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White Paper on Penn Trafford Contract Negotiations A fundamental issue in a new contract is what is the proper cost for

our pay package for our employees given the controls PT has over a pay package dominated by salary, pensions, and health care costs. These three factors have increased in the last few years such that the districts total pay package is beyond reasonable levels, mostly due to the states lack of action to correct escalating pension cost. The average teacher working in a Pennsylvania public school today receives total compensation roughly 50 percent higher than what he or she would receive in private-sector employment. In that sense, the teacher is, indeed, "overpaid." PT teachers and PA teachers are paid the 6th highest in the US. That is especially true of teachers with more years of experience but what about entry level teachers who may appear underpaid because they may receive lower starting salaries than other college graduates in other fields like engineering. However, prospective teachers are predominantly drawn from the bottom third of their college graduating class, and the Pennsylvania easily completed step training process allows an entry level teachers to rapidly increase their salary without any input on performance or contracts that adjust everyone salaries upward. It is the generous fringe benefits that push total teacher compensation far ahead of privatesector levels. A full-career teacher can receive guaranteed pension benefits four times those of a private-sector worker with a 401(k) plan. Moreover, most teachers also receive health benefits worth hundreds of thousands of dollars over the course of employment, and attractively packages retiree health benefits. Our employees pay very little for healthcare cost, only about $100/month for plans that follow the districts historical lower deductible plans. Compare that to typical private sector values cost share of $500/month with most having high deductibles. On top of that, school teachers are only half as likely to become unemployed as private-school teachers and workers in similar white-collar occupations. Economists since Adam Smith have agreed that extra job security has a monetary value, which has been estimated to be around 9 percent of compensation. In response to these data, critics often argue that teaching is an especially difficult job that justifies higher pay, citing long work hours and out-of-pocket expenses on classroom supplies. The problem with this argument is that many jobs are hard, and many jobs require sacrifices. Teaching is certainly challenging, but it is not uniquely so. For example, when the Census Bureau asks Americans how many hours they work per week, teachers give virtually the same answer as non-teachers. And even if we assumed that non-teachers suffered zero out-of-pocket expenses, the "hundreds of dollars" spent by teachers on classroom supplies would have little effect on our analysis. After all, average teacher salaries and benefits total well over $125,000. There is no reasonable means of adjusting the data or altering the assumptions to make the teacher compensation premium disappear.

The issues of pay and healthcare would be less significant if pension benefits defined by state law had not tripled in the past few years. Harrisburg has not been able to address new laws to correct pensions with costs and benefits far beyond those in the private section. Pensions often amount to retiree benefits equal to of their highest salary pensions that would otherwise require our employees to save one-third of their salary ($25,000 to $60,000 annually) to get the same retirement income. Due to rapidly increasing and non-controllable pension benefits, the average PT employees pay package has become well beyond what should be provided.

With pension costs rising and non-controllable, the two controllable areas of the pay package, salary and healthcare cost sharing, need attention to make the total pay package reasonable. These circumstances mean the new contract should significantly increase healthcare cost sharing, up to the private sector average of $500/month with higher deductible, and elimination of any pay increases for the duration of the contract.