1. Money Matters: Costing & Ability to Pay Iowa Professional Fire Fighters University of Iowa Labor Center

2. What is Costing? The Employer’s attempt to estimate the future labor costs of the bargaining unit. Forecast Projection Based on conventions and assumptions

3. Forecast Economic forecast, like a weather forecast, not expected to be entirely accurate.

4. Projection How do we predict the future? What happened in the past Trends

5. Partial Picture Employer will have overall budget projection, but will only want to bargain over the costs associated with the bargaining unit. Pie grows by 50%! What happens to our slice?

6. Costing Conventions What do you count? Straight time v. Overtime Vacations/holidays Sick Leave Insurance Taxes Workers’ compensation Etc.

7. Costing Assumptions Change/no change in workforce (turnover) Change/no change in wage progression (step movement) Change/no change in insurance enrollment Change/no change in business structure or operations

8. Conclusion: There is no “right” way to do costing, but it is important to agree, as much as possible.

9. Why Does the Union do Costing? 1.Need to know what employer is thinking 2.To get best deal for our members 3.Calculate and evaluate “trade-offs” 4.Argue for or against a proposal 5.Educate and advise membership

10. 1. Need to Know What Employer is Thinking Employer’s bargaining team has a limit or “authority”, beyond which they can’t go. May be conditional May be flexible

11. 2. Get the Best Deal for Members Need to understand how the employer is doing costing to evaluate the offer they are making. “This is the best we can do.” Cost is 3.9% Take it?

12. 3. Calculate “Tradeoffs” “We’ll pay an additional $50/month toward the insurance or you can have a $.50/hour raise.” You have 30 seconds to decide. Which one do you pick?

13. 4. Argue For or Against Proposal Employer proposes a less comprehensive insurance plan, but wage proposal doesn’t include all the cost savings. Union proposes additional holiday and Employer responds by lowering its wage offer by more than the cost of the holiday.

14. 5. Educate and advise members Employer thinks in terms of total cost. “This offer represents $1,984,762 in new expenditures.” Members think about individual benefits. “I’ll make $1,984.76 more a year under the new contract.” “The wage increase is only 1% under this offer, but the employer is going to absorb the whole insurance premium increase, which is the equivalent of another 3% in wages.”

15. Costing Basics - Wages 100 employees Everyone makes $16.00/hour Calculate value to each employee of 3% increase (per hour and per year) For three years What’s total cost to employer?

16. Costing Basics - Wages CurrentYear 1Year 2Year 3 $16.00$16.48$16.97$17.48 x 3% $.48$.49$.51 CurrentYear 1Year 2Year 3 $46,592.00$47,989.76$49,416.64$50,901.76 CurrentYear 1Year 2Year 3 $4,659,200$4,798,976$4,941,664$5,090,176

17. Costing Basics - Rollups What does $1.00/hour increase really cost the employer? ItemRateCost Wage$1.00 FICA7.65% IPERS5.75% Total1.132%

18. Costing Basics - Rollups What does $1.00/hour increase really cost the employer? ItemRateCost Wage$1.00$2,192.00 FICA7.65%$167.69 IPERS5.75%$126.04 Total1.132%$2,485.73

19. Costing Insurance Status Total Premium Employee Share Employer ShareNumber Employer Total Cost Single$450$25$4257$35,700 Family$900$150$75038$342,000 TOTAL$377,700

20. Costing - Big Picture

21. Ability to Pay Does the City have enough revenue to finance the increased costs?

22. Revenue Where does it come from? –Property taxes, assessed by City, collected by County –Fees and charges –Interest income What makes it increase? Are there limits?

23. Revenue How do we know how much the City has? Comprehensive Annual Financial Report. Numbers don’t mean anything without context. Trend is what is most significant.

24. City of Iowa City

25. Revenue What if it’s down? Look at fund balances Cost savings Get help