students”) will be imple- mented in the elementary schools; and the Board has moved to substantially lengthen the school day and year.29 And this fact-finding proceeding is the first proceeding of its kind under the Act.30

While the parties have been proceeding under the impasse procedure found in Section 12(a-10)(4) of the Act for this Panel to give “... advisory find- ings of fact and recommended terms of a settlement for all disputed issues ...” for the new Agreement between the Board and the Union, the Act has another impasse procedure which has not been implemented by the parties.

As earlier noted, Section 4.5(a)(4) of the Act provides that the Board is not required to bargain over “[d]ecisions to determine class size, class staffing and assignment, class schedules, academic calendar, length of the work and school day ... length of the work and school year ... hours and places of in- struction, or pupil assessment policies” and those topics are, pursuant to Sec- tion 4.5(b) of the Act “... permissive subjects of bargaining” (although the Board must bargain over the impact of those decisions per Section 4.5(b) of the Act). Under Sections 4.5(b) and 12(b) of the Act, there is a specific impasse proce- dure for these topics which is distinct from this procedure and the Act provides that as the fact-finder in this proceeding, I have no jurisdiction over those dis- putes.31

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The second impasse procedure which limits my jurisdiction has not been implemented by the parties and I express no opinions on matters which may at some future time be covered by such a proceeding. Moreover, given that this is the first impasse procedure under the Act and is coming at a time of a huge sea change between the parties and in CPS, this Report should be limited to resolv- ing only this specific dispute and should have no precedential value for future disputes between the parties.

This Report is therefore confined to this dispute — and no other future disputes. This Report is therefore non-precedential. VII. THE PARTIES’ OFFERS

The Scheduling Order establishing the procedures for this matter re- quired the parties to file statements of disputed issues.32 The parties re- sponded by filing statements indentifying over 100 issues (61 from the Board and 45 from the Union) — many with numerous subparts.33 Consistent with the provisions of the Act, the Scheduling Order also required the parties to file final offers.34 The parties responded with the Board filing on 14 issues (with many subparts) and the Union filing on three specific issues, but incorporating all of its previously filed issues.35 VIII. DISCUSSION

A. Lengthening The School Day And Year

One issue which will not be decided in this proceeding is the propriety Board’s determination to lengthen the school day and to add days to the school year. Under the Act, lengthening the school day and year is the Board’s statu- tory right.36

B. Duration

The Board seeks a four year term.37 The Union seeks a two year term.38

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In unstable economic times, contracts of short duration often better serve the interests of parties as they permit the parties to address changing conditions in short order rather than having to wait years before being able to address contract terms which may have been reasonable at the time they were negotiated, but become unreasonable or unworkable through the passage of time. On the other hand, contracts of longer duration provide stability.

As we endure through and hopefully come out of the Great Recession, these are unstable economic times, which would weigh toward a shorter dura- tion for the Agreement as sought by the Union. On the other hand, this collec- tive bargaining relationship is tumultuous, even toxic, and these parties need to be separated from each other for some time in the collective bargaining proc- ess where they bring so many issues to the table at one time, which would weigh toward a longer duration as sought by the Board.

Both goals can be accomplished with the Board’s offer on duration of four years as modified by this Report. This Report recommends opportunities for reopening contract terms (insurance and wages) so that the parties can ad- dress changing conditions.39 Given the present economic uncertainties, the need to provide for stability in this relationship and considering that reopeners are available on certain core economic issues (or others which may be mutually agreed to by the parties), a four year general term is recommended (July 1, 2012 through June 30, 2016).

C. Wages 1. General Wage Increases

The Union seeks an increase of 22% in the first year of the Agreement (which includes the percentage movement to the longer school day and year) and 3% in the second year of the Agreement.40 While further detailed in its fi-

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nal offer set forth in Appendix C, the Board offers wage increases of 2% per year for four years with freezes on step increases. For the last year of its pro- posal, the Board’s 2% offer is made “provided that the parties have mutually agreed upon a differentiated compensation plan to become effective on July 1, 2015.”41 The Board’s 2% per year offer includes the movement to the longer school day and year.42

First, with respect to the Board’s seeking a differentiated compensation plan, that proposal is a breakthrough. The current wage schedule is based on lanes (corresponding to educational degree achievements) and steps (for years of service); years of service and grade for other employees or other specified flat rates.43 The current wage schedule is a product of years of collective bargain- ing between the parties which is a statutory factor which should be considered (Factor (C) — “prior collective bargaining agreements and the bargaining his- tory between the parties”).44

For the sake of discussion, I will assume that the Board’s proposal for a differentiated compensation plan is a “good idea”. However, more than a “good idea” is needed to justify the kind of breakthrough change sought by the Board. Under the statutory factors, the Board has not shown that such a dramatic change is warranted and it certainly has not shown that the existing method of compensating employees is broken. If they choose, the parties can establish a committee to look into differentiated compensation — and it may well be that such a plan could prove more beneficial to many in the bargaining unit. How- ever, for purposes of this proceeding, that potentially “good idea” is not enough to cause a change.

Second, as specified in the Act, the “the average consumer prices in ur- ban areas for goods and services, which is commonly known as the cost of liv-

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ing” is a factor for consideration (Factor J — also referred to as the consumer price index, or “CPI”).45 Another factor for consideration is “the present and future general economic conditions in the locality and State” (Factor H).46 Given that the 2007-2012 Agreement just expired on June 30, 2012, no hard data exist for cost of living increases covered by periods of the new Agreement. Cost of living forecasts therefore have to be considered.

The forecasters are typically in the same basic range — in the low-to-mid 2% increases in the cost of living for the next few years. See e.g., the Federal Reserve Bank of Philadelphia’s Second Quarter Survey of Professional Fore- casters (May 11, 2012):47

Measured on a fourth-quarter over fourth-quarter basis, headline CPI in- flation is expected to average 2.3 percent in 2012, up from 2.0 percent in the last survey; 2.1 percent in 2013, down from 2.2 percent; and 2.5 per- cent in 2014, up from 2.3 percent. ...

These projections must carry significant weight.48

Third, several of the statutory factors under the Act look to the Board’s ability to fund proposals based on existing resources and impact on the Board’s ability to pursue its educational mission (Factor F — “the employer’s financial ability to fund the proposals based on existing available resources, provided that such ability is not predicated on an assumption that lines of credit or reserve funds are available or that the employer may or will receive or develop new sources of revenue or increase existing sources of revenue” — and Factor G — “the impact of any economic adjustments on the employer’s ability to pursue its educational mission”).49

However, given the length of the Agreement it seeks (and which has been recommended) — i.e., four years — and the current unknowns concerning the economic recovery, the Board cannot really predict with any degree of absolute

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certainty how its revenues will look in the future years of the Agreement (par- ticularly years three and four). At most, then, the Board’s ability (or inability) to fund the wage increases tips towards the speculative — particularly in the out years of the Agreement.

Fourth, external comparability for employees performing similar services in public education in the ten largest U. S. cities is a factor that can be consid- ered (Factor I — “a comparison of the wages, hours, and conditions of employ- ment of the employees involved in the dispute with the wages, hours, and con- ditions of employment of employees performing similar services in public edu-

cation in the 10 largest U.S. cities”).50 for comparison purposes:51

1. New York 2. Los Angeles 3. Houston 4. Philadelphia 5. Phoenix 6. San Antonio 7. San Diego 8. Dallas 9. San Jose

The Board identifies the following cities

The Union identifies the following comparable cities:52

1. New York 2. Los Angeles 3. Philadelphia 4. San Diego 5. San Jose

The Union omitted several large cities from its list of comparables. Ac- cording to the Union (id.):

... Texas and Arizona are southern states where teachers do not have col- lective bargaining rights. Therefore, the compensation and working con- ditions for teachers in Houston, Phoenix, San Antonio and Dallas should not be weighted the same as for union-represented teachers with collec- tive bargaining rights working in school districts in the remaining six of

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the ten largest cities: New York, Los Angeles, Chicago, Philadelphia, San Diego, and San Jose.

I reject the Union’s approach that comparable cities under the Act should only be considered if the employees have collective bargaining rights. The Act does not make that distinction, but merely states in Factor (I) that the Panel can look to “a comparison of the wages, hours, and conditions of employment of the employees involved in the dispute with the wages, hours, and conditions of employment of employees performing similar services in public education in the 10 largest U.S. cities.”

Under the interest arbitration procedures found in Section 14 of the IPLRA governing security employee, peace officer and fire fighter disputes, ex- ternal comparability is also a listed factor.53 Prior to the Great Recession in 2008, external comparability was the driving factor under the IPLRA for setting contract terms for those classifications of public employees and I was a big proponent for the use of external comparables to resolve interest arbitration disputes under the IPLRA.54 However, with the shock to the economy inflicted by the Great Recession, after 2008 that approach had to change because it was no longer appropriate to compare municipalities with contracts negotiated prior to the crash with those being settled after the crash. Nor did it make sense to make comparisons amongst municipalities whose experience in the Great Re- cession may have been completely different — some municipalities fared far worse than others. Until the economy recovered, external comparability, in my mind, no longer yielded “apples to apples” comparisons as it did before the crash and the focus turned more towards the present state of the economy as better reflected by the cost of living.55

Until the economy recovers, the same analysis has to hold here. Like Section 14(h) of the IPLRA for security employee, peace officer and fire fighter

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disputes where external comparability can be used for setting terms of collec- tive bargaining agreements when it is an “applicable” factor, the same require- ment for external comparability to be an “applicable” factor exists in Section 12(a-10)(4) of the Act governing this dispute. We are far from being out of the woods in any real recovery since the onset of the Great Recession. Further, there is no real evidence to show that the economies of the cities identified by the parties fared the same as Chicago so as to make external comparability an “applicable” factor. That will change in the future as the economy comes back. But for now, I just cannot give substantial weight to external comparables to dictate a recommendation in this case. The comparisons with other cities that the parties seek that I make do not, in my opinion, result in “apples to apples” comparisons.

Upon weighing the relevant factors as discussed, I am of the opinion that given the present unknowns of the economic recovery and the Board’s future ability (or inability) to fund wage increases in the out years, the most reliable factor is the cost of living. Although the Union has not done so in its offer, for purposes of this discussion concerning the general wage increase, the Union’s offer of 22% in the first year of the Agreement must be parsed out to differenti- ate increases for movement to the longer school day and year from the general wage increase. As discussed at VIII(C)(2), the Union seeks a 19.4% increase at- tributable to the longer school day and year. For purposes here, that must be taken to mean that the amount attributable to the general wage increase for the first year is 2.6% (22% - 19.4% = 2.6%). The Union specifically then re- quests 3% in the second year of the Agreement. I find the Union’s request for a general wage increase is too high. Similarly, the Board’s offer of 2% per year (which includes movement to the longer school day and year) is too low.

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As discussed at VIII(D), the Board’s Health Insurance proposal is being recommended, which will mean increased costs for the employees with certain groups of employees having to pay more than before. For that reason, the rec- ommended wage increase should be at or slightly higher than the forecasted cost of living increases.

On balance, the wage increases recommended shall be as follows to be applied on all lanes and steps and/or hourly rates:

There must also be a condition placed on the recommended wage in- creases. Although the Board agreed in the 2007-2012 Agreement that it would pay five, 4% wage increases, it did not pay the 4% wage increase for the 2011- 2012 school year. The Board’s rationale for that action was based in Section 47-2.2 of the 2007-2012 Agreement in that raises were made subject to Board’s adoption of a resolution that there is a reasonable expectation that it will be able to fund the increases.56

The problem is obvious. The Board can now agree to the wage increases recommended in this Report (or any wage increases negotiated by the parties), but then, as it did for the 2011-2012 year of the last Agreement, not pay those wage increases. The wage increases recommended by this Report or agreed to by the parties will then be meaningless. To better guarantee that wage in- creases set by the Agreement are, in fact, granted (and to avoid the turmoil caused by the Board’s withholding the 2011-2012 wage increase), there should

Contract Year

Increase

2012-2013

2.25%

2013-2014

2.25%

2014-2015

2.50%

2015-2016

2.50%

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be no operable language in the Agreement similar to Section 47-2.2 of the 2007-2012 Agreement which permitted the Board to not pay a called-for wage increase.

Because of recent litigation between the State of Illinois and AFSCME, there has to be a further condition placed into the Agreement to further guar- antee that wage increases called for by the Agreement are, in fact, paid.

Like the parties here, just prior to the Great Recession, the State of Illi- nois and AFSCME negotiated a collective bargaining agreement. That contract was signed on September 5, 2008 and was for the period September 5, 2008 through June 30, 2012. That contract called for 15.25% in wage increases over that period. The September 5, 2008 effective date of the State-AFSCME contract was significant because while at the time the country and the State were experiencing a recession, a few weeks after the parties completed their negotiations and the Agreement was ratified and signed, the stock market crashed and what was a recession became the Great Recession.

Unlike here, after the contract was in effect and the Great Recession hit, the State and AFSCME negotiated a series of concession agreements to avoid layoffs, which included an agreement by AFSCME to defer certain wage in- creases called for in the collective bargaining agreement. The total concessions granted by AFSCME to the State came to approximately $400,000,000. One of the wage increases which was deferred nevertheless required payment of a 2% increase on July 1, 2011 (rather than a 4% increase to be paid effective that date as originally negotiated). The State failed to pay the 2% wage increase to approximately 30,000 employees as renegotiated effective July 1, 2011 arguing that it did not have to do so because sufficient money to pay those increases were not appropriated by the General Assembly.

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I was the arbitrator for disputes arising under the concession agreements between the State and AFSCME. By award dated July 19, 2011, I found that the State violated the collective bargaining agreement and the concession agreements by failing to pay the 2% wage increase as required to be paid effec- tive July 1, 2011. I ordered the State to pay the 2% wage increase to the em- ployees (with interest). The State made a series of statutory and Constitutional arguments which I found I could not address as an arbitrator because my function was to interpret the parties’ negotiated agreements and the courts are charged with interpreting statutes, the Constitution and public policy.

The State moved to vacate the award and AFSCME moved to confirm it. On July 2, 2012, Judge Richard Billik of the Circuit Court of Cook County ruled in State of Illinois, Department of Central Management Services v. Ameri- can Federation of State, County and Municipal Employees, Council 31, 2011-CH- 25352 (“State-AFSCME Pay Case”) which was followed by a written order on July 9, 2012, that even though a collective bargaining agreement requires payment of specified wage increases (and even though an arbitrator has found that the State was required to make the payments as negotiated), there is an overriding public policy that prohibits the State from disbursing public funds to pay the wage increases without the lawful authority to do so in terms of an appropriation for the expenditure of those funds. According to the Court:57

... [T]here is a well-defined and dominant public policy that can be identi- fied under the circumstances in this case, and that is plaintiff [the State] cannot spend public funds for the Wage Increases without sufficient ap- propriation by the General Assembly to do so, pursuant to section 21 of the IPLRA. Plaintiff has thus identified a public policy which supersedes the policy defendant is advocating that favors collective bargaining and the enforcement of the payment obligations of the parties’ agreements re- sulting therefrom.

***

... Plaintiff has shown that it can assert an identifiable public policy that if established is a defense to plaintiff’s compliance with that contractual

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obligation to pay the Wage Increases. The factual premise of that as- serted public policy defense is that there are insufficient appropriated funds to allow plaintiff to pay any Wage Increases to defendant’s mem- bers in any of the remaining 10 Agencies. The matter is remanded to ar- bitration for a further proceeding to allow plaintiff to establish its public policy defense. ...

By Supplemental Opinion and Award dated July 16, 2012, I declined the remand from Judge Billik and returned the case to him for further proceedings: because I found that in accord with well-established precedent, arbitrators do not determine public policy matters and only function to interpret negotiated contract language in collective bargaining agreements and public policy issues are for the courts to decide:

With all due respect to the Court, the remand as set forth in the Court’s Order of July 9, 2012 is declined. Because arbitrators only interpret lan- guage in collective bargaining agreements and courts interpret public policy, if there are any other proceedings to be had in this dispute con- cerning the State’s public policy argument to justify its non-payment of the contractually required 2% wage increase of July 1, 2011, those pro- ceedings must be before the Court and not before this arbitrator or any other arbitrator.

There was an observation that was made in my July 19, 2011 award in

that case about the impact of that case which is relevant in this matter:58

Because I am an arbitrator functioning solely under the terms of the Agreement and the Cost Savings Agreement, I have not considered the State’s statutory or Constitutional arguments. However, if the State is correct in its statutory or Constitutional arguments that although it has negotiated multi-year collective bargaining agreements with the Union since 1975 (and, I note, has also long negotiated multi-year collective bargaining agreements with other unions), it now does not have to pay negotiated and agreed-upon wage increases in those multi-year collective bargaining agreements because wage increases agreed to by the State in those agreements are, in effect, unenforceable or are contingent upon sufficient appropriations from the General Assembly and that such posi- tions find support in Section 21 of the IPLRA and the Constitution, then a major foundation of the collective bargaining process — the multi-year collective bargaining agreement — has been upended.

Multi-year collective bargaining agreements bring stability to the parties and the public. Multi-year collective bargaining agreements set forth the parties’ obligations and responsibilities over a period of years. It is mostly employers who seek multi-year collective bargaining agreements (typically longer agreements than those sought by unions) so that the employers can have a clear idea of costs associated with labor and so that they can plan and budget accordingly. Because employers in the public sector basically provide services to the public, labor costs (wages and benefits) constitute most of the costs public employers incur.

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If the State is correct that negotiated wage increases in multi-year collec- tive bargaining agreements are unenforceable or are contingent upon ac- tion by the General Assembly (or, for other public entities, the various county, city, village, district councils, boards of trustees, etc.), it is quite likely that very few unions, if any, will now ever agree to multi-year col- lective bargaining agreements. If the State is correct in its position, I highly doubt that any interest arbitrator setting terms and conditions of collective bargaining agreements in security employee, peace officer and fire fighter disputes under Section 14 of the IPLRA will choose to impose anything more than a contract for one year’s duration because final eco- nomic offers made by a public sector employer will, for all purposes, be illusory if those offers are contingent upon subsequent appropriations being passed by the public employer.

If the State is correct in its statutory and Constitutional arguments, the result will be that public sector employers and unions will have to nego- tiate collective bargaining agreements every year instead of having mufti- year agreements (typically three to five years and sometimes longer) which bring labor peace and stability. Some public sector contracts in this state have taken years to negotiate or settle through the interest ar- bitration process under Section 14 of the IPLRA. Having been involved in the collective bargaining process as a mediator and interest arbitrator for over 25 years, I estimate that thousands of multi-year collective bargain- ing agreements have been settled in this state. If the State is correct that economic provisions of multi-year collective bargaining agreements are not enforceable or are contingent upon subsequent appropriations for the out years of the agreements, then the collective bargaining process will be, to say the least, severely undermined. If the State is correct, the result will be most chaotic and costly as public sector employers and un- ions will now have to drudge through the often laborious, time- consuming and costly collective bargaining process on a yearly basis. Unions will do that. Public sector employers will be loathe to have to en- gage in that costly and time consuming endeavor on a yearly basis. If the State is correct in its statutory and Constitutional arguments, the multi-year collective bargaining agreement is, for all purposes, probably dead.

I recognize that for collective bargaining agreements the State of Illinois and the Board operate under different statutory frameworks. But the conse- quences of the State-AFSCME Pay Case — i.e., that the State (or any county, city, village, district councils, boards of trustees, etc.) can negotiate a multi- year collective bargaining agreement and then avoid having to pay negotiated wage increases in the out years of the contracts will jeopardize — if not kill —

multi-year collective bargaining agreements because unions will not want to agree to contracts (especially where concessions may have been granted) only to find out down the road that wage increases previously promised are not go-

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ing to be paid because of a subsequent refusal by the public employer to ap- propriate those funds.

And that is what happened here for the 2011-2012 4% wage increase. Because of the lack of an appropriation, the previously agreed-upon 4% wage increase was not granted. The result has been much of the fuel for the now toxic relationship between the parties. And that is what could be happening here as the Board seeks (and has obtained) the longer term of the Agreement (four years) arguing for stability while the Union sought a shorter term (two years) when there is now a legal cloud hanging over whether the Board as a public employer can pay promised wage increases if it chooses not to appropri- ate for those increases.

The State-AFSCME Pay Case has the very real potential impact of derail- ing the stabilizing effect of multi-year collective bargaining agreements. If that is to be the law in this State, so be it, and all public employers, unions, em- ployees, negotiators, administrators (and arbitrators) will have to live with that result. But the direct consequence of that result is that public employers who want longer collective bargaining agreements will be frustrated in getting those as the unions will see promises made which can be easily broken and will sim- ply not agree to multi-year contracts.

Consistent with the Board’s request as discussed at VIII(B), I have rec- ommend a four year contract. That recommendation avoids much of the prob- lems caused by the State-AFSCME Pay Case due to the reopeners permitted for the third and fourth years (thus, in effect, making this a two year agreement for wages and insurance — a duration consistent with the Union’s request). How- ever, I am not satisfied that those reopeners will prevent a situation where a wage increase called for in the new Agreement is not paid by the Board —

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particularly as the State-AFSCME Pay Case winds its way through the court system and because of the Board’s stated budget difficulties.

The State-AFSCME Pay Case will play out and the law and the impact of the result in terms of whether multi-year agreements will be the exception or the norm will follow. However, for this case — and for purposes of stability — I cannot permit a situation which occurred in 2011-2012 which caused so much turmoil when the Board withheld the 4% wage increase for 2011-2012 to reoc- cur and I further cannot permit a wage increase to be withheld when this Agreement recommends concessions in benefits by the employees (e.g., not re- ceiving a fully proportionate increase based on their wages as of June 30, 2012 for longer days and hours imposed by the Board (discussed at VIII(C)(2)); greater health care premium contributions (discussed at VIII(D)); and phasing out the sick leave banking and payout provisions (discussed at VIII(E)).

To further make certain that wage increases in the Agreement are, in fact paid, in addition to the recommendation that there should be no operable lan- guage in the Agreement similar to Section 47-2.2 of the 2007-2012 Agreement which permitted the Board to not pay a called-for wage increase, I further rec- ommend that in the event the Board does not pay a wage increase called for in the new Agreement, the Union should be relieved of its no-strike obligation as found in Section 47-1 of the 2007-2012 Agreement and the Union may (with 10 days notice to the Board) strike over that failure to pay a set wage increase. In such a case, the Union could strike without first having to go through the im- passe resolution procedures found in the Act.59 Knowing that a strike may re- sult from failure to pay an increase will serve as a deterrent against non- payment.

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 36

The impasse procedures found in Section 12(a) of the Act are pre- conditions to a strike for the formulation of a collective bargaining agreement. This requirement freeing the Union from its no-strike obligations under the Agreement should the Board not follow the terms of the Agreement does not in- volve the formulation of the Agreement, but addresses compliance with the Agreement. In any event, statutory requirements can be waived and, further, the Union has already taken and obtained the necessary strike authorization vote.

2. Compensation For The Longer School Day And Year a. The Computation

According to the Board:60

Chicago Public School students spend 22 percent less time in the class- room than the average American public school student. The Full School Day – with expanded instructional time – will bring to an end Chicago's disgraceful status of having the shortest school day of all major American urban school districts.

The Union attacks any implication that CPS teachers have short work days, citing a study conducted by University of Illinois Professors Robert Bruno and Steven Ashby, Beyond the Classroom, An Analysis of a Chicago Public School Teacher’s Actual Workday (April 9, 2012), which concluded:61

Results from this survey revealed that claims that teachers are working “too short a day” are unwarranted at best and intellectually dishonest at worst. The following are some key findings:

 Teachers on average work 58 hours per week during the school year.  The work of a teacher happens before, during, and after the school

bell rings.

 Teachers on average work a 10 hour and 48 minute standard school day.

 Teachers are at school an average of almost nine hours per day even though elementary students attend school for 5 hours and 45 min- utes and high school students for 6 hours and 45 minutes.

 A typical teacher spends almost 2 hours more working at home in the evening.

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 37

 Teachers carve out another 3 hours and 45 minutes to do school- related work each weekend.

 A teacher’s role goes beyond merely instructing in the classroom. Teachers spend just over 3 hours each day performing non-teaching related activities.

 Teachers also spend an average of 12 days during summer break do- ing at least one school-related activity.

 Teachers average 30 hours of professional development training while the school year is not in session.

It may well be that CPS students do not have long school days compared to other districts. However, CPS teachers clearly work long hours. And there is no dispute that the Board has the unilateral right to increase the length of the school day and year — which it has done.62

Compensation for the longer school day and year is the major flashpoint of this dispute. If the longer school day and year were not part of this equa- tion, coming to terms on a new Agreement would have been a much easier task for the parties. However, the issue of compensation for the longer school day and year is here and is the proverbial elephant in the room. That issue must be decided.63

While the Board has the clear right to increase the school day and the school year, it is simply unfair and unrealistic to expect that employees should be required to work those additional hours and days for free or without fair compensation for the substantial additional work.

The Board’s plan is not to add a few minutes each day or for an addi- tional day for the year. According to the Union’s calculations (which have not been challenged), the longer school day and year will increase teachers’ work in the elementary schools by 21.4% and in the high schools by 14.6%, with a weighted average of 19.4%.64

Many of the employees already work long hours outside of the classroom or workplace.65 As beneficial as the longer school day and year may be to the

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 38

students, the employees should not be required to work the increased hours and days without fair compensation. There simply is no persuasive argument against that proposition. Employees should not be required to work 20% more hours for free or for little increased compensation. The real question is how much should the employees should be paid for the extra hours and days im- posed by the Board?

For purpose of discussion on this issue (and putting aside any disagree- ment the Union may have with the Board’s budget projections), I will accept the Board’s projections for FY 2013 of a total operating revenue for CPS of “... $4.749 billion, which represents a decrease by $120 million from the original amount budgeted for FY 2012 ... CPS appears to be at risk of losing more than $60 million in State funding ... [resulting in that] the initial deficit for FY 2013 approaches a range of over $600 million.66 For purpose of discussion on this issue, for FY 2014 and FY 2015 I will also accept the Board’s projections of flat revenues and high increases in pension contribution obligations, which along with debt service obligations, “... help drive the deficit to projections for those two fiscal years to a range of $1 and $1.3 billion.”67

At first reading, those sobering deficit projections bring Factor F front and center (Section 12(a-10)(4)(F) of the Act — “the employer’s financial ability to fund the proposals based on existing available resources, provided that such ability is not predicated on an assumption that lines of credit or reserve funds are available or that the employer may or will receive or develop new sources of revenue or increase existing sources of revenue”). And the Board relies heavily upon that factor.68

By accepting the Board’s projections, Factor F would ordinarily carry the day for the Board precluding further wage increases over-and-above the gen-

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 39

eral yearly wage increases discussed at VIII(C)(1). But as strong as Factor F appears to support the Board’s position in this case, the Board cannot rely upon that factor for determining the issue of compensation for the longer school day and year.

Section 12(a-10)(4) of the Act is clear that the Panel “... shall base its findings and recommendations upon the following criteria as applicable” [em- phasis added]. The Board cannot expect much weight, if any, to be given to a budget deficit argument to defeat the recommendation for additional compen- sation for the longer school day and year when the Board created the problem by unilaterally implementing the longer school day and year to the extent it has done. Again, the Board chose to exercise its statutory right to extend the school day and year. The Board cannot defeat additional compensation for those longer hours and additional days by arguing that although it has the right to impose the longer school day and year, it cannot afford to pay for it and the employees must therefore work those additional hours and days essentially for free. The analogy raised by the Board’s argument is to an individual who buys a car he cannot afford and because he cannot make the payments argues that he should be able to keep the car even though he cannot make the pay- ments. In such a case, “I can’t afford it” is not a defense — he simply should not have bought the car in the first place. Given that the Board caused this problem, Factor F which looks to the budget is therefore not an “applicable” factor.

Now the question becomes what additional amounts over and above the wage increases should be paid for the longer school day and year?

As a general approach, in the first year of the Agreement the Union is seeking a direct proportionate increase to the existing salary schedules to be

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 40

paid for the added hours and days. I find that approach yields an increase which is too high.

The Union’s argument is that because the school day and school year is increased according to its calculations by a weighted 19.4% (21.4% increase at the elementary school level and 14.6% at the high school level with a weighted average of 19.4% due to 30% of the teachers working in the high schools and 70% working in the elementary schools), wages should be increased by the same percentage for salaried employees to correspondingly compensate them for the increased work hours and days.69 The logic of that argument is compel- ling. Salaried employees should not be forced to work substantially longer hours with increased days without being compensated and it makes sense to increase wages based on the proportional percentage increase in work time.

The Board’s argument is that because of the favorable benefits the em- ployees received under the 2007-2012 Agreement it has already, in effect, pre- paid the employees in prior contracts for many benefits and thus, no further increases should be allowed at this time. But the other side of that argument is that those benefits were collectively bargained in the past and whatever agreements the parties came to in the past were not intended to tie their hands in future negotiations — especially ones that deal with changed circumstances in the economy and length of the school day and year as have surfaced in these negotiations. In short, from the Union’s point of view, what was agreed to in the past should not be held against the employees for the new Agreement.

These past several years have been extraordinarily difficult on public employers including school districts. The Board’s budget problems are a clear reflection of those problems. Although I have found that the Board’s budget problems cannot defeat the Union’s request for additional compensation for the

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 41

longer school day and year, how well the employees did during the Great Re- cession under the 2007-2012 Agreement must tilt the Union’s request for addi- tional compensation downward.

The Union’s final offer seeks a wage adjustment of 22% for 2012-2013.70 However, as discussed at III, over the life of the 2007-2012 Agreement, the em- ployees actually received 16.98% in wage increases (the compounded 16% amount of the four, 4% increases they actually received) while the cost of living only went up 10.33%. Thus, over the life of the 2007-2012 Agreement and even with the withheld 4% increase for 2011-2012, the employees came out of the 2007-2012 Agreement 6.65% ahead of the cost of living.

To fairly compute an increased wage attributable to the longer school day and year, although not to the extent urged by the Board that it has pre-paid its part, consideration must still be given to the fact the employees did very well under the 2007-2012 Agreement (16.98% in compounded wage increases to the salary lanes) as compared to the actual increase in the cost of living for the period covered by the 2007-2012 Agreement (10.33%) which was further in- creased as employees made multiple (and up to five) step movements. One reasonable way to compute an increase for the longer school day and year and to give the Board credit for increases actually received by the employees under the 2007-2012 Agreement which exceeded the actual cost of living increase is as follows:

First, salaried employees’ last contractual wage rates at the expiration of the 2003-2007 Agreement should be increased by the actual cost of living in- crease for that period (presently computed at 10.33%) and not by the com- pounded wage increase they actually received (16.98%).71 This reduction (for

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 42

computational purposes only) brings the employees in line with actual changes in the economy during the life of the 2007-2012 Agreement.

Second, that reduced amount should be increased by the percentage in- crease caused by the Board’s lengthening the school day and year. As an ex- ample and assuming the Union’s computations that the Board’s increased school day and year yields a weighted 19.4% increase in work time required by the salaried employees (which was not challenged), the result from the above paragraph shall then be increased by 19.4% — the weighted increase in hours among all teachers. That result yields the wage adjustment for the longer school day and year and becomes a transitional base salary attributed to the longer school day and year for employees moving into the 2012-2013 school year (the first year of this Agreement).

Third, the wage increase for 2012-2013 recommended by this Report (2.25%) should then be applied to the wage adjustment for the longer school day and year.

An example of the computation using the Lane II, step 8 Master’s Degree teacher who, at the end of the 2003-2007 Agreement received $57,721 in an- nual salary (exclusive of pension pick up) shows the computation:

In simple terms for comparison purposes, the adjustment for movement to the longer school day and year as announced by the Board amounts to a

Lane/Step

Annual Sal-

Increase By Ac-

Added Adjustment

Added Wage In-

ary As Of

tual Cost of Liv-

For Longer School

crease For 2012-

6/30/07

ing During The

Day And Year

2013 (2.25%)

(End Of

2007-2012

(using the Union’s

2003-2007

Agreement

19.4 Weighted

Agreement)72

(Presently

Increase)

10.33%)

II-8 (Master’s)

$57,721

$63,683.58

$76,038.19

$77,749.05

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 43

weighted average of a 19.4% increase in hours. The Union seeks that propor- tionate increase in pay to be added to the last wage rate earned in the 2007- 2012 Agreement. Using this example of the Lane II, step 8 Master’s teacher, the Union’s formula would move that employee from $67,526 (the last wage rate under the 2007-2012 Agreement) to $80,626.04 ($67,526 + 19.4%). The formula used in this example takes into account the economic conditions caused by the Great Recession and the actual increase in the cost of living dur- ing the life of the 2007-2012 Agreement (10.33%) and begins its calculation with what the employee earned just prior to the beginning of the 2007-2012 Agreement ($57,721) and moves that employee on the basis of the actual cost of living (10.33%) to $63,683.58 ($57,721 + 10.33%) and then applies the 19.4% increase in hours, bringing that employee’s wage rate to $76,038.19.

Looking at what that means in terms of an increase over the last wage earned by this employee under the 2007-2012 Agreement, this employee’s last wage earned under the 2007-2012 Agreement is adjusted by 12.6% (($76,038.19 - $67,526) / $67,526) = 12.6%) — and not 19.4% as sought by the Union. In short, in this example, the Union seeks to adjust the last wage rate in direct proportion to the 19.4% increase in hours. This example takes into account the realities of the economy as well as the actual increase in work hours of 19.4% and, in the end, increases the last wage rate for this employee by 12.6% for the increase in hours announced by the Board.

Hourly paid employees should not receive this adjustment because by working the additional hours as a result of the longer school day and year, those employees directly receive the increased wages.73

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 44

b. Alternatives Available To The Board

Based upon the presentations made in these proceedings, if the Board is to fairly compensate the employees for having to work longer hours and days, the Board will not be able to afford the increases resulting from its decision to lengthen the school day and year to the extent it has announced. If the Board desires to lessen the monetary impact of the recommended compensation for the longer school day and year, it has a very straight-forward option — the Board can simply reduce the length of the school day and/or the school year from its stated expansion. Any reduction in the longer school day and year will therefore cause a proportionate decrease in compensation found appropriate for the presently stated longer school day and year.

The Board is totally in control of this issue and can literally dictate the added compensation, if any, attributable to the longer school day and year. However, what the Board cannot do is increase the school day and year to the extent it has done and also expect the salaried employees to effectively work the additional hours for free or without fair compensation because the Board claims it cannot pay for the increase it imposed.

There may be other ways for the parties to resolve the compensation is- sue caused by the Board’s imposition of the longer school day and year. How- ever, those other ways must come through collective bargaining and not through the impasse resolution process.

D. Health Insurance

Effective January 1, 2013, the Board seeks an increase in the employee contribution rate.74 The Union seeks to maintain the status quo by freezing

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 45

current premiums and co-pays and removing any “triggers” for higher employee costs.75

At the beginning of the 2007-2012 Agreement and depending upon the option chosen by the employee (several HMO and PPO options, with distinc- tions for single, couple or family coverage), employees paid a percentage of sal- ary (single coverage ranging from 1.3% to 2.2%; couples coverage ranging from 1.5% to 2.5%; and families ranging from 1.8% to 2.8%).76 For calendar years 2008, 2009 and 2010, employee contributions were frozen at the 2007 level and converted from a percentage of base salary at the time to a flat dollar

amount.77

According to the Board:78

... The flat dollar amount then became the employee’s contribution dur- ing that period, notwithstanding the fact the employees received a 4% wage increase in each of those three years without a concomitant in- crease in their contributions (unless an employee advanced to a higher step or lane during this period, in which case she paid the flat dollar con- tribution applicable to the new salary step/lane). To be strictly accurate, employee contributions were not “frozen” during this period; as a per- centage of salary (the traditional approach) they declined. That was the good news for employees. As a consequence of this temporary freeze, employees were spared an increase of over $11.1 million. Not only did CPS absorb the increase in health care costs over the term of the Agree- ment, it took on the additional burden of discounting the employee con- tributions.

For 2011 and 2012, increases in contributions were dependent upon cost expense. If the cost of health care increased between 1% and 5%, the employee contribution increased by one-half of what it would have been under the per- centage of salary approach and if the increase exceeded 5%, then employees paid the full amount of their contributions as measured by the applicable per- centage of salary then earned.79 The 5% figure is known as a “trigger”. Thus, according to the Board, this provision restored the existing contribution rates, but did not increase them.80

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 46

The Board proposes to keep the existing structure of employee contribu- tions (percentage of base salary depending on plan selected and category of coverage). However, effective January 1, 2013, the Board proposes to set the contribution rate (depending on the plan an employee selects) capped at 2.2% for single coverage; 1.7% to 2.8% for couples coverage; and 2.3% to 3.5% for family coverage.81 According to the Board:82

For couples, the increase is either 2/10 or 3/10 of a percentage point, depending upon the plan selected. For family coverage, the increase is between 1/2 and 7/10 of a percentage point. Note that under these modest increases there remains a significant range – within each cate- gory of coverage – under which employees may select the coverage most suited to their needs. In 2013 the contribution schedule for couples ranges more than a full percentage point – from 1.7% to 2.8%. For fami- lies the range is from 2.3% to 3.5%. Further, the schedule features over- lapping ranges, such that an employee with a family selecting the Lower Cost HMO will pay only 1/10 of a percentage point more than a single employee opting for the Higher Cost PPO.

Further, under the Board’s proposal, there could be additional increases in the contribution rates based upon a 5% trigger:83

Increases in these contribution rates will hinge on the degree of success in containing health care costs. As long as the annual increase in cost does not exceed 5%, there will be no increase in the contributions. But if the increase in any year exceeds 5%, there will be a commensurate in- crease in the contribution rate(s). ...

As part of its health insurance proposal, the Board also proposes a Well- ness Program with incentives for participation in the program which reduces health risk factors and an opt-out provision and non-participation requirement for a $600 per year contribution differential.84

The Board also proposes an increase in co-payments for emergency room visits from $125 to $150 per visit effective January 1, 2013.85

Clearly, during the 2007-2012 Agreement, the Board’s health care costs substantially increased. According to the Board, between FY 2007 and FY 2011, its health care costs increased from $250,765,000 to $353,878,000.86

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The Union does not really dispute this assertion, but argues that according to the Board’s own data from its consulting firm, the cost per member per month for health care is rising considerably below market average.87 But the fact re- mains that the Board’s health care costs have been substantially rising.

The Board’s proposed premium contribution changes are not significant. Wellness programs are beneficial to employees in the long-run an increase in the co-pay for emergency room visits is not a substantial economic burden. Further, balanced against the recommended increased wages, the premium payment adjustments sought by the Board are not significant particularly given the freezes in health care premiums during a major portion of the 2007-2012 Agreement. The largest increase is for those employees who have family cover- age, going from a high of 2.8% of salary for premium to the proposed 3.5% of salary for premium — an increase of .7%. But again, looking at how well the employees did during the life of the 2007-2012 Agreement, that increase is also modest. Keeping the example as simple as possible by not considering the in- creased compensation due to the longer day and year, returning to the Lane II, step 3 Master’s teachers in June 2007 who had the highest coverage for single, couples and family and then progressed through the wage and step increases of the Agreement and then adding in the 2.25% salary increase recommended by this Report for 2012-2013, the following is the result of the Board’s insur- ance proposal:

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 48

COMPARISON OF HEALTH INSURANCE PREMIUM CONTRIBUTIONS FOR LANE II, STEP 3 MASTER’S TEACHERS

Thus, in this example for an increase in salary totaling $21,471 for these employees since June 30, 2007, under the Board’s proposal, these employees will pay a maximum of $471 more (for single coverage), $744 more (for couples coverage) and $1,084 more (for family coverage). Given the substantial salary increases over the duration of the 2007-2012 Agreement and further taking into account the wage increases for the upcoming years recommended by this Report, the Board’s proposed premium increases are quite modest.

It is clear that family coverage costs more — but it should. There are more individuals who are covered by an employee’s family coverage health in- surance benefit as compared to coverage for singles or couples and therefore higher costs are attributable to family coverage due to potentially more use of the benefit. As the Board convincingly argues, the family coverage should also be increased more than the other coverages because the employees with single and couples coverage are, in effect, subsidizing the employees who have family coverage.

The unknown is what effect the 5% trigger for further increases re- quested by the Board may yield. And there is another elephant in the room — the uncertainty of the impact of health care reform legislation at the national

Date

Annual Salary

Single Coverage

Couples Coverage

Family Coverage

(excluding

additional

compensation

for length of

day and year)

6/30/07

$47,576

$1,047 (at 2.2%)

$1,189 (at 2.5%)

$1,332 (at 2.8%)

7/1/12

$69,04588

$1,518 (at 2.2%)

$1,933 (at 2.8%)

$2,416 (at 3.5%)

Increase

$21,471

$471

$744

$1,084

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 49

level, which was just decided in National Federation of Independent Business, et al. v. Sebelius, supra (June 28, 2012) upholding the constitutionality of the Af- fordable Care Act. See e.g., Robert Frank, Giving Health Care a Chance to Evolve, New York Times, July 1, 2012, Sunday Business [discussing the Su- preme Court’s June 28, 2012 ruling in Sebelius]:89

... No one can be sure how the law will play out. ... ***

The new law will hardly be the final word on these issues. Though it takes tentative first steps on cost control, government budgets will be decimated unless we do much more to reduce inflation in medical serv- ices. ...

See also, Peter Frost, Expect a shift in health plans, Chicago Tribune, July 3, 2012, Business [also discussing the effect of the Supreme Court’s deci- sion in Sebelius]:90

Many Chicago-area employers have remained on the sidelines with their employee health plans, waiting for the U.S. Supreme Court to determine whether the 2010 health care overhaul passed constitutional muster.

But with the court’s decision last week to uphold most of the law, com- panies may pursue a historic change.

Many employers are quietly considering a move away from traditional de- fined benefit plans and toward defined contribution plans, which set aside a fixed amount of money each year for employees to use toward health care costs.

***

While there’s little doubt a transition is afoot, companies are unlikely to make wholesale changes until a cloud of uncertainty is resolved.

Because 2012 is an election year, there’s a chance that the law, or major portions of it, could be repealed if Republicans are able to gain control of Congress and the White House from Democrats.

Further, even if the law survives the general election, no one knows how well the state-based health insurance exchanges will work when they come online in 2014 ....

Bargaining on health care is almost impossible. As pointed out by the Board, see my interest award in City of Chicago and Fraternal Order of Police, Lodge 7 (2007 Agreement) at 72 and cases cited:

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 50

... as I have unfortunately had to observe before, in the current economic climate collective bargaining between employers and unions on health care issues is most difficult. “Insurance costs are skyrocketing which makes bargaining on this issue border on the impossible.”

Add to that the uncertainties of what will happen as national health care legislation plays out, setting long-term health insurance provisions for the out years of the Agreement is simply not wise because it is all premised on guess- work. But nevertheless, the Board has sustained substantial increased costs attributable to health insurance.

The focus at present for this dispute has be on the substantial increased costs sustained by the Board and the uncertainty of what is to come. There- fore, the Board’s insurance proposal is recommended, but with several condi- tions:

First, because of all of the future uncertainties, there should be no trig- gers in the Agreement for increased insurance contributions by employees. However, commencing January 1, 2014 (or any other date agreed to by the par- ties), the parties should have the right to reopen the Agreement on health in- surance. That reopener should cover the final two years of the Agreement —

2014-2015 and 2015-2016. By January 2014, the parties should be in a bet- ter position to assess what the real cost impacts of the Board’s health insur- ance proposal are — both on the Board and the employees.

Second, should either party reopen on health insurance, unless agreed otherwise, the Agreement should also be reopened on wages. Simultaneously reopening on wages and health insurance will allow the parties to assess the economy at that time and address the real economic conditions on the ground, which at this time, are just guesses.

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 51

Third, Section 12(d) of the Act provides that “[n]othing in this Act pre- vents an employer and an exclusive bargaining representative from mutually submitting to final and binding impartial interest arbitration unresolved issues concerning the terms of a new collective bargaining agreement.” Should there be an impasse between the parties after negotiations for any reopener de- scribed in this section, that dispute should be resolved by an expedited interest arbitration proceeding to set the new insurance rates, wages and conditions utilizing the factors set forth in Section 12(a-10)(4) of the Act.

Fourth, for employees who go on extended leaves of absence, the Board seeks to change the current contract provisions which provide that those em- ployees pay only the contribution rate for active employees as opposed to CO- BRA, where they would pay the actual cost of coverage.91 The Board states that this benefit is “... conservatively estimated at $670,000 per year.”92

The Board has the burden to demonstrate why that type of change is needed. Without a specific showing of abuse or other factual basis for chang- ing the benefit, the Board’s showing falls far short of meeting its required bur- den. It is recommended that this provision concerning employees on extended leaves of absence should remain unchanged.

E. Sick Leave And Short-Term Disability Leave

Employees currently receive 10 sick and three personal days per year which can be accumulated up to a maximum of 325 over the course of their ca- reer.93 Upon retirement, resignation, or death (and depending upon meeting specified criteria, e.g., age and length of service), employees can receive a pay- out of between 85% and 100% of the value of accumulated sick days to a maximum of 325 days.94 In FY 2012, CPS projects having to pay out $52 mil-

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 52

lion in accumulated sick leave for departing employees.95 The Board estimates that CPS has $459 million on its books for accumulated sick leave.96

The Board proposes that it will continue to honor sick leave banks in that days in those banks will remain available for use and payout upon separa- tion, but will be frozen; going forward, employees will continue to receive 10 paid sick days and three personal days per year, but those days not utilized in that year will not be eligible for carry over and will not be added to bank of ac- cumulated sick leave and unused sick days accumulated after July 1, 2012 will not be used for payout on retirement.97 The Board proposes to add (at no-cost to the employee) a short-term disability benefit which activates after 10 days of illness (including maternity leave days) and will pay 100% of the employee’s regular salary during the first 30 calendar days of illness, disability (or mater- nity leave); 80% of salary for the next 30 calendar days; and 60% for the third 30 calendar day period (with long-term employees having the option of taking short-term disability benefits and the sliding scale rates or drawing down from their accumulated sick leave banks at 100% salary).98

The Board’s proposal provides a substantial no-cost benefit to the em- ployees (particularly for those who do not have sufficient accumulated days in their leave banks, thereby providing, for those who need it, a paid maternity leave benefit they do not presently have); to a great degree maintains the exist- ing benefit for employees with accumulated days for payout upon separation; and, in the long-term, provides a substantial cost reduction for the Board be- cause leave banks will no longer be accumulating.

Paid sick days are typically designed to compensate employees when they are too ill to work. Here, with its carry over, banking and payout provisions, the sick leave benefit has become a costly retirement benefit unrelated to an

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 53

employee being incapable of working due to illness. That benefit has now caused the Board potential substantial liabilities. In light of the Board’s offer for a short-term disability benefit, maintenance of certain aspects of the sick leave benefit and the gradual phase out of the payout provisions of benefit over time and given how costly the sick leave benefit has become, that benefit should now be modified, but in a way that does not harm long-term employees who have planned their retirements based upon the prior promises of the Board to compensate them for banked sick leave.

The Board’s proposal is recommended, with the condition that the par- ties are able to agree upon a method to compensate (monetarily or otherwise) long-term employees who exceed a specified number of years of service to be agreed upon by the parties. If the parties can agree upon how to treat long- term employees, the Board’s proposal is recommended. Otherwise, no change is recommended.

The Union seeks leaves of absence provisions in Article 33; seeks to give PSRPs the right to take leaves of absence along with teachers; allowance of leave to attend legislative sessions and extensions of leave for commencement; conforming provisions to requirements of law; and extending the Pension En- hancement Program for another contract term and adjusting the payout method to satisfy legal obligations.99 The Union has not demonstrated why those changes should be recommended. Those kinds of achievements will have to come through the bargaining process.

F. Job Security/Reassignment and Appointment

The Union points out that since the summer of 2010, CPS laid off 2,500 teachers, institutional coaches, city-wide specialists and paraprofessionals; there is an expectation that there will be further layoffs; entire staffs at targeted

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 54

schools are terminated regardless of qualifications; and there will be an expan- sion of non-union charter schools which serve to divert attendance away from neighborhood schools and cause existing schools to lay off staff.100 The parties have been through and are still going through litigation concerning tenure and reassignments rights of faculty (in court, before the Illinois Educational Labor Relations Board and in arbitration).101 The Union also asserts that in July 2010 and for the first time in CPS history, 1,288 teachers and PSRPs were laid off due to lack of work, which, according to the Union, meant they were dis- charged and were not placed into the reassigned teacher pool under Appendix H of the 2007-2012 Agreement (which would have allowed them a year’s wages while worked temporary assignments in schools until they were permanently appointed), which resulted in protracted litigation.102

The Union argues that “[r]educing teacher turnover by preserving quali- fied teachers within the system is vital to improving education at CPS and a critically important bargaining objective by the CTU”.103 Therefore, according to the Union, “[a] robust, clear and well-developed reassignment and recall process is critical to providing students, their families and the teachers who serve them with highly qualified instructors who are provided a secure path- way back into their classrooms in the event of budget cuts, changes in educa- tional focus, drops in enrollment and other school actions where the entire staff is cut.”104 The Union proposes establishment of a pool of displaced teach- ers from which principals must first hire for vacancies before hiring from other sources.105

Even assuming this Panel had jurisdiction to consider this issue, no change can be recommended.

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Under current conditions, school closings, consolidations and other ac- tions often leave senior and highly-qualified teachers with few opportunities to directly move to other schools. As a result, the teachers lose their positions and the students lose the ability to benefit from the experience and talent of those teachers. Perhaps the current system is in need of repair and is not functioning well. At best, the Union has made an argument for a good idea. The Union really argues that current job security/reassignment provisions util- ized by the Board have unfair results. However, the current system is not bro- ken to be corrected through the impasse resolution process. Any changes to the provisions of the Agreement governing job security/reassignment and ap- pointment must be negotiated.

No change is recommended. If this issue is to be resolved, this issue must be addressed through bargaining.

G. Other Issues Raised By The Union

The Union has raised other issues concerning changes to evaluations, reducing class size, staffing of non-classroom teachers, full curriculum, prepa- ration periods, professional development, special education periods, profes- sional standards, bullying, and paperwork reduction.106 Again, even if this Panel had jurisdiction to consider these issues, at most, the Union is proposing better ways from its standpoint to address these issues. The Union has not shown that the existing conditions are broken. These kinds of changes must come through bargaining. No changes for these issues can be recommended.

H. Conformity With Law

A number of the provisions of the Agreement may be inconsistent with present provisions of the law. The parties should establish a committee to ex-

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 56

amine the 2007-2012 Agreement and change provisions not in conformity with current laws.

I. Tentative Agreements

All other agreements not addressed by this Report and reached by the parties during negotiations should be incorporated into the Agreement. IX. CONCLUSION

This is a volatile labor dispute in a toxic collective bargaining relation- ship. The different approaches of the parties have resulted in a confrontation that has all the makings of a full-scale labor - management war. The Union has now successfully taken a strike authorization vote — resoundingly so, with a 90% vote — and, absent the non-rejection of this Report or a meeting of the minds across the bargaining table, the war is about to become very real.

The tragic irony of this case is that as incendiary as this dispute is, when it comes to the children who are impacted by this matter, both sides truly have the same goal — to better educate the children of the City of Chicago. The par- ties’ approaches are just so drastically different.

The Panel has now performed its statutory function and issued this Re- port with “... advisory findings of fact and recommended terms of a settlement for all disputed issues ...” for the new Agreement.107 Under the statutory scheme, the next step is that during the 15-day period from today, the Board or the Union can either reject the Report or, through silence (and thus non- rejection), accept this Report’s recommended terms which will then be incorpo- rated into the parties’ new Agreement thereby ending the dispute. The signifi- cance of the parties’ actions (or non-actions) in the next 15 days is critical. A potential massive strike is looming. The public is now intensely watching to see what the parties choose to do.

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While my colleagues on the Panel may not agree with all of the recom- mendations I have made, the recommendations made in this Report are, in my opinion, a fair a resolution of the disputed issues between the parties formu- lated in a most difficult situation and within the confines of my authority under the Act. Should either party reject this Report, the consequences may well be dire — approximately 25,000 teachers covered by the Agreement potentially go- ing on strike putting some 400,000 students out of school when those students should be in school receiving quality educations.

As the Neutral Chair and Fact-Finder, it should also be lost on no one what I am now attempting to do with this Report. Section 12(a-10)(3)(I) of the Act gives me the authority “... to attempt mediation ....” Notwithstanding ex- tensive and professional cooperation between the parties, thus far, the media- tion process has been engaged in, but it has failed. As of this writing, the par- ties remain too far apart and the chasms on all of the major issues just have not been bridged. Major bargaining goals sought by both parties have not been obtained through this fact-finding process. This process is just not a substi- tute for the give and take across the bargaining table.

With the Board’s position that there is going to be a longer school day and year and the corresponding costs which come with requiring employees to work longer, I recognize that given its current budgetary difficulties, the eco- nomic provisions of this Report may be too much for the Board to accept. The Board has control over much of the major monetary impact recommended by the Report — i.e., the compensation for the longer school day and year. As dis- cussed at VIII(C)(2)(b), if the Board desires to lessen the monetary impact of the recommended terms of this Report, it can simply reduce the school day and/or year from its stated expansion. The reduction in the compensation for the

Chicago Board of Education and Chicago Teachers Union Fact-Finding Report Page 58

longer school day and year as recommended in this Report will be proportion- ate.

I also recognize that if the Board implements the terms of this Report, it may well be that layoffs and/or increases in class size will follow — a situation which is self-defeating to the parties’ overall stated goal of better educating the children in the City of Chicago. But again, in many respects, the Board has brought that prospect on itself by moving to the longer school day and year in such a dramatic fashion when it does not have the resources to do so. And the Union has also contributed to the potential problem by not compromising fur- ther on economic issues when it did so well under the 2007-2012 Agreement —

something that may have to do with the bad blood caused by the Board’s withholding the 4% wage increase called for in 2011-2012.

Additionally, those same economic provisions and the lack of any af- firmative relief on other issues identified as important by the Union, but not achieved, may prove too little for the Union to voluntarily accept. While in my opinion, the recommendations in this Report are supported by the statutory factors or are not permitted by those same statutory factors, the reality is that the parties remain so far apart that even a fair resolution as recommended here will not avert the strike that is coming. I am still following the mandate in Sec- tion 12(a-10)(3)(K) of the Act that I am “to employ any other measures deemed appropriate to resolve the impasse.” Should either side reject this Report, with this Report, I am attempting to drive the parties back to the bargaining table to resolve this dispute. There are still trade-offs that can be made. The parties now know their strengths and weaknesses and far as the statutory fact-finding process is concerned. There has to be more flexibility on both sides than has been shown thus far. If this dispute goes to the next step — i.e., to the street

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— neither party will win this dispute and the children of the City of Chicago will be the ultimate losers. The only difference will be that there will be a strike, but the differences between the parties will still be there.

The short but difficult solution to this dispute is that the Board cannot unilaterally restructure the Union’s contract and further expect employees to work 20% more for free or without fair compensation because the Board opted to exercise its statutory right to lengthen to school day and year at a time when it is in a very difficult budget situation. And the employees must put aside the rage caused by the Board’s withholding the 4% increase for 2011-2012 and recognize that because they still did so well over the life of the 2007-2012 Agreement, there must be a tempering of their economic demands for the next Agreement.

I have been a labor law

Dated: July 16, 2012.

APPEARANCES: For the Board: James C. Franczek, Jr., Esq. David A. Johnson, Esq. Stephanie B. Donovan, Esq. Jennifer A. Dunn, Esq.

For the Union: Robert E. Bloch, Esq.

BEFORE FACT-FINDING PANEL

EDWIN H. BENN (Fact-Finder and Neutral Chair) JESSE J. SHARKEY (Union Panel Member) JOSEPH T. MORIARTY (Board Panel Member)

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