1. Collective Bargaining in a Troubled Economy: Management Perspective Matthew H. Upton, Esq. 1 Copyright 2010 Drummond Woodsum. These materials may not be reproduced without prior written permission. 100 International Drive, Suite 340 Portsmouth, N.H. 03801 603-433-3317 mupton@dwmlaw.com

2. Economic Challenges Slow economic growth. Voter job loss and/or wage freezes. Uncertain future economic conditions. One time revenues funding ongoing governmental obligations. Rising retirement costs. Rising Health Insurance costs. Deferral of routine capital replacement and repair. 2

3. Impact of Troubled Economy on Collective Bargaining Greater voter scrutiny of Collective Bargaining Agreements (voters expect “belt tightening”). Increase in voters rejecting contracts (40/30 rule). Voters expect municipal/school employee wages & benefit packages to mirror private sector. Voter dissatisfaction with rising benefit costs and benefit levels (Historically: benefits in lieu of salary). Voter dissatisfaction/disillusionment with government in general = less voter support of governmental spending (Tea Party). 3

4. Aggravating Factors Decreased municipal revenues= increase in municipal tax rate and increased scrutiny of school budget. – Lower car sales = Less registration revenues for municipalities. – Less real estate development = No growth in real estate tax receipts. – Lower discretionary spending (rooms and meals) = Less Shared Revenue from State. – Elimination or failure to fully fund State and Federal programs. 4

5. Aggravating Factors (cont.) Evergreen law: a. Warrant disclosure. b. May require significant “Pay Plan” changes (reduce large step increments). c. New Hampshire Retirement System spiking charges. Private retirement funds (401K) impacted by down turn in economy = Less early retirements and turn-over of senior staff. 5

6. Short Term Considerations Eliminate or reduce funding of underutilized benefits in favor of modest salary increases. Increase employee contributions to Health Insurance or reduce benefits to offset modest salary increases (prescription drug benefits). Decrease benefit costs wherever possible. Lower overtime expenses (if possible). Current salary and COLA increases in short term contracts (no step scale- Evergreen). 6

7. Long Term Considerations Consider tying future salary increases to COLA Index (no increase in index-no increase in wages). Reduce exposure to rising Health Insurance costs: a. HMO driver. b. Share future premium increases; or c. Fixed employer contribution for life of contract. Consider reducing step increment in salary schedules. Consider COLA Increases to augment salary schedule (not subject to Evergreen). Consider austerity programs and share savings with Union employees (stop loss, energy use reductions, benefit reductions, and wellness programs etc.). 7

8. Preparation for Bargaining In Troubled Economy Develop a master plan for your contracts and establish goals as to what you can reasonably hope to accomplish on both a short and long term basis. Research local economic factors (home sales, delinquency in real estate tax collections, anticipated tax increases, foreclosures, layoffs, business closures, bankruptcies, and voter history on approving collective bargaining agreements). Know the value and availability of both short and long term savings or cost avoidance measures. Understand the potential impact on other negotiations (pattern bargaining). 8

9. AT THE TABLE Understand and embrace economic factors. Be creative in finding cost savings or cost avoidance. Be realistic (If the Union is better off saving NO-They will!). Consider interest based bargaining to assist in creative/education process. Avoid long term management-union conflict over current economic circumstances or uncertainty. Theme of any contract settlement must include “belt tightening.” Sometimes no contract may be best alternative. 9

10. Mid Contract Considerations Develop good will with voters by reopening contract to eliminate excessive spending. Management-union partnerships to decrease or avoid unnecessary costs. Sell cost savings/avoidance as an alternative to layoffs. Union and management efforts to improve overall service to students and taxpayers. 10

11. Voter Contract Approval Highlight cost savings and concessions (“belt tightening”). Emphasize future cost avoidance. Compare to other local or comparable communities. Emphasize value to taxpayer. Be transparent. Reach out to taxpayer & parent groups (40/30 Rule). Consider other budgetary savings to offset wage increases. 11

12. General Settlement Trends Most contracts settling with 1.0%-2.5% salary increases annually (including value of steps). Some Unions are electing “Status Quo” over changes in benefit levels or other concessions. Nearly all contracts approved by voters have some “belt tightening.” Contract deemed overly rich are being rejected (even with support of school board). 12

13. Union Efforts in a Troubled Economy Aggressive campaigns to educate and mobilize members for favorable contract settlements. Broaden contract struggles into political and financial forums. Solidarity with other Unions engaged in “contract fights.” Mount a “determined struggle” to achieve contract goals. Work to Rule at impasse. 13

14. Preparations for Impasse Impasse will lead to mediation and most likely Fact-finding (not always been the case). Last offer must be defendable to voters based on unique economic circumstances of community (likely to get political). Determine last best offer before you start bargaining and work backwards. Minimize damage during negotiations by moving to mediation early if parties are far apart.. 14

15. 15