1. The Shifting Total Compensation Paradigm Practical Tools for Negotiations and Recruitment John Yeh, Partner Burke, Williams & Sorensen, LLP ACSA Negotiators’ Symposium, January 20, 2016

2. Today’s Objectives Basic legal principles Components of compensation (salary, benefits, STRS/PERS) Methodologies for assessing economic value of components LCAP issues Tools for comparing total comp Bargaining strategies

3. COMPONENTS OF COMPENSATION

4. Components of Compensation “Direct wage compensation” (according to salary schedule)  Stipends for extra/ adjunct duty STRS/PERS contribution Health and welfare benefits (medical, dental, vision) What else ….. ?

5. Components of Total Compensation Gov’t Code Sec. 3548.2: Look at overall compensation, including: direct wage compensation vacations, holidays, and other excused time, insurance and pensions, medical and hospitalization benefits, continuity and stability of employment; and all other benefits received.

6. SALARY: BASIC LEGAL PRINCIPLES

7. The Salary Schedule Educ. Code Sec. 45028: Each certificated employee “shall be classified on the salary schedule on the basis of uniform allowance for years of training and years of experience.” “Employees shall not be placed in different classifications on the schedule, nor paid different salaries, solely on the basis of the respective grade levels in which such employees serve.”

8. The Salary Schedule Educ. Code Sec. 45028: District can “grant any employee hired after a locally specified date differential credit for prior years of experience or prior units of credit for purposes of initial placement on the salary schedule of the district.” Exceptions: teachers of special day and evening classes in elementary schools, teachers of special classes for elementary pupils, teachers of special day and evening high school classes and substitute teachers.

9. The Salary Schedule Agreement to move all teachers in Steps 17-20 back to Step 17, to allow more rapid advancement of all unit members to highest step, violated uniformity requirement. Adair v. Stockton Unified School Dist. (2008) 162 Cal.App.4th 1436

10. The Salary Schedule Negotiated Exception to uniform salary schedule requirement: Mandatory bargaining subject, Agreement required to implement non-uniform schedule. Gov. Code Sec. 3543.2(d)&(e)

11. THE ECONOMICS OF WAGE ACCRUAL

12. O“Scoresheet”V Year 1: Higher Starting Salary Year 5: Faster Progression Year 9: Gap Widens to approx. $5,000/Year Year 9: Step Advancement Does Not Top Out Year 15: Takes 15 Years for V to Reach top of O Year 15 and Beyond: Continued increases Source: http://www.ve nturausd.org/ Portals/5/Cert ificated%20S alary%20Sch edules/14- 15%20SY%20 Certificated% 20Salary%20 Schedule%20( Teacher%20S peech%20The rapist%20Nur se%20Counse lor).pdf Source: http://www.orangeusd.k 12.ca.us/hr/SalarySche d/CESALARYSCHEDULE Tchr.pdf

13. Side-by-Side Cumulative Impact

14. 14 WORK YEAR IS 184 DAYS Source: http://www.sandi.net/ cms/lib/CA01001235/Centricity/ Domain/94/salaryschedules/Affected%20Jan%201%202013/Tea chers.pdf Source: http://dmusd.org/cms/lib02/CA 01001898/Centricity/Domain/5 8/2013- 14%20Salary%20Schedule%2 0- %20Group%203_Board%20Ap prov%2004-23- 14_CERTIFICATED.pdf SDSD “Scoresheet” DMDM Year 1: Higher Starting Salary Year 5: Faster Progression Year 7: Gap Widens to approx. $9,000/yr Year 7: Step Advancement Does Not Top Out Year 16: Takes 15 Years for SD to Reach top of DM Year 17 and Beyond: Salary Schedule tops out at higher salary

15. Side-by-Side Cumulative Impact

16. Factors Impacting the Economics of Salary Schedule Progression Starting salary Increases between steps Number of years to reach maximum step Maximum salary at highest step Step at which salary maxes out How long employee works at school district

17. Addressing Salary Schedule Progression In Bargaining Be aware of your reality Understand comparable district reality Quantify comparison when possible Avoid unintended consequences Don’t get whipsawed

18. IMPACT OF LOCAL CONTROL FUNDING FORMULA (LCFF)

19. LCFF – The Basics Base Grants Supplemental & concentration grants  LCAP must show use to increase services to unduplicated pupils proportional to increased funding (Ed. Code Sec. 42283.07(a)(1); 5 CCR 15496(a))

20. LCFF – The Basics Districtwide use of supplemental & concentration grants: Enrollment 55% or more: show services principally directed at, and effective in meeting, unduplicated student goals Enrollment less than 55%: show use is most effective to meet unduplicated student goals and basis for determining, including options considered, research, etc.

21. LCFF – Impact on Compensation Negotiations Comparability Do the usual indicators of comparability still apply? Demographics, student achievement, geography Does LCFF funding model create new “peer” districts?

22. LCFF – Impact on Peer Benchmarks Ability to Pay Using LCAP to demonstrate the “public interest” along with ability to pay Limits on supplemental & concentration grant use

23. HEALTH AND WELFARE BENEFITS

24. Health and Welfare Benefits – Fundamentals What should the contract specify? Eligibility  When eligibility triggered  Pro-ration for partial FTE? When eligibility terminated  Suspension without pay?  Leave of Absence?  Resignation/Dismissal? Types of coverage offered  Medical, dental, vision

25. Health and Welfare Benefits Costing/Comparisons 3-tiered Highest paid Compare pro-ration rules Data collection challenges

26. THE ECONOMICS OF HEALTH AND WELFARE BENEFITS

27. Health and Welfare Benefits – Economics Levels of Coverage –Single –Employee + 1 –Family

28. Health and Welfare Benefits – Economics External plan comparisons  Co-Pays  Deductibles  Premiums  Contribution caps  Internal comparison issues

29. RETIREE HEALTH AND WELFARE BENEFITS

30. Retiree Health and Welfare Benefits Requirements for eligibility?  Years of service Types of and scope of coverage  Same coverage as current employees, or  Coverage in effect on date of retirement Retiree contribution  Frozen at date of retirement, or  Changes with current status quo At what level, cost, and type of benefits does the retiree “vest?”

31. Retiree Health and Welfare Benefits Comparing costs Comparing coverage

32. RETIREMENT / PENSION BENEFITS

33. Retirement Benefits - Pension Future retirement benefits and related costs are part and parcel of overall compensation County of Sacramento (2008) PERB Dec. No. 1943-M.

34. Retirement Benefits - Pension Government Code requires factfinders to consider, weigh, and be guided by overall compensation, including pensions and all other benefits received Gov. Code, Section 3548.2 Pension costs represent a large portion of overall compensation - - future wages

35. Retirement - Employer Contributions 2015/16 – 10.73% 2016/17 – 12.58% 2017/18 – 14.43% 2018/19 – 16.28% 2019/20 – 18.13% 2020/21 – 19.10% 2015/16 – 12.6% 2016/17 – 11.847%* 2017/18 – 13.047%* 2018/19 – ?* 2019/20 – ?* 2020/21 – ?* CalPERSCalSTRS *2016/17 and 2017/18 rates based on April 15, 2015 CalPERS projections; CalPERS previously (March 2014) projected a 20.4% employer contribution rate in 2020/21. Undated projections should be released soon.

36. Retirement – Employee Contributions Recognize that employee costs are rising too

37. Retirement Costs (PERS rates use 2014 estimates) 37

38. Capturing Retirement Costs Include retirement costs when comparing year-over- year compensation increases to CPI

39. TOOLS FOR TRACKING TOTAL COMPENSATION

40. Total Compensation Comparison Wellmade Unified School District Total Compensation Comparisons for Teacher BA + 30 Salary Pension and Health For 2015-16 Year Revised: 8-15- 2015 District Total Employer STRS Rate 1 Match Class Monthly Salary (Top Step) Employer Retirement Cost Cafeteria Plan Max Family Health ER Contribution DentalVision Total Caf., Med, Dental, Vision Total Direct Agency Costs AUSD 10.730%BA + 30$5,138.00$551.31$0.00$1,419.47$54.24$15.32$1,489.03$7,178.34 BUSD 10.730%BA + 30$5,956.00$639.08$0.00$1,948.22$95.00$30.90$2,074.12$8,669.20 DUSD 10.730%BA + 25$4,985.00$534.89$0.00$1,200.00$154.01$26.87$1,380.88$6,900.77 EUSD 10.730%BA + 30$5,502.00$590.36$0.00$2,400.06$188.20$23.92$2,612.18$8,704.54 JUSD 10.730%BA + 30$5,617.00$602.70$0.00$1,988.69$176.93$0.00$2,165.62$8,385.32 IUSD 10.730%BA + 25$5,309.00$569.66$1,502.00$0.00 $1,502.00$7,380.66 LUSD 10.730%BA + 35$5,999.00$643.69$1,660.00$0.00 $1,660.00$8,302.69 NUSD 10.730%BA + 30$6,320.50$678.19$0.00$1,710.11$191.18$31.14$1,932.43$8,931.12 PUSD 10.730%BA + 30$5,349.00$573.95$0.00$1,681.50$125.00 $1,931.50$7,854.45 RUSD 10.730%BA + 25$5,366.00$575.77$0.00$119.00$0.00 $119.00$6,060.77 SUSD 10.730%BA + 30$4,977.00$534.03$0.00$1,812.07$131.63$13.93$1,957.63$7,468.66 VUSD 10.730%BA + 30$4,201.00$450.77$0.00$1,550.04$143.21$13.30$1,706.55$6,358.32 Average:$5,393.29$578.70$263.50$1,319.10$104.95$23.37$1,710.91$7,682.90 WUSD 10.730%BA + 30$5,765.00$618.58$1,022.00$0.00$125.00$0.00$1,147.00$7,530.58 Percentage above/below the average of comparable districts. -2.0% fn 1: For classified employees PERS rates should also identify any EPMC (employer paid member contributions).

41. Individual District Snapshot

42. Measuring Compensation Against CPI

43. OTHER COMPONENTS OF EMPLOYEE COMPENSATION

44. Other Components Additional leave time (negotiated in contract)  Personal Necessity Leave  Catastrophic Leave  Extended Leave Credit for prior service Opportunity for adjunct duties Stipend Opportunities Professional development Prep time Transfer, reassignment and priority rights as to vacancies Longevity

45. Other Components Include in surveys Quantify as salary equivalents as part of total compensation if possible Separate surveys when appropriate

46. Summary Rules governing compensation Components of total compensation Comparing total compensation Strategy

47. QUESTIONS?

48. 48 THANK YOU John Yeh Burke, Williams & Sorensen, LLP jyeh@bwslaw.com