A compromise on the 403(b) tax-sheltered annuity is the main stumbling block in a potential one-year, districtwide salary freeze that could save the Albert Lea School District $500,000 and prevent cuts or reductions to ten positions.

“We’re trying to negotiate through the minefield here of trying to figure out how to do what we said: keep everybody hired and keep everybody from going backwards,” said Superintendent Dave Prescott.

About 10 positions have been notified they will be cut, but Prescott said a salary freeze that included administrators, teachers and other staff, would save the district $500,000 in the budget, making up most of the $600,000 budget shortfall.

Prescott said the administrators have agreed to the freeze. He said support staff are on the fringe but would likely agree if the Albert Lea Education Association, the teachers’ union, agreed to the potential freeze: “I think it’s very likely if we can get something worked out with the teachers.”

At the same time, ALEA President Jim Munyer said there are currently no tentative agreements, and ALEA and the board are still working out the details of the overall package.

The length of the potential freeze is still being negotiated. Prescott said a freeze could last two years.

“It’d be great if the 403(b) thing could be worked out because I think that’s probably the main hang-up,” Prescott said.

In February, an arbitrator upheld an increase from $2,000 to $8,250 in the maximum amount the district would match on the 403(b) pension plan for teachers with 18 years or more of service.

ALEA and the Albert Lea school board plan to meet Thursday and likely on Friday to work toward a compromise to the 403(b) issue and the rest of the contract.

The 403(b) pension plan is not the only issue ALEA is still debating with the Albert Lea school board. ALEA negotiator David Ware said they’re still working on language items, the salary schedule and insurance.

“Any settlement is based upon a total package,” Ware said. “It’s difficult to pull out one issue and then isolate that one issue. There are no tentative agreements at this point.”

“Typically what happens is you give in some and you hope to gain in others, and you hope to achieve a compromise,” Ware added.

The 403(b) issue dates back to wording put in the teachers’ contract about 15 years ago. Larry Kellogg, district director of finance, said the intent was for the maximum amount matched to rise gradually, but it stayed at $2,000 until the Legislature passed a bill last spring that, because of unintended language in the bill, raised this maximum amount to $8,250. This took effect in the middle of a two-year contract and was not planned in the school budget.

Out of 67 teachers in the district with 18 years of service or more, Kellogg said 48 were already contributing more than $2,000 to the 403(b) pension or decided to add to their contributions after the increase. Since the arbitrator upheld the increase, the district is matching additions up to $8,250, which has resulted in $177,000 being paid in monthly increments between Jan. 1 and June 30 of 2009, Kellogg said.

Now ALEA and the board are negotiating to change that language in the contract.

Under the old wording, the district matched up to 3 percent of salaries for employees with four to 17 years in the district, which was between $1,186 and $1,857 a year.

Kellogg said ALEA proposed a plan to increase the maximum amount matched to 4 percent for teachers with four to 11 years in the district to 4 percent, and 5 percent for teachers with 12 or more years of experience.

The school board proposed to keep the 3 percent match for those with four to 17 years of service in the district, while increasing the amount to 2,500 for those with 18 years or more.

Before this law change, Kellogg said the amount the district met under the 403(b) plan was already more than many other schools in the Big Nine Conference.

The Austin School District matched up to $200 for those with four to eight years of service, and the number climbed in increments to $1,100 for those with 20 or more years of service. The Mankato School District matched $900 for those with one or more years of service.

But negotiators for ALEA said comparing the 403(b) plan to other schools only tells part of the story.

“The 403(b) was negotiated years ago, and in order to gain the 403(b), we gave up a lot. It was not a gift that was given to us,” Ware said.

Sherrie Gaykin, ALEA negotiator, said the 403(b) pension is only one part of the overall contract, and she said other schools focus more on insurance or on other things.

“You have to look at the whole benefit that a contract gives an employee,” Gaykin said. “Other school districts put more money maybe toward their insurance, or their salary schedule. We obviously put language with our 403(b).”

Another major issue is the health insurance policy. The district and teachers both pay part of the health insurance policy, and the district will likely pay the increase in rates. However, Prescott said the district didn’t anticipate a 12.5 percent increase in rates, compared to a 2.1 percent increase last year. But Prescott said the district is trying to work out ways to pay that.

“We’re just trying to keep from going deeper into the hole,” Prescott said. “Like I said, we’re trying to make up $600,000, and there’s a lot of pieces to that puzzle.”

The contract negotiations aren’t usually at this point in June, and Prescott said the process often continues into the next school year as late as January, Prescott said. He said there was a sense of urgency to finish the process this year because of the terminations or reductions to about 10 people.

“It’s tense but there’s a sense of ’we want to work together,’” Prescott said.