BARGAINING CONTINGENCY LANGUAGE
for Salary Increases in light of Proposition 123
‘For public employees in Arizona, once they sign a contract for a specific term, there can be legal impediments to
increasing the contracted salary amount during the term of the contract. However, some situations, such as the
potential passage of Proposition 123 or an override or even a late state budget, can result in additional funds being
made available to Districts after contracts have been issued. Districts should include “contingency” language in
employee contracts, so that the additional revenue can be used to increase employee compensation.
Contingency language is always important, but with Proposition 123,1 the importance is magnified. If voter
approved, Proposition 123 will provide over $530 million new dollars to schools over FY16 and FY17.2 Given the
timing of the election, contingency language is one step to ensure that the funds from Proposition 123 are directed
to employee compensation. In working to ensure this, please consider the following:
What protections does Prop 123 have related to school district employee compensation?
HB 2001, which becomes law if Proposition 123 is approved by the voters on May 17, 2016, has several provisions
that will impact school district employee compensation. For one, there is a onetime expansion of the amount that
a district or charter can carryover from the 15-16 budget into the 16-17 school year. Essentially, a school district or
charter that receives additional funding or budget capacity in fiscal year 2015-2016 because Proposition 123 passes
may carry forward any portion of that funding or budget capacity into fiscal year 2016-2017. The amount budgeted
as the budget balance carryforward is specifically exempt from the revenue control limit.
Also, HB 2001 also provides that “A school district or other entity that receives additional funding or budget
capacity in fiscal years 2015-2016 and 2016-2017 as a result of this act may use the additional monies for increased
employee compensation in fiscal years 2015-2016 and 2016-2017.” This provision specifically permits the proceeds
of the Cave Creek settlement for both FY16 and FY 17 to support increased compensation to the employees in
the district or charter, and this provision was specifically included to address the logistical problem related to the
timing of the election and the issuance of contracts.
May a school district give salary increases to employees after contracts are signed?
Article 9, Section 7 of the Arizona Constitution prohibits a gift of public funds by any public entity, including
school districts. If employees sign contracts for a fixed salary, then the district may not pay more money for the
same services that employees already are obligated to perform under their original contracts. Paying more money
without receiving any additional benefit is an illegal gift of public funds.3
1
Proposition 123 is the result of the settlement of the inflation funding lawsuit, Cave Creek v. DeWitt, brought
by the Arizona Education Association (“AEA”), the Arizona School Boards Association (“ASBA”), the Arizona
Association of School Business Officials (“AASBO”).
2
The estimated Base Level increase statewide for this school year (FY16) is about $248 million, plus $50 million
in the Additional Funds. However, that new Base Level includes the $74,394,000 that was not originally part of
the base for FY16. The total new money for FY16 is about $224 million, and districts will receive their share for
FY16 in late June 2016. However, for FY17, Districts will receive about $300 million in new money, beginning
on July 1, 2016.
3
A district expenditure is not an illegal gift of public funds if 1) the money is used for a public purpose; and 2)
the district receives a sufficient benefit, or “consideration,” for the money spent. See Wistuber v Paradise Valley
Unified School Dist., 141 Ariz. 346, 687 P.2d 354 (1984).
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BARGAINING CONTINGENCY LANGUAGE
for Salary Increases in light of Proposition 123
May a school district pay additional salary if the contract provides for the increase?
Yes! Districts may provide additional salary to employees if the employment contract states that the employee will
receive the extra pay under certain circumstances. This type of provision is called a “contingency” or “condition
precedent” because a specified condition must precede the obligation to pay the extra salary. This additional salary
is not an illegal gift of public funds because it is part of the initial compensation package agreed upon by the
employee and the district. For example, teacher contacts have been approved when they specify additional pay if,
and only if, an override passes. See Attorney General Opinion No. I85-093.
How should the contingency be written in the contract?
Generally, any contingency language must be clear enough that a third party or court can understand and enforce it.
The clearer the contract language, the more likely a court will enforce it. It is easier to enforce provisions when there
is only one triggering event that may occur at a certain time, i.e. If X happens, then the employee gets Y.
In drafting your contingency language, remember the following:
1. Be sure the salary increase is guaranteed if the contingency occurs.
Example: If the override passes on November 4, then each employee shall receive an extra $200.
2. Avoid discretionary language.
Example: If the override passes on November 4, then the Governing board may increase compensation for
each employee.
3. Avoid using language that attaches salary increases to legislative authorization for additional funding
“for salary increases,” “to offset retirement contribution increases,” or for other specific reasons.
Increased legislative appropriations may not be earmarked for that kind of specific purpose.
Is it possible to have a contingent salary increase without a contract?
Yes. The important step is to have the governing board approve the contingency provision. The contingency could
be an explicit provision in an employee’s contract. The contingency also could be included in the board-approved
salary schedule, or the governing board could approve a motion making salary increases contingent on certain
events.
What questions should be asked to clarify the meaning of any contingency?
The following questions may be useful to ask during a bargaining session.
1. What is the contingency or event that will trigger an increase or decrease?
2. Who will decide whether the contingency occurred?
3. When will the decision about whether the contingency occurred be made?
4. How will the amount of increase or decrease be calculated?
5. How will the increase or decrease be divided among employees? For example, will the increase or decrease
be the same dollar amount for everyone or a percentage of salary?
6. When will employees receive a salary increase? For example, will they receive it in one lump sum or will it
be distributed equally through remaining paychecks?
7. When will employees receive less pay if salary is decreased? For example, will the reduction be taken out
of one paycheck or remaining paychecks?
8. Will the district work collaboratively with the association to discuss any
pay increase or decrease under the contingency?
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BARGAINING CONTINGENCY LANGUAGE
for Salary Increases in light of Proposition 123
What are examples of contingency provisions?
There is no one perfect contingency provision. Review proposed language with your AEA Organizational
Consultant or AEA legal staff. Some examples of contingency provisions follow.
In a contract:
If Proposition 123 is voter approved at the May 17, 2016 election, the District will use ____ percent
(___%) of the district’s additional base level funding and additional funding from Proposition 123 from
FY 16 and FY 17 to increase all teachers’ salaries for FY16-17 on a prorated basis.
If Proposition 123 is voter approved at the May 17, 2016 election, the District will use ____ percent (___%)
of the district’s additional base level funding and additional funding from Proposition 123 from FY16 to
pay all employees a stipend. The proceeds received from the passage of Proposition 123 for FY16 shall be
distributed as additional salary to all employees employed during the 2015-16 fiscal year. The additional
salary will be prorated based upon an employee’s hiring date and the ratio of his/her assignment to a fulltime equivalent assignment. The additional salary shall be paid no later than July 15, 2016.
If Proposition 123 is voter approved at the May 17, 2016 election, the district shall allocate 80% of
the additional base level funding and additional funding for salaries and 20% for other non-salary
expenditures. Each employee shall receive an equal pro rata share of the allocated monies as additional
salary which shall be paid no later than July 15, 2016.
If Proposition 123 is voter approved at the May 17, 2016 election, the district shall allocate xx% of the
additional base level funding and additional funding to non-certified employees as additional salary an
equal pro rata share of the amount received by the district. The district shall also allocate xx% of the
additional base level funding and additional funding to certified employees as additional salary an equal
pro rata share of the amount received by the district.
By Governing Board motion:
The Governing Board recognizes the contribution of employees to the mission of the District and wishes
to achieve a fair distribution of available resources. Given the need to offer contracts prior to the May 17,
2016 election for Proposition 123, the Governing Board makes the following commitment to employees:
If Proposition 123 is voter approved at the May 17, 2016 election, then employee shall receive a
stipend of $xxxx by July 31, 2016, and their 2016-17 salary shall be increased by an additional xx%
Remember: You can negotiate the various percentages/amounts based on the additional money coming to your
district.
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