One of the major selling points of the proposed contract is that we are getting the "full retroactive raises" despite the length of years to actually receive it. In a contract that is giving its members a 1.43% annual raise for the seven years, less than the 2.2% inflation rate for the last three years. Failure to give us the 11.3% raise in our upcoming September checks (instead its 2.1%). A " zero raise" for eighteen months with most of these raises and "retroactive raises" deferred and back-loaded to the end of the contract and "throwing the ATRs under the bus". It now appears we are being shortchanged on our "retroactive pay".
Esteemed high school Math teacher Steve Hiller of the Bronx has taken the time to fully analyze the math involved and believes the City and the UFT used some questionable accounting tricks to claim the teachers will be made whole by October 2020. Without going into detail here is the email Mr. Hiller sent me. Decide for yourself.
UFT CONTRACT: Consequences of no interest on deferred payments
The following is a brief examination of the math behind the deferred payments in the proposed contract. The claim made on numerous occasions by Mulgrew that UFT members will receive “100 percent of the money they are entitled to, back to Nov. 1, 2009, by 2020” is at best a reductionist simplification of the true nature of the payments, and at worst a willful attempt at manipulation of the membership. New York City is the financial capital of the world. It is simply impossible to accept that the framers of this contract simply forgot about the role of compound interest when payments are deferred over time.
I must admit up front that I am by no means an accountant, and have little knowledge of the formulas used in that world. I have approached this problem purely mathematically, and it is conceivable that I have neglected some factor. That said, given the elegance of the result, both intuition and experience tell me that this is highly likely to be the correct solution. If anyone has the relevant financial knowledge, I would love to hear from you.
The interest calculations here are complex. On the one hand, the city is apportioning raises in a piecemeal fashion over many years. Each of these individual amounts grow for different lengths of time. On the other, the city is making several discrete payments to us at many different points in time, each decreasing the total amount that will grow with interest. To the extent of my understanding of the contract, the equation below tells the value of the aggregate monies owed to us in 2020 if they were invested at a rate r from the time they were earned (where an interest rate of 4% corresponds to r = 1.04).
Below in the table on the left you will find the 2020 value of the retroactive payments at top salary compounded for various interest rates. Note the 0% rate is what the contract proposes. (For the life of me I cannot figure out why the UFT claims the total payments for top salary is $54,000 – even at 0% interest, my current understanding of the contract insists that this should be $56,000.) To find your loss from not getting any interest, pick a percentage rate and subtract $54,000 from the value.
The table on the right is the big takeaway. It shows how many months at your current salary the contract is deficient for various interest rates. This table should be roughly independent of what that salary actually is. This can be viewed as how many months the contract expects you to work for free.
Again, this is a very complex problem and I am not an accountant. But it is clear to me that very pertinent information has been withheld from the discourse, and this is something that both the city and the UFT are almost certainly aware of. I speculate that this was a way to claim we are being given the 4% + 4% as per pattern bargaining, without having to actually pay it to us. To wit, if we were instead given 3% + 3% with five and a half percent interest, we would be receiving almost identical payouts.
As someone who knows the math, I will say that this very much feels like an attempt to manipulate those who do not, and this intellectual dishonesty rankles me considerably. I fear that many UFT members are unaware of the implications of the proposed 0% compounded interest, and my hope is to ensure that you have all relevant information before you cast your vote. If you would like to know the derivation of the equation I have used, feel free to contact me.
tl;dr – contract not as sweet as purported, and wasn’t all that sweet to begin with.