Pennsylvania Court Rules that Financially Distressed Districts May Not Cancel Teachers’ Contracts to Balance Their Budgets

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Pennsylvania Court Rules that Financially Distressed Districts May Not Cancel Teachers’ Contracts to Balance Their Budgets

In a major victory for teachers’ unions in this ongoing era of massive education budget gaps, on January 22, 2015, the Commonwealth Court of Pennsylvania unanimously decided that the School District of Pennsylvania and its School Reform Commission (SRC) could not unilaterally cancel its teachers’ contract, even if such action would save the district tens of millions of dollars in a single academic year.

Since 2001, the school district has been in “financial distress” as determined by the state’s Secretary of Education and has been operating under the direction of the SRC, which was charged with assuming control of the operation and management of the district.  On October 6, 2014, in order to save an estimated $44 million dollars during the current school year, the SRC voted to cancel its expired, though still effective teachers’ contract after failing to reach an agreement on new terms for the teachers’ collective bargaining agreement. By canceling the contract, the SRC had hoped to negotiate a new contract that would no longer require the district to pay 100% of the monthly premiums for teachers’ and their families’ medical coverage, but would instead shift some of these costs to teachers through co-pays and deductibles.

The teachers’ union successfully petitioned for a temporary restraining order to block the SRC’s efforts to terminate the contract on October 16, 2014. The SRC appealed to the Commonwealth Court of Pennsylvania, citing the district’s ongoing budget shortfalls.  Despite the SRC’s failure to reach an agreement with the teachers’ union after 21 months of negotiation and over 120 formal bargaining sessions, the court found that the parties had not reached a “point of impasse” and, therefore, the SRC was not entitled under Pennsylvania law to make unilateral changes to the contract.  Nor was the SRC statutorily entitled to make such unilateral changes to the contract, the court reasoned.

Nevertheless, the court was not wholly unsympathetic to the financial plight of the school district.  The court acknowledged, for example, that “[t]here have been numerous difficult decisions that the SRC has been forced to make in an effort to overcome these economic hurdles, including a one-third reduction in staff and the closing of 31 schools in recent years.” The court further “recognize[d] that the SRC’s actions have been aimed at effecting needed economies in the District’s schools to provide the necessary education to its students.”  However, to the extent that the SRC desired the authority to plug its budgetary gaps by unilaterally terminating or modifying the teachers’ contracts, the court advised the district to take up this matter with the legislature.

The SRC is considering whether to appeal this decision to the state Supreme Court.

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