Contract Negotiations Between UFT and City In State Hearing

Via James Eterno and Jeff Kaufman at ICEUFT, there is a must read Reuters piece about the contract negotiations between the city and the UFT:

With just three weeks remaining before his team cedes power to Mayor-elect Bill de Blasio, Bloomberg's administration will cite accounting rules at a closed-door state hearing on Wednesday as it tries to shut the door on any retroactive raises being paid out as bonuses in future years, according to people taking part in the hearings.

In the administration's view, the rules stipulate that any lump-sum payout must be booked in the year it is made, not spread out over years. The amount owed would be too big a hit for any one year and would break the city's balanced budget requirement, they say. The stance effectively closes down any attempt by the teachers for a settlement along those lines, at least with the Bloomberg administration.

...

At an earlier hearing, the teachers union, the United Federation of Teachers, which has been working without a contract since 2009, argued that under generally accepted accounting principles, or GAAP, rules for municipal budget keeping do not require an arduous one-time cost.

An accounting expert for the United Federation of Teachers also cited a 1991 deal when the city deferred part of a teachers' wage increase, paying $47 million out in 1995 and 1996 -- with interest of 9 percent -- and thus setting a precedent for the practice of deferred payments.

"It's a very big bill attached to this retroactive pay raise, and (the Bloomberg administration is) specifically raising this as a deal breaker," said Barry Epstein, an accounting expert at Cendrowski Corporate Advisors, who testified on behalf of the union. "Essentially what they are saying is, we'd be happy to pay this to you except we can't do it because we have a balanced budget law and this will bust the budget."

"My answer to that is they are misinterpreting their accounting requirements," Epstein said.

The mayor's office and the Department of Education declined to comment. But other people familiar with the proceeding supported Epstein's characterization on the city's position.

The UFT, citing the confidentiality of the negotiations, declined to say if it would seek retroactive raises in the form of one-time bonuses, though it has argued that they are permissible under accounting rules.

The back pay issue has intensified since last month when Bloomberg said he would hand a balanced budget to de Blasio, eliminating an anticipated $2.2 billion deficit.

Ronnie Lowenstein, head of the Independent Budget Office, a publicly funded city budget watchdog, has said her office soon will release a forecast with significantly higher long-term revenue predictions than Bloomberg's. That is likely to seized upon by city workers eager to bolster their case. 

Lowenstein said that paying out retroactive raises as bonuses in future years and covering the cost with non-recurring expenses would be in accord with the principle of not using one-off income to cover recurring expenses.

"If some portion of the raises are one time payments that would meet that definition," she said at a recent conference organized by the Citizens Budget Commission.

Important piece of news at the end of that story - the IBO is going to issue an economic forecast for the city that will show significantly higher long-term revenue predictions than the one Bloomberg is using to argue no retro raises for you.

As the Reuters article notes, that will bolster the arguments for retro raises since the city will have more money than Bloomberg is claiming it currently has.