STATE OF FLORIDA PUBLIC EMPLOYEES RELATIONS COMMISSION

In the Matter of Special Magistrate) Proceedings ) between ) ) Miami-Dade County Public Schools ) ) ) and ) ) United Teachers of Dade, AFT, ) NEA, FEA, AFL-CIO )

Case No. SM-2010-100

Before: Robert B. Hoffman, Special Magistrate Appearances: For UTD: Mark Richard, Esq. Phillips, Richard & Rind, P.A. For the M-DCPS: Christopher F. Kurtz, Esq. Place of Hearing: Miami, Florida Date of Hearing: March 22, 2011 Briefs Received/Hearing Closed: May 2, 2011 Date of Decision: May 18, 2011

RECOMMENDED DECISION I. Introduction and Background This is an impasse proceeding pursuant to Sec. 447.403 of the Florida Statutes and Florida Administrative Code Rule 38D-19.005. Following efforts to resolve their differences through collective bargaining, and the declaration of an impasse, the parties, Miami-Dade County Public Schools (M-DCPS or the District) and United Teachers of Dade, AFT, NEA, FEA, AFL-CIO (UTD or the Union), submitted their unresolved issues relating to wages and 1

health insurance to this Special Magistrate. The parties waived the 20-day limit for the hearing. Both parties were afforded a full opportunity to present evidence at the Special Magistrate hearing convened at the Florida International University Law School in Miami and otherwise participate in the proceedings and to file post-hearing briefs. M-DCPS is the fourth largest school district in the country. It employs 36,433 full-time employees and operates 207 elementary schools, 65 middle schools, and 42 high schools. UTD and M-DCPS are parties to a three year collective bargaining agreement effective July 1, 2009 through June 30, 2012. The bargaining unit covers instructional employees, office employees, paraprofessionals and school support employees. The Union represents approximately 27,678 MDCPS employees. M-DCPS as a school district is coterminous with Miami-Dade County, the largest county in the state of Florida with a population of approximately 2,500,625. The next largest is the adjacent county of Broward (1,766,476). The bargaining relationship began in 1975 and has resulted in some 14 CBAs. The current CBA (2009-2012) provides for a wage re-opener for each fiscal year. Health insurance is negotiated annually on a calendar year basis as a result of yearly insurance contracts prevalent in the heath care insurance industry. In September 2010, the parties commenced re-opener negotiations for the 2010-2011 fiscal year, which included wages and the yearly health insurance design and costs. The parties met in five sessions and on December 14, 2010 the Union notified PERC that the Union had declared an impasse and requested a Special Magistrate list. To summarize, the UTD proposed a 2-step salary increase, plus an increase of $1,500 at the top step of each of the salary schedules. This would be a recurring cost of $109.5 million. It also requested status quo on health insurance that would cost the District $18.5 million or $25 million for all District covered employees. The District offered to agree to status quo on the

health insurance. It rejected the 2-step salary proposal due to its recurring nature and the uncertainty of the economy as it adversely affected the M-DCPS. The District offered first to pass the 7.9% premium increase to the employees for dependent coverage, and a proposal to absorb the 7.9% increase. It rejected the Unions wage proposal and instead offered a one-time 1% service incentive with a cost of $13 million. The Union rejected the 1% offer in or about December 2010. The same 1% offer was accepted in November 2010 by another union with a bargaining relationship with the District, AFSCME. In January 2011, the new Florida governor submitted a state-wide proposed budget which cut education funding by $1.7 billion or 10-percent. If adopted M-DCPS maintains it would have a revenue reduction of $200 million. As of the date of this hearing the budget was pending in the state legislature, but then passed on May 15, 2011. On February 14, 2011 the District made two decisions regarding both its wage and health insurance offers. First, it wrote the Union that it was withdrawing the 1% offer. The District explained elsewhere that the concern was the governors budget adversely affecting revenue and it wanted to keep the $13 million as a hedge against this and other revenue cuts. Testimony from the District is that the 1% offer was made at a time, in November 2010, when the District believed it had assurances from the governor-elect that education would be held harmless when budget cuts would be proposed. The Union responded on February 15 that the District was retaliating against the Union for wanting to maintain the status quo while engaged in bargaining. Secondly, the District advised the Union on this date that it would provide the unit with an open enrollment period for health insurance. Superintendent Carvalho wrote employees covered by three of the unions, plus UTD covered employees that open enrollment to make changes would begin on February 16 and end on March 1. He wrote: The Districts position is

to fully absorb this years 7.9% increase. This subsidy is the equivalent to a $25 million increase to employees compensation. There is little disagreement that the District has serious financial problems as a result of decreases in revenue sources, especially resulting from the recession that has adversely affected property values and jobs. These matters will be set forth in more detail in the positions of the parties concerning wages. To summarize their positions on the two impasse issues: The Union maintains there is an agreement on health insurance. It has accepted the Districts status quo proposal and the District has so told employees when it notified them of the open enrollment for insurance that it has agreed to absorb such costs. At this hearing the District took the position that an agreement on health insurance only exists if there is an agreement on salaries. The District argues that it cannot afford any salary increase and if one were imposed on it, the consequence would be layoffs in order to pay for them, even one costing $13 million. The Union maintains that although it seeks the step increases, it is realistic enough to realize that it cannot happen given the Districts current financial condition. Its brief concludes:
Although the Unions members deserve that and more, the Union recognizes that it is within this Magistrates discretion to find an equitable resolution. Equity requires that the Unions members get something for the 2010-2011 fiscal year, whether in the form of a one-percent bonus or otherwise.

B. Resolution of the Issues at Impasse Any recommendation made from this Special Magistrate process comes from a consideration of the factors deemed relevant by the Florida legislature. Section 447.405 sets the standard for rendering the recommended decision as a just settlement. This Special Magistrate wrote about what is just in Okeechobee County Board of County Commissioners and International Union of Operating Engineers Local 487, SM-2006-0049 (2006): 4

What then achieves a settlement of this dispute that is just? This is the standard prescribed by the Florida legislature to resolve impasse disputes. It is not something that is imposed by the Special Magistrate as a standard. And the word "just" in its plain, ordinary meaning cannot be clearer: "In accordance with or adhering to the principles of justice; fair." The Random House College Dictionary (1980)

`The overall SM scheme provides latitude within this statutory framework for the Special Magistrate to weigh the significance of these factors and then reach a conclusion that reflects a fair and reasonable recommendation of the impasse issues. It is not a gathering of points for winning each factor. Rather it is a consideration of which factor or factors should be decisive when examining the overall issue for these parties. The five statutory factors in 447.405 include:
(1) Comparison of annual income with same or similar work of public employees showing like or similar skills under the same or similar working conditions in the local area; (2) Comparison of annual income with similar public employees in similar public employee governmental bodies of comparable size within the state; (3) The interests and welfare of the public; (4) Comparison of peculiarities of employment in regard to other trades or professions, such as intellectual qualifications and others listed; (5) Availability of funds.

In Miami-Dade County and TWU local 291, (SM-X00037) (Hoffman 2000) the SM defined what happens with these factors:
In arriving at a recommended decision, the Special Magistrate must give weight to some or all of the five factors listed in Section 447.405. The bottom line for this recommendation is essentially whether, using this Section as the criterion, the evidence at the hearing establishes that a proposal is fair and reasonable. (Emphasis added)

Finally, 447.405 contemplates that the Special Magistrate is not solely bound by these factors: . . . the factors, among others, to be given weight by the Special Magistrate in arriving at a recommended decision shall include . . . . The following articles are at impasse: 1. Health Insurance a. Union Position Although the Parties are technically at impasse over health insurance, beginning in March 2011, the District implemented open enrollment for the bargaining unit. As stipulated to at the hearing, the Union and the District are recommending that the Magistrate recommend the current 5

operational implementation of health insurance that has been in effect since March 2011 as his final recommendation. For the 2010-2011 fiscal year, health insurance for the UTD bargaining unit cost the District approximately $18.5 million. The Union recognizes that the District should get credit for this amount. Nonetheless, it should be recognized that health insurance costs to teachers has also increased due to the Districts institution of banding based on salary. As testified to by Ms. Diana Urbizu, the Districts Administrative Director in the Office of Labor Relations:
Q: Now, because you went to banding, some teachers got a small raise, but [it] caused them to go into the next band for dependent insurance? A: Yes. Q: Which means they could have lost money; they could have lost their raise [last years] by going into another band? A: They could have, yes. Q: In fact, some did? A: Im sure some did.

Therefore, although the Union recognizes the benefit of the District absorbing some of the health insurance costs, the economic reality is that teachers get less money because of health insurance costs. It bolsters the notion that teachers need some recognition at some level in terms of salary. b. M-DCPS Position The District considers health insurance as an integral part of an employees compensation and the Districts goal during negotiations was to obtain an agreement on both wages and health insurance. The rationale for the Districts position was that the funding for both wages and health insurance comes from the same source and the District needed to know what the budget liability would be for the next fiscal year. Health insurance cost concerns have plagued both employers and unions for many years. To address these escalating costs, the District recently implemented a self-insurance program. This program, which started in calendar year 2010, saved the District from $72 million worth of increases had it stayed fully insured with its then-current 6

health insurance carrier. Despite these efforts, the District was faced with a $25 million increase (7.9%) in the cost of health insurance for calendar year 2011. Payment for these costs come from the same pot of dollars used to pay salaries. Therefore, funds were limited and the District needed an agreement on both health insurance and wages. Employee cost for dependent coverage is attractive compared to comparable public employers such as Broward Schools, Palm Beach Schools and Miami-Dade. Although South Florida has the highest cost of health insurance in the country, M-DCPS subsidizes dependent coverage more than any other school district in Florida. Despite these high costs, M-DCPS has offered to continue providing free health insurance for its employees while heavily subsidizing dependent coverage. In 2011 alone, M-DCPS is subsidizing health insurance by $60 million. The economic realities of health insurance are amplified by the current economy and the gloomy forecasts for the subsequent fiscal year. The current economic climate is not something that occurred overnight. In 2007, the Special Magistrate opined on a similar matter involving Nassau County and IAFF, SM-2007-026, (decided August 20, 2007) and wrote:
. . . when the County conditioned its proposal on changing this provision [health insurance], it did so only in light of the economic realities it faced, i.e., the financially burdensome increases in costs that have accompanied health insurance in recent years. Thus, while on one hand it seemed unfair to impose such a condition, the economic reality is that the payment of wages, the highest cost item in a budget, must be impacted by the costs of other compensation paid to employees.

Any examination of what is just and reasonable must take into account the realities of the enormous costs for health insurance. However, because the District places a high priority on health insurance for its employees, the District is willing to pay the entire cost increase, which for the UTD unit is $18.5 million as part of a total compensation agreement. c. Recommended Decision The Superintendent was clear in his February 15, 2011 letter to all union represented employees of the District: The Districts position is to fully absorb this years 7.9% increase. 7

He made that statement in connection with opening enrollment for the coming year. There was no reference made that fully absorb meant only absorbed if the wage settlement, whether zero or something else, was satisfactory enough to the District or depended on the entire compensation package. His letter was a clear notification to these employees that the District had decided to fully absorb the increase. Moreover, the proposal made to the Union in writing contains no conditioning of it on a wage proposal. The Special Magistrate is thus not being asked to make a recommendation as to which sides offer is just. The issue is whether there was an agreement made after impasse as to the Districts offer that no longer makes health insurance an issue. As found above, the Special Magistrate concludes a mutual understanding existed that health insurance would be kept at the status quo irrespective of any wage settlement. The health insurance proposal made by the District is, therefore, recommended. 2. Salary The Special Magistrate concludes that it is in the best interests of all of those reading this Recommended Decision to fully understand and appreciate the depth of the positions taken by these two parties on this critical issue. In so doing, the positions are somewhat lengthy. But their importance cannot be diminished, which makes it necessary to have them despite their length. a. The Districts Position In an impasse proceeding such as this, the first two factors, as well as the fourth factor, "are of secondary importancebecause the overriding constraint on [the school district] is lack of money." Gadsden County Sch. v. Gadsden Educ. Staff Prof'l Ass'n, Case No. SM-2008-037 (Nov. 10, 2008). Therefore, an impasse proceeding such as this "turns on the fifth and third statutory factors, the 'availability of funds' and the 'interest and welfare of the public.'" Id.

As to the availability of funds, the FY2010-11 budget stands at just under $4.3 billion, a remarkable $1.6 billion drop from a mere three years ago. Over that time, property values plummeted, the global economy crashed, the employment market dried up, and the Districts student enrollment steadily declined. In the face of such a drastic decline in revenue, the District has used four guiding principles to serve as a roadmap in navigating a way through this financial debacle. These guiding principles are: improve student achievement; protect the classroom; protect the workforce; maintain fiscal viability of the District. In that light, the FY2010-11 budget is highlighted by the following: No RIF of full-time teachers; protects the most vulnerable members of our workforce; no cuts to the arts; further reduces class size; improves the credit rating outlook; no tax increase or increase in locally-controlled millage. During the budget process, the District was confronted with numerous cost increases for mid-year salary agreements, new textbooks, increase in charter school costs, class size compliance, reserve and tax collection requirements mandated by law, a separate Health

Premium Subsidy Reserve due to uncertainty of calendar year 2011 self insurance program, and a substantial reserve to protect employees and programs in advance of a possible mid-year reduction in State revenue, as well as the loss of all ARRA State Stabilization funds in FY201112. Even though the Districts revenues increased by $89 million, the District had $147 million in major cost increases and $85 million needed to be cut from the budget. These issues were also confronting the District when negotiations commenced with the Union for fiscal year 2010-2011. The District advised the Union that there were insufficient funds to pay for their salary proposal. There is no argument that the District values its employees and that these employees deserve salary increases. However, the District must balance these

concerns with its obligation to be fiscally responsible, especially when the forecasts for public education funding are so pessimistic. The Districts revenue will be reduced. General fund revenues have decreased $300 million since 2007-2008. If not for ARRA funds and Education Jobs funds, the District would be facing an additional loss of over $182 million. At the same time, the Districts reserves were irresponsibly low. The District needed to increase its reserves to 3% as required by state law. Further, state law now requires school districts to budget as though the district was going to collect 96% of local taxes (95% the previous year). Since recent experience showed that the District has been only able to collect, at most, 94.5% of local taxes, the District set up a reserve fund of 1% in the event the full 96% of taxes is not collected. Combining the decreases in revenues and the increases in costs, M-DCPS had to reduce the budget for the 2010-2011 fiscal year by approximately $85 million. M-DCPS cut its central offices of $8 million. Since 2008, central office costs have been reduced by $45 million, or 52%. $26 million of maintenance projects were brought in-house. Other cuts included transportation savings by altering the bell schedule of schools ($4 million), phasing out selected high school programs ($7 million), changing ratios for gifted teachers ($7 million), changing teacher ratio supplements ($8 million), aligning ESE allocations with state guidelines ($18 million) and eliminating certain ESOL supplemental allocations ($6 million). The Union was aware of the Districts budget issues because their representatives attended School Board meetings when the budget was being discussed. The Union agreed with the Districts priorities of protecting the classroom and maintaining the fiscal viability of the District. However, if the Union's raises are funded there would be a potential loss of more jobs.

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The District budgeted for a mid-year holdback because during the last three years there have been holdbacks from the Legislature. This money was put aside to protect employees. During negotiations, the District offered the 1% non-recurring service incentive because it had earlier received assurances from the Governor that education would be held harmless (the 1% came from reserves of $29 million which were from non-recurring revenue). Unfortunately, when the Governors budget was released in January, those assurances were no longer true. As a result, the District withdrew its 1% offer, opting instead to keep these funds as protection against further cuts and to protect the workforce. The Unions three witnesses agreed that the District is in dire financial shape. Despite these dire economic circumstances the Union proposed a 2-step salary increase that would cost the District almost $110 million. The Union admits that the District cannot afford their proposal. Incredibly, the Union proposes that the District raise taxes to pay for these salary increases, despite the fact that the Mayor of Miami-Dade County was recently recalled for raising property taxes and supporting employee raises. Raising taxes during these tough economic times is not only politically unfeasible it hurts the very citizens the District is serving. Although the Union claims that the District has failed to increase the millage rate, failed to ask the voters to tax themselves further (during a time when many people are unemployed and losing their homes to foreclosure) and failed to file suit against the State for failure to adequately fund education, it is the District that must answer to the citizens of this community, not the Union. Other than raising taxes or suing the State, the Union did not present any viable alternatives. In any event, there is no guarantee of success, rendering these potential revenue

sources as speculative at best. If the District is to fund salary increases, it must do so from the funds available in the budget today. While the Union agreed that the District was woefully

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underfunded by the State, even going as far as stating that other Florida school districts were benefiting from revenues that should be coming to Miami-Dade County Schools, the Union presented no credible evidence that funds were available to pay for these raises. The Unions exhibits show contract settlements of various Florida school districts for the last three years. However, they are not a true comparison of what the employee takes home at the end of the day. To accurately compare salary increases one must review both an employees salary plus the cost of health insurance. For example, a teacher could receive a 2-step salary increase yet pay much higher health insurance costs than a teacher in a neighboring county. A school district may have funds for a salary increase because it passed on all the healthcare costs to the employee. Therefore, simply listing salary increases for other school districts provides no useful information for comparing compensation. As to the interest and welfare of the public factor, M-DCPS has made very difficult decisions in reducing its budget to make up for the unprecedented decrease in revenues coupled with the increase in essential costs. It has tried to avoid impacting educational programs, and every effort has been made to try and avoid laying off additional employees. This next year is predicted to be the worst financial year for M-DCPS since the great depression due to the following major factors: 1) Federal funds, received via State Fiscal Stabilization funds, comprises 5% of the Districts general fund and fund 5% of the workforce.

M-DCPS accepted this funding to keep from laying off 2,000 employees. Unfortunately this money will expire at the end of the 2010-2011 fiscal year. 2) Property values have dropped 30% in the last two years and are forecast to drop an additional 6% next year. This affects the Districts capital fund and employees funded by capital (maintenance and construction) are facing layoffs. 3) The District received $73 million in Education Job funds. However, the

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District used $35 million of these funds to hire 500 teachers to meet class size requirements. If the District did not hire these teachers, it was facing up to $16 million in penalties from the State. This money could have been used for teacher raises if class size requirements were not in place. The Districts major objective is damage control, not employee raises. None of the current budgets being discussed in Tallahassee fill the enormous hole being left by the expiration of State Fiscal Stabilization funds. Exacerbating this dreary budget forecast is the Governors proposal to reduce the Base Student Allocation (BSA) to levels not seen since 2002-2003. MDCPS cannot maintain a school district and give raises to employees when the building block of educational revenues the BSA is so low it is equal to what it was nine years ago. Due to all the previous reductions in M-DCPS' budget, any additional cuts made to fund the Union's salary step increases will result in additional layoffs. Employees are a very valued commodity. They are the frontline people who are in front of our children every day. If the District cannot deliver essential services to our students, then the interest and welfare of the public is harmed because education is the core mission of the District. More importantly, it means possibly degrading the quality of education the students receive. The District was able to offer the 1% non-recurring service incentive because of certain assurances from the current Governor of no cuts to education this year. However, this did not happen. The 1% offer was withdrawn because the Governors proposed budget had such an adverse effect on the District that it would have been very irresponsible to continue offering it. No one envisioned a 10% decrease in basic funding to the Florida Education Finance Program. The amount of money needed to fund the 1% service incentive can save the jobs of 750 paraprofessionals, 500 office employees or 330 teachers. Losing any of these employees would severely compromise the standards of service provided by M-DCPS to the community. Putting

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additional people on the unemployment rolls adds to the unemployment problem of the community at large. M-DCPS also has to consider the issue of fairness to its other employees and the community at large. M-DCPS has not offered recurring salary increases to any other union. AFSCME is the only bargaining unit that received the 1% service incentive primarily because they accepted it early during negotiations and they recognized that if they waited the money might not be available at a later date. In the name of fairness, M-DCPS believes that all its employees should share in the burden of reducing M-DCPS' budget. In order to balance its budget, it is essential that M-DCPS expeditiously reduce its operating expenses, and all employees be treated the same. b. Union Position Although the Unions members deserve the proposed salary increase made by the Union, and more, the Union candidly recognized that the $110 million it would take to fund this proposal may not be feasible based on the current economic situation. However, throughout negotiations and the impasse hearing, the Union made it abundantly clear that there were creative options to address the steps and salary needs. Despite the Unions efforts to find a flexible balance to benefit both parties, the District steadfastly refused to budge. The Districts unwillingness to provide any increase to the Unions wages undermines the public welfare of this state. The District offers zero while the Union seeks some financial recognition for these highly dedicated educators. Florida law requires the Magistrate to weigh the publics welfare in reaching a final recommendation. Florida Statutes 447.405(3). Despite the Districts argument that it has no money, the evidence showed that a major reason for this is the Districts own choice not to pursue such monies. It has failed to exercise

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local funding options, including raising the millage rate. Florida Statutes 1011.71(3) gives school districts the power to levy an additional 0.25 mills for critical capital outlay needs or for critical operating needs. All that is required to trigger the funds for these 0.25 mills is a super majority vote of the school board. For the 2010-2011 fiscal year, the District could have raised approximately $49 million with a 0.25 mill increase. The District never even floated this option out to the public, or opened it up for discussion. The District had the further power to levy additional millage for school operational purposes up to the 10-mill constitutional limit. Fla. Stat. 1011.71(9) (2010). The District could have exercised this power by local referendum. If the District would have levied the 10-mill max, it would have raised $419 millionmore than enough to solve the fiscal issues it has raised. This is particularly irresponsible considering that fifty-two of Floridas sixty-seven school districts took advantage of the quarter mill option to raise revenues. Also, the District failed to pursue constitutionally mandated funds from the state. Article IX, Section 1 of the Florida Constitution requires the state to pay for the costs of reducing class size. Despite this constitutional requirement, the evidence showed that the Florida Legislature allocated nearly $271.4 million less than the State Board of Education determined was necessary to meet mandates under the class size constitutional amendment. The District had the option to sue the state or even object publicly to the inadequate funding, but instead chose to do nothing. The Districts acquiescence and silence cost it $36 million. The District failed to pursue the state under the constitutional requirement of equitable funding. Since 2006-2007 the District has given more to the state than it gets back. It receives the least funds per student than any of the seven largest Florida Districts. For example, Duval County receives $275 more per UFTE. If the District were to actively pursue equitable funding

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to receive the same amount that Duval County receives, it would gain $94.7 million. The Districts failures to raise revenues and pursue state funding resulted in losses between $107.7 million and $549.7 million. This is the public school system, and the public was never given the option to discuss the possibility of a millage rate increase. If the District is not directed to raise revenues, and can just always give teachers zero, there is no incentive for the District to address the teacher salary crisis. Rather than just publishing a chart showing the huge disparity between what Miami-Dade gives versus what Miami-Dade gets, if the District were forced to find some money to fund a raise, the District would be more likely to go to the State to get the money necessary to run the fourth largest school system in the country. Article IX, Section 1 of the Florida Constitution: the education of children is a fundamental value of the people of the State of Florida. Education must be properly funded for this provision to mean anything. The District withdrew its proposal for a 1% bonuswhich AFSCME already received. While it is true that UTD members rejected the bonus as unfair, M-DCPS never inserted a penny into the budget for salary increases. The District took the position that regardless of the cost, it was incapable or not authorized to offer anything that has a cost next year. According to the Districts Labor Relations Director, its bargaining team was instructed to try to see what [they] can do to help [their] teachers, [their] employees, but were never allowed to give any kind of salary increase. Now, despite the directive to try to help the teachers and support professionals, the District disingenuously asserts it cannot fund even the one percent bonus. This bonus is still some recognition of the value of the educational workforce. Even more appalling, the District benefitted from the Unions prior concessions. However, not one penny generated from the Unions prior efforts was ever dedicated to giving teachers even one dollar of

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a raise. M-DCPS has never made itself amenable to discuss any compromise or joint resolution. Such a stance is not in the publics best interest. The teachers have worked hard to achieve successes in education. However, the Districts actions provide no incentive to become a teacher. If teachers receive nothing in the 2010-2011 fiscal year, all they will have received in three years is a two-step increase. That means that a teacher making $38,750 will have received a raise of just $250 in three yearsjust $0.22 a day. These are the people who work so hard that Florida is ranked fifth academically in the nation, yet for their hard work they are told there is nothing left for any increase. This is demoralizing, and will only push qualified candidates into other fields. The school system and the public deserve better. The statutory notion of respecting the publics welfare in an impasse proceeding has its genesis in equity. As became clear during the hearing, the Union shared in the burden of the Districts fiscal difficulties. The Unions concessions were even recognized in the March 3, 2011 report from Moodys Investors Service:
Financial improvement since fiscal 2008 was accomplished by making over $400 million in expenditure cuts, negotiating favorable three-year union contracts, and averting significant health care cost increases by going self-insured. Union concessions, related to salary freezes and furlough days were important contributors in conjunction with other cost saving measures and conservative budgeting.

However, now that there is improvement, the teachers and other bargaining unit employees get no share of the benefit. This is inequitable, and cannot be perpetuated. By Florida Department of Educations (FDOE) standards, the Districts financial health is improving. Moreover, Jewell Gould, Director of Research for the American Federation of Teachers, testified that with the assistance of this Union, the District has been able to raise its reserves from $4 million to over $96 million. In fact, the Districts own Revenue Trend exhibit showed an increase for the 2010-2011 fiscal year in both Total General Fund Revenues and Funds Available to Balance. Although the District focused on the more negative aspects from the 17

Ratings Agencies, Mr. Gould pointed out the strengths in the Districts finances, including good financial management practices and a low to moderate debt burden.1 He praised the joint effort of the Union and the District in turning the school system around, and noted that these efforts have resulted in improved credit ratings, which in turn has led to further investment in the District. In fact, the District has felt comfortable enough with its financial position to take on an exceptional liquidity risk regarding higher interest rates. If the District has been willing to take on that risk to do business, why not take even a portion of the risk for labor, and for the professionals who hold up this school system? The Special Magistrate is obligated to consider comparable school districts in reaching a recommendation. The evidence showed that of the comparable school Districts, every district other than Dade and Broward has received something in two out of the past three years. All of the comparable Florida school districts face the same economic challenges as M-DCPS. The state budget cuts affect the other superintendents in the exact same way the Florida Education Finance Program cuts impact Dade. All of the statutory rules and administrative regulations regarding budgetary and spending restraints are identical for these school systems. But there is one critical differenceevery other school system has found some way to give teachers something in terms of salary in two out of three years. The global economic crisis cannot be the sole answer to everything that faces the District. The hardworking professionals of this bargaining unit deserve what their counterparts in other school districts have receivedsomething. The Union has presented several options to the
1 Mr. Gould also pointed out discrepancies in the way the District presented its financial health at the hearing, and how it presents it to investors. (32 percent tax base decline presented at the hearing, while just 10-12% loss presented to the rating agencies); (Statement at hearing that enrollment hadnt changed, but ratings agency reports reflecting influx of Haitian immigrants).

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District throughout this process. Whether it is in the form of a bonus, a step, or a raise, there must be something more creative than zero. There must be some professional respect. There must be some recognition of the educators. A zero cannot serve justice, nor can it meet the requirements of Chapter 447. c. Recommended Decision The Special Magistrate agrees with the District that the two most relevant 447.405 factors are the availability of funds and the interest and welfare of the public. Clearly, the first factor is most crucial. If funds are not available then it is difficult to have the public interest override this money factor. Its a dilemma that in these times is not uncommon. Quoting from an interest arbitration involving teachers in another state, where the dilemma was much the same as here:
The Board of Education is placed squarely in the middle of these financing problems. On one hand, they must provide for the citizenry the best possible education for the children of the area. On the other hand, they must answer to those same citizens for the use of the tax dollars. Unfortunately, millage issues seem to be the area where already-overtaxed voters get their revenge. Unless the Oscoda area constituents soon realize the importance of their support, their children will have no classrooms in which to learn. The burden of supporting the capital expenditures of a school system should not fall totally upon the teachers, although some restraint in wage demands is advisable.2

The dilemma is even greater some 40 years later. School Districts are dependent not only on those tax dollars from the state, but an array of subsidies and grants from the federal government, state programs and complex formulas for distributing all of these monies. Obviously with the devaluing of property the revenue is less from property taxes, the main source of revenue. And with the State of Florida through its new governor proposing a drastic cut in school funding of some $700 million (that passed just prior to the issuance of this decision), the already strapped District now must face the potential of even less revenue. To its credit, M-

Osoda, Mich. Area School Board, 55 LA 568 (Block, 1970)

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DCPS has reduced its costs by over $500 million in three years, while at the same time protecting the classroom from any cutbacks. The parties came to this Special Magistrate with the notion that he either confirm that the District has no available funds to pay any wage increase (the Districts position), or find some innovative and creative ways to discover how to pay for an increase for the teachers (the Union view). Clearly the parties have been at it for many months trying to find these ways. They have their experts and have analyzed the budget, revenue options and cost saving measures inside and out. For the Special Magistrate to find something that they could not find is suggesting that he resort to some unknown or even magical powers. Neither party has suggested that the money could be found in any budget item. Short of dismantling programs, laying off employees, or substantially tapping the reserve fund, there seems on the face of it little that can be done to even recommend a something increase now sought by the Union. The District has made a strong case for the unavailability of funds for the Unions recurring step salary increase proposal. To burden the District with this ongoing obligation in the face of both the revenue drain and increased costs, would be unreasonable and not in the interest of any just settlement. Whether the 1%, onetime payment, the offer made by the District in late 2010, rejected by the Union at that time and then taken off the table complexly by the District in early 2011, is also unjust and unreasonable is worthy of a number of comments. These comments are made with the objective of achieving a prompt, peaceful, and just settlement of this dispute as set forth in 447.405. 1. The interest and welfare of the public statutory factor cannot be ignored, even in the face of the above financial concerns. As seen, arbitrator Block well stated years ago that support for teachers is vital if the public expects them to produce quality education, let alone the

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buildings to make it happen. Its an obligation that Florida citizens even placed in their constitution in Article IX, Section 1:
[T]he education of children is a fundamental value of the people of the State of Florida. . . . . Adequate provision shall be made by law for a uniform, efficient, safe, secure, and high quality system of free public schools that allows students to obtain high quality education.

This high quality is seen, for example, by a top 5 ranking given to Florida schools. Making and keeping it that way for the welfare of the citizens of Miami-Dade County is obviously the ongoing responsibility of the District. As such, the District must weigh against this obligation is its obligation to have a balanced budget and to not bankrupt the system. But it is not without any precedent, as pointed out at this hearing, that the District has seen fit to find room in its budget after declaring there was none. And as such, even in these dire economic times, providing teachers with at the least some signal of recognition through an increase of any value, sends an important message to them that the District is looking out for them. It also sends an important message to the Countys citizens, and in particular the parents of children in this District that within its means M-DCPS can provide some support, however, minor for the teachers of their children. Even more so, it can do it without burdening the public. 2. The 1% District offer, or some variation, is the best way to provide teachers with that recognition. It meets the criteria expressed by the District of not being recurring. Its a onetime payment that does not burden the District beyond this year. And it can be done in ways that are less burdensome for the one year, such as making the amount .5% or even .75% as first offered. It can be paid in two stages, with the first payment upon ratification and the second after six months. And that payment can be conditioned on the financial ability to make the payment at that time. Section 407. 4095 could be invoked then for the 14 day impact bargaining period regarding any change that is a financial urgency. Or, the payment would be spread out over a number of pay periods. There is no limit to the variations that can be utilized. 21

3. The consideration for this one time increase must take into account the series of events that led the District to offer the 1%, AFSCME to accept it, UTD to reject it, the changed economic circumstances that followed and the District withdrawing it. The economic conditions that existed, or rather the political situation that existed when the offer was made dramatically changed when the Governor took office in January 2011. The offer was made at a time when the District believed through assurances that the education budget would be protected from any cutbacks. And even though the District believed it could not afford any recurring increases, it felt comfortable with this onetime payment offer. It no longer felt comfortable with it once the Governor announced that the education budget would be cut in his proposed budget. UTD rejected the 1% without knowing that the budget would be slashed, much the same as the District did not know. To now maintain that its too late to revive it because of a proposed budget (now passed), and to flatly state that no increase will be offered, is to in effect deprive its core value employees of even the smallest of any financial recognition. 4. It appears from the Districts position that the financial urgency of this current situation is such that even allowing the 1% to be paid now to AFSCME would be of concern. And as shown at the hearing, the District certainly has both the statutory right under Section 447.4095 that allows a public employer the right to re-open contract negotiations with its bargaining units for a 14 day period, 3 or to contractually change it as it has done in the past with UTD.
Q. Ms. Urbizu, aren't you allowed, under Florida law, if it's a fiscal urgency, to take the money back? . . . Can't you, under Florida law, do a fiscal urgency? . . . Can't you ask AFSCME for the money back under Chapter 447? A. We could ask AFSCME for the money back. ... In School Dist. of Manatee County, CA-2008-067 (2009) PERC declared: It seems clear that the statute [447.4095] is intended to provide public employers and bargaining agents an opportunity to engage in abbreviated impact bargaining when faced with a financial urgency modification of an agreement.
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Q. Ms. Urbizu, didn't you declare and take away a pay raise that was in the last contract from these teachers? A. I said that already. I said, in '08-'09, we were not able to pay the increase in the year three due to inadequate funding. Q. So, you have the right, either contractually or statutorily, to take the 1-percent back from AFSCME. You have that authority, correct? A. We do.

That it has taken no steps to do so, suggests that the urgency is not so urgent to take those steps. It thus leads to the reasonable question as to whether there is room in the budget or the reserve fund for either the 1% payment, or any of the variations discussed above. 5. The actual cut back in the states education budget affecting the District is somewhat offset by another adopted change passed by the legislature. Teachers will now be required to pay 3% of their salaries into the Florida Retirement System. 4 This new law now allows the District to recoup some of the loss from the state budget. But at the same time it means even less money for teachers. The savings for this District would be substantial, although obviously not enough to make up for the expected drop in state funds. Urbizu testified:
Q. So, when you said the governor's budget was going to hit you for another -- you said 200 million, roughly, right? A. I said the governor's budget shows a 10-percent -Q. Cut to you? A. -- cut -- no, cut to education. And that may, may, because that budget has not been approved yet. Q. But, you used the figure of 200 million, I think? A. Yes, 200 million. Q. But, isn't it true that part of his proposal is to make all these teachers pay for their FRS retirement and the School District wouldn't be paying that and you would get 50 to 60 or 70 million savings to the District? A. Yes, but that hasn't passed yet, either. Q. I understand, but you just told this magistrate, woe is me, $200 million possible cut in the budget, but you didn't say that the effect on the District might be 130, because he's taking pension money out of their pockets, did you? A. No, I didn't say that.

There is no cost analysis in evidence to determine the amount of savings to the District. But it can be generally concluded that given the now passed 3% contribution, as opposed to the

Measures that Passed in Floridas Legislative Session, Miami Herald, May 15, 2011.

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Governors proposed 5%, the range would be $35 to $50 million. 5 The upshot is that the some $200 million proposed budget concern that led the District to withdraw the 1% is actually not that high, given this savings from retirement. The reduction is coming out of the pockets of the teachers who have contributed to the Districts cut backs in previous years with concessions. Recognizing that the teachers are not just having their wages frozen and getting zero, but are now actually getting less than zero, suggests that some form of recognition by the District is appropriate, especially given that the District continues to take the position that it remains proper to do so for AFSCME. 6. The Special Magistrate is not recommending an increase that would put employees on layoff. The District has made much of the fact that the 1% cost of $13 million would affect a large number of jobs. But as seen above, it can be spread out, apportioned so that only one-half is paid in the event of a financial urgency at six months. And, inasmuch as the original 1% proposal relied on the reserve fund, 6 no budget item from the general fund is needed. 7 With the reserve fund in good shape, taking this small portion to pay for this one time percentage will go a long way to making the settlement a just one. 7. It must be kept in mind that it does not take much to make this settlement just in accordance with 447.405. The Union is asking only for something that is more than zero. In the realm of offers seeking increases it is unique. It suggests strongly that the Union is fully
A very rough estimate would be taking the reported statewide average teachers salary of $46,700, which is likely lower that the average in this District, and multiply it by 3% and then by 27,678 employees. The result is $38.5 million.
5

Judith Marte, Chief Budget Officer testified: THE SPECIAL MAGISTRATE: The 1-percent service incentive that was offered to the Union, was that in your budget? THE WITNESS: When we initially did the budget, we put in the reserves . . . It was a non-recurring revenue.
6

Moreover, the FDEs Office of Funding and Financial Reporting projects a substantial increase in the Districts unreserved fund from $96 million to $156 million by June 30, 2011, making its financial condition ratio almost double from the previous year. The Districts Budget Chief testified that there may not be any substantial increases to the capital reserve fund.
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aware of the Districts economic plight. It no longer seeks the step increases that would recur every year. And it no longer even seeks to put a number on the amount of an increase. Not doing so demonstrates the Unions willingness to work with the District, and at the same time to make certain that the dignity of its bargaining unit can still be maintained through these difficult times. The latter point should not be overlooked by the District and should be measured against what little it would take to recognize it. 8. Of somewhat lesser weight are the statutory comparison factors. Noteworthy is that of the seven largest districts, M-DCPS will have the lowest cumulative raise during the last three years. It will also be the only District, other than Broward which is still in negotiations, to not receive an increase in two out of the last three years. Given the lack of any cost comparison and other related information needed to adequately make a meaningful comparison, the Special Magistrate places more relevance and weight on the availability of funds and public interest factors, as already noted, as will be further discussed. 9. The Union raises a number of arguments regarding what the District should be or should have done to raise revenue. The Special Magistrate agrees with M-DCPS that the political climate is not good for raising taxes, especially going to the voters or even using the supermajority powers of the Board without voter approval. This is best seen in the recent statewide elections in Florida, and more particularly the overwhelming votes that ousted two County Commissioners as recently as March 2011 and a previous vote casting out the Mayor. To thus raise millage rates in this climate, even in public hearings, is unrealistic and counterproductive to other efforts that can be made (see below). There is simply too much evidence out there showing that voters are in no mood to increase any taxes, regardless of the reasons.

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10. Seeking redress for money already taxed and not fairly distributed is a major point that voters in this County would likely want to hear. They want to be assured that that their children are receiving high quality education and that it is being accomplished by a fair and equitable application of the adequate provision guarantees in the state constitution. A certain formula exists for payments to the District from the state that should be grounded in these constitutional mandates.8 It is undisputed that since 2006-2007 the District is getting less than what the Countys taxpayers are giving. Of the largest seven school districts, six of them receive more funds for full time students than M-DCPS, even though the cost of doing business and living in Miami-Dade County are higher than any the districts in their counties. This failure to achieve equitable funding meant a funding loss to M-DCPS in a range from $22.7 million to $94.7 million. Union official Joe Minor, a specialist in government and labor relations, testified:
The equity funding gap, again, this is primarily driven by DCD. Miami-Dade County, under this new formula, is somehow not as expensive as Jacksonville. It's not as expensive as Broward County. It's clearly -- living here, it's clearly as expensive or more expensive. Our health insurance costs are higher. District cost differential is explicitly in law for higher personnel costs. So, salary, insurance costs, all the things associated with hiring and retaining high quality personnel, somehow the State is saying that we can do that cheaper than, again, Jacksonville. And we haven't pursued that, either.9

Florida Department of Education 2010-11: Funding For Florida School Districts. FEFP funds are primarily generated by multiplying the number of full-time equivalent (FTE) students in each of the funded education programs by cost factors to obtain weighted FTE students. Weighted FTE students are then multiplied by a base student allocation and by a district cost differential in the major calculation to determine the base funding from state and local FEFP funds. Program cost factors are determined by the Legislature and may represent relative cost differences among the FEFP programs. Also see Doing the Math. Southern Office, The Council of State Governments, October 2004. The non-voted millage rate is set by the State legislature each year. It then appropriates those funds which are apportioned by FEFP.
8

Minor also testified to a $36 million CSR funding gap, but never explained what it meant. He testified: CSR funding gap, again, very clear evidence of what the State's obligation was by their own math. We know exactly what they gave us, and we know what the immediate loss to Miami-Dade County Schools was, which was $36 million. A Union exhibit states: Failure to achieve the CSR funding need as determined by the FLDOE cost the District $36 million. The Unions opening statement referred to a constitutional class size amendment requiring the State to pay for the costs of reducing class size. The District received $36 million less from the legislature for this allocation. The prospect of successfully suing the State for this money seems dim in light of its current financial status.
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The Special Magistrate understands that the formula used by the Florida Education Finance Program is not necessarily one that reflects a 100% equitable distribution. For example, there may be districts that reside in counties that have the ability to raise more revenue and that a utilization factor is applied that can be either positive or negative.10 Why that factor, or the entire application of the formula has resulted in the District receiving less than these other districts since 2006-2007, in significant amounts, must raise considerable concern if it continues. District Superintendent Carvalho recognized this dichotomy when he wrote Florida State Senator Wilson on December 17, 2010. He emphasized that a priority for the District in the upcoming legislative session would be to provide level funding to school districts. .
. .

But apart from this effort, given that the recurring differences amount to

considerable money to the District, it should be urged that the District pursue other options as well. It is important for the District to show not only its teachers, but the citizens of this County that it is cognizant of this unfairness and is seeking actively to level out the playing field of local property tax money coming back to this District. And finally, using these efforts is an element when considering the Special Magistrate statutory factor of the interest and welfare of the public. Obviously it does not produce any immediate funds. But, as noted, pursuing this more comprehensive effort may reasonably suggest to the public that the District needs the money and is making an all-out effort to make certain in the future that it has it. If and when teachers seek some increase the District will be in a position to respond to the Union, the Board and the public that it has pursued or is pursing these means to assure that money is available for its teachers and the District is not being shortchanged.

Funding For Florida School Districts. Florida Department of Education 2010-11. Doing the Math. Southern Office, The Council of State Governments, October 2004.
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In sum, the Special Magistrates recommendation is that the Districts ability to pay increases is severely hampered. In these circumstances, however, a sufficient basis exists, as discussed above, for the District to seriously consider the factors relating to availability of funds and the public interest and welfare and the points made concerning them. The Special Magistrate concludes that the thrust of those considerations warrants a recommendation that the District adopt a one-time, non-recurring percentage salary increase that will not impose a hardship on the District resulting in layoffs of any employees. CONCLUSION These recommendations are made in light of all the evidence presented at this hearing, including the arguments and written submissions of the parties. The Special Magistrate has made these recommendations to reflect the objective set forth in Sec. 447.405 of achieving a prompt, peaceful and just settlement of the dispute between these parties.

_____________________________ Robert B. Hoffman Special Magistrate _____________ At Fort Myers, Florida this 16th day of December, 2010. Each party has been duly served. The decision is released as of receipt electronically.

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