Proposed 2010-11 School District Budget . . . Ray Clarke’s Comments on School Board Meeting

Last night was TESD School Board meeting with discussion of the proposed 2010-11 district budget as the major agenda item.  I was attending a DuPortail House Board meeting and as always, I thank my friend Ray Clarke for attending the School Board meeting and then for sharing his notes with us.  For Ray and any other who attended – I am curious what was the resident turnout like last night?  Staff, teachers, parents in attendance?  Many comments from the audience members?

It looks like the unfunded pension program (PSERS)  problem is looming ever closer on the horizon . . . wonder if there is time before the Primary next week to have a statement from the local candidates on their proposed solution to the problem?  If not before the Primary Election, I do think that we need to have public dialogue before the November General Election and know where the candidates stand on this important economic issue facing the Commonwealth.

Update from the School Board meeting budget discussion

First, a quick appreciation for District Business Manager Art McDonnell. His presentation tonight was very clear. He always seems to be on top of the details, and the budget process has chewed through a lot of those details.

The proposed budget passed with one change: removal of the $80,000 of revenue estimate for the Activity Fee. The consensus being that there is not enough time to sort through and socialize all the details for the upcoming year, but that such a fee should be considered for 2011/12. The lost $80,000 will come from the fund balance.

Board members Brake and Bookstaber proposed amendments that would slightly lower the non-contract compensation increase (to 2%) and the property tax increase (to 2.5%), but received no other votes. I’m not sure that I buy the arguments against the former, but I can see how the $7 million deficit for 2011/12 would weigh on the decision to tax at the Act 1 index. That shows how important it was for the Board to vote not to apply for exceptions back in January, forcing the expense reductions.

The good news is that Moodys affirmed the district’s AAA rating, even considering the dire financial outlook for 2011/12 and especially beyond. Now seems to be a good time to borrow what we can to assure funding to keep the facilities going, while the District tries to figure out how to offset the remaining contracted salary increases and benefits entitlements. Beyond that, hopefully new contracts will reflect the community’s own compensation experience and ability to pay. The notion of above-inflation compounded annual salary level and tenure increases is – to use a word popularized at the meeting – unsustainable.

Those actions will not address the retirement plan problem, though – a net $6 million contribution increase in 2012/13 and another $3 million on top of that in 2013/14 – by which time the fund balance would be wiped out, even with inflation-linked tax increases.

This leads to one of the most critical questions for our prospective state representatives: what – specifically – would you propose to address the unfunded pension liability? What changes in benefits? What changes in contributions, employer and employee? What aid to school districts, and from what source? Let’s hear from them.

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  1. This is so sad… A delay in the 80,000 fee for extra curricular activities because “we do not have time” — with a 350,000 compensation package the Superintendent should be able to find time — or ask his highly paid staff to find the time. But it is easier to just dip into reserves.

    It is also very important to understand just who is responsible for the PSER’s situation. The pension program is controlled by the state legislature and not the Union or the teachers… Harrisburg raised the percentages at the same time they increased their own benefits, for no other reason than to keep the spotlight off of their own greed. They also are the ones that reduced the contribution rates for the the school districts when the markets were a bit higher. So, we the taxpayers had the savings for a number of years – and now it is time to pay the pauper. And it is easy to blame the teachers.

    We should all contact the folks in Harrisburg to amend the state law such that all new teachers would be covered under a defined contribution plan (401K) rather than the defined benefit plan in place today. Existing teachers would still be covered by the current program. Yes the local Union will scream and holler – as will the state Union bosses — but it is a legislative issue and there are more taxpayers than there are teachers – so let’s be heard.

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    Ray Clarke Reply:

    Interesting typo, PD – I feel that it is the “paupers” that are paying!

    Could we ever get to a point where pension plan changes are actually apportioned across all the workforce, so that there is less of a two tier teacher class? Do we want to discourage young teachers from entering the profession? A pension of 85% of final salary after 30 years seems pretty rich to me. I’m not sure that the legislature came up with the pension plan all by themselves – union political contributions must have had an influence. As they will on any changes, of course.

    To Pattye’s question, attendance was sparse, with just one comment from a retiree concerned about the inequity and unsustainability of the union (and now by extension all other employee) salary and benefits plans. The low turn out in part probably reflects the thorough process and communication leading up to this point.

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  2. I agree with the board that the idea and machinations of an activity fee must be thought out smartly. If you are so against the superintendants pay package, why wouldn t you be upset with tacking on a user fee for the kids? Maybe an across the board user fee would make sense, especially for all kids, per year as per colleges, but for every action there is the law of unintended consequences. And they have to be evaluated.

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  3. I agree with papadick58. How hard can it be to come up with the policy on the Activity Fee. They could go to a private school or college website and cut and paste the forms, then have their financial people do a quick calculation.

    I also agree on the move to the Defined Contribution (DC) Plan from the current Defined Benefit (DB) Plan . It would actually be a 403(b) I believe. It is possible to move everybody from a DB plan to a DC plan (at least in the private world). That option should be explored as an alternative to keeping the DB for the current teachers and using the DC for the new employees.

    While we have the Legislatures’ attention, perhaps changing the laws concerning Strikes is in order.

    Finally, I am dismayed that they are giving raises at all. The reasoning does not seem sound at all. Feels more like a cop out.

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  4. Ray

    Just to clarify the pension numbers — it is 2.5% times the number of years of service up to 30 – and that is 75% not 85%.
    But that is not a big difference — and this was raised by 25% (From 2 to 2.5) under by the state cronies at the same time they raised their own benefits by 50%.
    And this benefit is totally out of line with Corporate America and needs to changed.
    It is also ironic that everyone is totally peeved at teachers — when all state workers are getting the same benefits… for holding a shovel up on a road repair. But that is ok as they are not affecting property taxes.
    I do not buy the argument that new teachers will not apply if there is a change in the retirement benefit plan. The reason for such a sweet retirement package was that it was needed to attract folks to the profession back when starting salaries were low. Now that starting salaries are over 40k a year — this benefit needs to be re examined.
    My point is that we should all be banging on the folks in Harrisburg to make a change. As I understand it the Union has 7 or more full time lobbyists working on keeping this Bill off the docket.. so emails from voters are our only method.

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  5. Would love to see everything changed to a defined benefit style plan (401k). I think that you will hear a lot of howling from the teachers’ union if you try though.

    In North Penn School District in Montgomery County, the teachers still went on strike after being offered tens of millions of dollars in raises and being asked to up their medical co-pay from 10% to 12% over the course of five years. They called the offer “unfair.” I think just about every working person (taxpayer) and senior (taxpayer) in the district would love to know their income was guaranteed to rise over the next 5 years.

    Worst of all, in every teachers’ contract is a clause that says the district may not hire anyone who hasn’t worked in the district within one year…so the district is basically shackled to dealing with the teachers’ union. They can’t even hire some replacements at lower costs if the teachers are being unrealistic in their demands (see North Penn).

    [Reply]

    Chet Reply:

    Mr Petersen, these inept candidates keep winning. They must be more “ept” than the Democrats, who lose. Right?

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  6. Papadick,
    This has nothing to do with the superintendent. It has nothing to do with not having enough time to figure it out. It is about adopting a new form of revenue. The easy part is running the numbers. The administration already did that. The short time referenced was the time to get all the discussions about it public and agreed upon by the elected board with enough public comment. In fact, the Superintendent and his administration was ready to adopt it and implement it at the discretion of the board. So why attack him based on his salary or the pay scale of the other administrators. That’s plain ignorant.
    $80k out of a $95+ million budget is a tiny piece of the pie.

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  7. JP —

    Sorry, yes, I meant a defined contribution plan.

    As for the one line in the contract, the Teachers’ Unions would rather work without a contract, stay in arbitration and strike than ever give that line up. You can blame it on the GOPers here, but it is the same EVERYWHERE in the state regardless of if a School Board is Republican-, Democrat-, or Independent-controlled.

    I know the old argument was it protected the “quality of the schools” by ensuring good teachers stayed, but it also protects bad teachers. Plus, with school districts throughout the southeast laying off teachers, it wouldn’t be a problem hiring new, good teachers who haven’t worked in the district in a year.

    FTW

    [Reply]

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