Tuesday, February 17, 2009

Summary of Negotiations to Date

Contract negotiations between the Neshaminy Board of School Directors and the Neshaminy Federation of Teachers (NFT) began in January 2008. The goal of these negotiations is to reach agreement on a new contract for certified staff to replace the old one that expired on June 30, 2008. Because no agreement was reached by that date, the NFT thus far has continued to work under the terms of the old contract. The rules governing collective bargaining for Pennsylvania public school employees are defined under Pennsylvania's Act 88, which was passed into law in 1992. The two sides have met 15 times since January 2008, but there were significant delays in obtaining detailed information requested by the NFT from the District’s health insurance carrier Independence Blue Cross. As of February 2009, the Board and NFT have not reached agreement on any substantive issues.
From the beginning, the Board has made it clear that one of its primary goals was to stop the runaway cost increases associated with the health benefits plan provided to employees under the prior contract. The District's total employee benefit costs increased by 60 percent over the course of the last six-year contract, and the NFT's members and retirees who still draw health benefits from the District accounted for about 80 percent of those costs.
The current base medical package under the prior contract – Personal Choice 15 – is provided by Independence Blue Cross, and is one of the most expensive among all school districts in Bucks County. The current companion prescription drug plan is Rx 5/20, where employees incur a $5 co-pay for generic drugs and a $20 co-pay for brand-name drugs. The plan also includes a "single source" provision that allows employees to pay the lower $5 generic rate for any brand-name drug that does not have a generic equivalent; this provision covers over 90 percent of all brand-name drugs. The District also offers a less expensive HMO medical and drug plan alternative to employees; in the 2008‑09 year, less than 10 percent of NFT members selected the HMO plan.
In addition, Neshaminy is the only District in Bucks County that provides a full and free benefits package to retired employees, which is good until they become eligible for Medicare (usually at age 65). Most important of all, Neshaminy employees make ZERO contribution toward their health care premiums. Neshaminy is the only District in Bucks County where employees do not make any premium contributions.
Taken together, the medical and Rx plans for current and retired certified staff cost taxpayers over $12.5 million in the 2007-08 school year.
In light of these facts, the Board has sought substantive changes to the medical and prescription drug plans. The Board's initial proposal was to switch the base medical plan from Personal Choice to a managed care plan called C1-F1-O1. Unlike Personal Choice, this plan would require employees to enroll with a primary care physician and obtain referrals for certain types of specialist care. The overlap in doctor participation between the two plans is well over 90 percent. In addition there would be changes in certain coverages and co-pays.
Early estimates from Blue Cross indicated that making the change to C1-F1-O1 for the 2008-09 school year would reduce the costs to cover certified staff from $12.5 million in 2007-08 to $8.7 million in 2008-09, a savings of $3.8 million, while still providing the staff with excellent medical and prescription drug coverage.
The HMO alternative would continue to be offered; other Personal Choice options (with higher prescription drug co-pays and formulary restrictions) would also be offered as “buy-up” plans where the employee would be responsible for any increase in premium over the base plan.
Regarding premium co-pays, the Board's initial proposal called for employee contributions of 10% in Year 1 of the new contract, 11% in Year 2 and 12% in Year 3. These rates are in line with what employees in many neighboring school districts currently pay.
From the beginning, the NFT indicated no willingness to move away from the current health benefits package. Because no agreement was reached by June 30, 2008, and because there still is no agreement, the District has been forced to continue the identical package of benefits that existed last year – PC15 and the Rx 5/20 plan with the single source drug provision. As a result, instead of health benefit costs declining by $3.8 million this year, they have risen by $1.3 million, or over 10 percent.
In September 2008, after Blue Cross verified to the parties that the single source drug provision alone costs the District well over $1 million annually, the Board also proposed eliminating that provision. No other District in Bucks County offers it; in fact, to our knowledge no other District has had it since at least the early 1990s.
Recent rate estimates provided by Blue Cross in December 2008 suggested that, moving forward, there would be substantially less savings under the managed care plan than would have been the case for the current school year. As a result, in January 2009 the Board unilaterally dropped its managed care proposal and reverted back to a base plan offer under Personal Choice – PC 20/30/70, along with a 5/30 prescription drug plan without the single source provision. Employees therefore would continue to enjoy a benefits package that does not require enrollment with a primary care physician, would not require referrals for most specialist care, and would not include drug formulary restrictions.
In light of the fact that every other District in Bucks County has had premium contributions for years, and the unilateral offer to move back to Personal Choice without drug formulary restrictions in the base plan, the Board also revised its proposal for employee premium contributions to 15%, 16% and 17% over three years.
Unfortunately, the NFT's response to the Board's latest proposal indicates a clear unwillingness to recognize the dire financial troubles that the District and taxpayers face during these challenging economic times. The union rejected the Board’s offer, and has now proposed moving to Personal Choice PC20 with a 10/25 drug plan, keeping the single source provision, and continuing zero premium contributions. If accepted, the impact of this proposal would be that health care costs would increase next year by "only" $1.8* million instead of $2 million if the old plan were kept. This is on top of the $1.3 million increase in costs already being incurred this year due to the retention of the old plan.
(*Subject to change based on final rates provided by Blue Cross.)
Moving to a less expensive Personal Choice plan and instituting premium contributions for the first time would cover the costs of the Board’s unchanged offer to increase average annual salaries by more than 3 percent for returning staff (including built-in step increases). Over a year ago, the NFT proposed an annual salary increase of over 6 percent. Since that time, the country has endured its worst economic crisis in 75 years, residents are losing their jobs, and retirement savings have been cut in half. Unbelievably, the union has refused to move at all from its original proposal, still insisting on 6 percent raises for each of the next three years. Taken together, the union’s current salary and health benefit proposals would increase District costs by an estimated $5.4 million next year alone.
The District wants and insists on a fair contract for its valued teaching staff. At the same time, we are facing a potential budget deficit of $14 million for next year that must be closed by June. Neshaminy remains the only district in Bucks County where teachers pay nothing toward their health care premiums, have the single source drug provision, receive a $27,500 lump-sum cash payment at retirement along with a full benefits package until age 65, and receive salary credit for enrolling in non-Masters Degree courses. On top of all this, the NFT is asking for a 6 percent increase in salaries. Especially under current economic conditions, the Neshaminy School Board believes it is unreasonable and unfair to expect taxpayers to continue to support outrageous salary demands and benefits for teachers that are so far out of line with what everyone else offers.