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The Use of Financial Information in Contract Negotiations


image of contract with penIn addition to the many challenges educational institutions face arising from the COVID pandemic, many Pennsylvania public schools will soon begin contract negotiations.  As required by the public school code, districts must begin the negotiations process by January 10.  The use of financial information in this process is crucial in reaching a contract that provides reasonable and affordable wages to district employees.  Preparation is essential for productive and effective negotiations.

  1. Be prepared to share financial information and discuss it with the union. Prior to the start of negotiations, the union will request certain financial information including the district’s most recent Annual Financial Report and Independent Audit Report to assess the district’s ability to pay.  This information is required to be furnished to the union. 
  2. Develop three to five- year financial projections. In order to formulate contract parameters, these projections should include actual and anticipated revenues and expenditures. School Business Officials should prepare these projections early and share them with the union to establish credibility for the district’s economic proposals.
  3. Develop proposals that include language revisions, salary schedules, and benefit changes. Determine the cost of each proposed change to assess the overall cost of the package and to provide a basis for setting contract priorities with their associated costs. Be sure to consider the financial impact of all contract language revisions.  The financial implications of some language changes may not be as obvious as others. 
  4. Determine the full cost of salary proposals. Prepare and cost out salary proposals based on the current bargaining unit census.  Do not adjust the census during the negotiation process for expected retirements or new hires.  You should obtain agreement with the union on the census to be used throughout the negotiations.  Include step advancement in the calculation of the total cost of a salary schedule.  Failure to include the step cost undervalues the proposed pay increase.    
  5. Determine appropriate comparables. Unions often rely on comparables to justify their proposals. Districts should determine appropriate comparables that are similar in type, size, locale, and wealth.  Complete an analysis of the comparable district’s entire economic package (including wages, benefits, etc..) to provide a more accurate basis for comparison.  This analysis should be completed early in the process and shared with the union to establish realistic economic expectations. 

When employer financial condition becomes an issue, both sides are likely to rely on financial information to assess ability to pay.  Because much of the information is prepared by management, union members may harbor doubts about its reliability.   To establish credibility of the information, it may be advantageous to engage the services of an independent third party.  Independent third parties may be contracted to provide verification, interpretation, or communication of financial data.  In addition, independent parties may be used to assist in preparing financial and other pertinent information, including fact finding data, used in the negotiation process. 

If you are interested in contracting independent services for contract negotiations, Boyer & Ritter is ready to offer expert assistance.  Please do not hesitate to contact Cathy Harlow, CPA at  Cathy has over 22 years’ experience as a Business Administrator in two different school districts as well as six years as a Superintendent.  During her tenure she negotiated contracts with both professional and support staff unions.  She prepared all pertinent financial information used in the process and provided support through face-to-face discussions and presentation of information.  She has also prepared information utilized in fact finding and presented at fact finding hearings.  Cathy is currently a manager at Boyer & Ritter and would be happy to assist with your negotiations.

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