As the city and the teachers union move closer to an agreement on a new contract, the issues under the microscope are coming into focus.

To teachers, the contract negotiations represent hope for a pay raise. For principals and teachers struggling to handle the implementation of the Common Core learning standards and a new evaluation system, the talks could lead to extra time in the school day. And for economic analysts, the negotiations will be a harbinger of the city’s fiscal outlook.

The outcome will offer a first look at how Mayor Bill de Blasio will deal with political allies when they’re on the other side of the negotiating table. De Blasio said during the election last year that he would be a tough negotiator with unions because they endorsed other candidates in the Democratic primary.

“I am unburdened by the support of the municipal labor unions,” de Blasio said last August. He was eventually endorsed by the UFT and other unions in the general election.

Both sides have their own priorities. Here’s a look at the biggest issues they’re working through.

1. Giving retroactive pay

The city’s teachers union has been without a contract for nearly five years, longer than any other municipal labor force. UFT negotiators are now demanding two chunks of back pay, and what de Blasio agrees to give them will set a standard for raises for the other 150 outstanding union contracts the city is facing.

The issue: The pay scales for teachers and other school personnel within the UFT have been unchanged since 2009, though most teachers have seen their salaries increase anyway thanks to scheduled pay bumps.

The union’s top priority now is getting $3.4 billion of back pay for the first two years its members worked without a contract. That would match up with what other unions got in 2008, when the UFT and principals union sat out of a round of collective bargaining.

The union is also negotiating a second round of back pay for the third, fourth, and fifth years its members worked without a contract. The outcome of that negotiation is being closely watched by more than educators, since it will likely establish a bargaining pattern for more than 150 municipal labor contracts that the city is looking to settle in the coming months.

On the table: City officials have said they simply can’t afford to pay an initial $3.4 billion round of back pay as a lump sum. On top of that, de Blasio’s aides have reportedly floated a long-term deal that would spread those raises for teachers out over several years instead. (Union insider Peter Goodman recently wrote that both sides may have agreed on a contract that would expire after de Blasio is up for reelection in 2017.)

All teachers currently in the system will get some raise under that plan, though how much will depend on how long they’ve been in the system.

All told, the city could be on the hook more than $8 billion if the city follows that pattern with other unions, according to the Citizens Budget Commission, a watchdog group. Budget analysts say would hurt the city’s fiscal outlook for years to come.

2. Revamping the Absent Teacher Reserve

After pay raises, figuring out what to do with “excessed” teachers who can’t find full-time posts is the biggest sticking point in contract talks. Both sides have long agreed that the current system doesn’t work, but haven’t been able to agree on a solution. New leadership at City Hall could finally break what has been a years-long stalemate.

The issue: The city is paying the salaries of nearly 1,200 teachers without full-time positions. Most were let go from previous jobs because of budget cuts or because their schools were closed, and others have received low ratings on their evaluations or were let go for disciplinary reasons. Last year, the city said that pool cost an estimated $105 million.

Many newly-excessed teachers find new posts quickly. But as of last spring, 59 percent of ATR members had been in the pool for two or more years, according to Department of Education data.

To the Bloomberg administration, and groups now pushing its agenda, the ATR pool is made up of weak teachers who should be removed from the city’s payroll. But educators contend there are plenty of competent teachers in the pool who could be contributing in schools if they were given a legitimate chance.

“It is a complete waste of such talent that these people are not being used in schools right now,” Mulgrew said in a radio interview in February.

The issue, some say, is a hiring system that means veteran teachers, with their higher salaries, are more likely to be passed over by principals who want to save money and hire new teachers.

“One principal cut short an interview by telling me that she would not hire me because I was tenured and too set in my ways,” Jonathan Joseph, who wrote on Chalkbeat this week that he was in the ATR pool for three years before finding a new job. “Another admitted to me that she liked me and my resume, but it was cheaper to hire a Teaching Fellow.”

On the table: In the past, Bloomberg and Mulgrew flirted with the idea of offering a buyout to long-term excessed teachers, but as their relationship deteriorated in the administration’s waning years, so did the possibility of an agreement.

Bloomberg’s final buyout offer last fall included no perks and just a four-month time limit for ATRs to find a job before getting laid off, which officials said would save the city at least $63 million each year.

But the proposed solutions have changed in dramatic ways since de Blasio took office, sources say.

Negotiators aren’t discussing ways to get rid of excessed teachers, some sources say. They’re instead focused on returning them to classrooms for longer-term teaching assignments—they currently rotate among schools weekly—and on finding ways to incentivize principals to hire from the pool.

Chancellor Carmen Fariña has repeatedly insisted that she’ll protect principals’ power to hire the teachers they want—a principle known as “mutual consent hiring.” What’s still unclear is how teachers could be matched with schools and what kinds of incentives Fariña might offer principals.

Up next: tackling teacher evaluations and training time.