The School Board on Monday night hailed Portland Public Schools' new labor contract with teachers as collaborative, fair and potentially game-changing in terms of how principals evaluate teachers going forward.

"The approval of this contract is a turning point," Co-Chairwoman Pam Knowles said before she and her colleagues voted 5-1 to approve the deal. "It is a relationship built on collaboration, not conflict."

Yet the new, two-year agreement calls for higher labor costs and at least 40 fewer high-school teachers next year. So why are most School Board members cheering?

Unlike previous contract negotiations between the school district and the Portland Association of Teachers, which represents about 3,200 teachers, the latest talks lasted only a matter of months. And they came to a resolution well before the current contract expires in July.

By comparison, negotiations on the existing contract stretched to almost two years, and Portland teachers worked for months without one in place. "It's difficult for morale when teachers are working without a contract," says Rebecca Levison, president of the teachers union.

As voters in the Portland district weigh two multimillion-dollar money measures for schools in May, teachers' morale takes on special importance. The school district, which wants voters to approve both a $548 million construction bond and a $57 million-a-year operating levy, needs teachers to help campaign for the measures.

The new contract also cements a deal to improve the way principals evaluate teachers, a process that hasn't been updated in 30 years. That new plan hasn't been hammered out entirely, but both sides have committed to putting an improved method in place by September. Only then can outsiders judge whether the new evaluations have helped teachers. David Wynde, a two-term member of the board, said that would give the district ample time to make sure the new system is implemented properly. "That's not kicking the can down the road," he said.

The deal also provides some financial certainty for the district. The new contract offers no cost-of-living increases in the 2011-12 or 2012-13 school years, when Portland Public Schools is projected to face back-to-back budget holes of $40 million a year due to shrinking state support for schools.

The full implications of the deal for Portland classrooms won't be known for weeks to come as the district continues to grapple with its budget. If either money measure fails or both do, the contract's financial impact on the district's budget will worsen and the district will have to lay off as many as 200 more teachers.

Although the contract offers no across-the-board raises, teachers who are eligible for automatic pay raises based on years of experience (raises known as "steps") will get those pay increases in both years of the contract. And in the second year of the deal, Portland Public Schools has agreed to add a new step to the salary schedule. As a result, a teacher with a master's degree and more than 12 years of experience who is already at the top pay level of $62,940 per year will see his or her salary increase by 2 percent to $64,199. Taken together, these step increases will cost the district $2.4 million in the first year of the contract and $6.8 million in the second year, for a total of $9.2 million.

To help pay for these raises, the school district and the teachers union agreed to change how the district allocates funding to high schools. Right now, the district assigns teachers to high schools on the assumption they will teach five out of seven classes in a school day. Going forward, the district will budget teachers to teach six out of eight classes.

That means the district will need fewer high-school teachers next year. PPS estimates that will save $4 million a year going forward. But that will also mean 40 high-school teachers—or about 8 percent—will lose their jobs.

The new contract does not spell out how individual high schools will arrange their schedules, however. Both the school district and the teachers union say those specifics will be determined on a school-by-school basis.

School Board member Trudy Sargent missed Monday night's last-minute meeting that approved the deal. Although that meant she couldn't vote, she expressed strong disagreement with the board's action in written testimony. 

"In this difficult economy, with high unemployment and depressed wages in our city and our state, this district faces a serious shortfall in revenue that will require deep cuts to balance the budget," she wrote. "Our duty to our students and our taxpayers requires us to hold the line on all costs to maintain the quality of the education we are providing for our students."

FACT: Board member Martín González was the lone vote against the deal, saying it didn't do enough to improve education for vulnerable students, especially immigrants. He didn't object specifically to the financial terms.