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Detroit Public Schools to teachers: Loan us $10,000

Ohanian Comment: It's kind of breathtaking. In the wake of playing a key role in wrecking the global financial system, Goldman Sachs, called the "great vampire squid wrapped around the face of humanity" by Matt Taibbi in Rolling Stone, is planning to pay its employees possibly the biggest bonuses ever. Meanwhile, Detroit teachers are asked to make longterm, interest-free loans to the district. Money to be returned when the job ends.

by Marisa Schultz

Detroit -- Thousands of Detroit Public School teachers will be asked Sunday to loan the district $10,000 each.

The alternative, the Detroit Federation of Teachers says, is taking a $36,000 pay cut.

That's the pitch union leadership will try to sell to its 7,000 members when they huddle at 2 p.m. at Cobo Center to review a tentative three-year union contract reached late Thursday.

Recognizing the district is facing a $219 million deficit but wanting to prevent pay cuts, union leaders came up with a negotiating table compromise that education experts are calling innovative and unique.

It's called the Termination Incentive Plan and it may be one of the toughest sells for union membership. Teachers would agree to a $250 deduction from their biweekly paychecks starting in January. The deductions come from 40 paychecks. Teachers would get the $10,000 back -- with no interest -- once they leave.

The district would hold the cash, reducing expenses in the short-term and lessening the need to borrow money to make payroll. Originally, the district sought 10 percent pay cuts for teachers and no step increases, which amounts to a $36,000 cut over five years, said Mark O'Keefe, executive vice president of the union. (Teachers' pay goes up every year until it maxes out at step 10.) Emergency Financial Manager Robert Bobb also wanted $45 million in total concessions, but only managed to get $32 million. "A $10,000 loan that you get back is better than a $36,000 pay cut that you can't get back," O'Keefe said.

Put it in those terms and "it's hard to say no," said Lisa Soronen, senior staff attorney for the National School Boards Association. "If that really was the choice, it doesn't seem crazy to agree to it."

The deductions would be pre-tax dollars, so the effect on take-home pay would feel more like $6,000 over two years. When a teacher leaves, the money would be tax exempt only if rolled into a tax-deferred annuity, like a retirement account, O'Keefe said.

Soronen, a former negotiator, called the provision clever, creative and representative of the "best of bargaining."

Unions are often accused of not recognizing the financial trouble of districts, but Detroit defies that stereotype, Soronen said: "It takes some courage ... to say, 'I'm willing to sacrifice my current financial (well-being) because the school district needs the money more than I do.' "

— Marisa Schultz
Detroit News


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