T/E School District Budget Options . . . Pay Waiver, Demotion & Furlough Discussion

I attended the T/E marathon ‘Budget Workshop’ last night.  For nearly 3 hours, the school board members and district administration waded through 30+ slides which contained so many charts and graphs, it was hard to take it all in.  The slides and their detailed explanation took up the vast majority of the evening with probably the last 30 min. devoted to audience questions. The workshop included three new cost-saving ideas that were ‘new’ to me  – a ‘pay waiver’, demotion and furlough.

There was a pivotal slide labeled ‘Options to Close Remaining Shortfall’ that grabbed my attention.  Slide #26 indicates the remaining budget shortfall (after taking budget strategies) at $3,570,509.  Two options listed to close the shortfall – (1) Outsourcing of custodial services $950K and (2) ‘Pay Waiver for remaining staff (TEEA and TENIG) $3,000,000.  We understand the outsourcing option; an RFP has gone out with a return date of early April.  An announcement detailing the results of the RFP should be available early May. 

What is a ‘pay waiver’?  If I understood it correctly, the school district would ask the teachers union not to take their contract guaranteed pay increase for 2011-12.  This would be a one-time pay waiver (a give-back of sorts).  Unlike a salary freeze that could be retroactive (as in the 6-month salary freeze in Radnor’s recent contract) or a salary freeze the first year but larger increases in the second year of a contract, a pay waiver would not be made up in a future contract. There was no indication that TEEA has been approached with this proposal.  Although several school board members praised the teachers, they also suggested the reality and the severity of the economic times, call for a ‘shared sacrifice’ by the taxpayers, teachers, etc.  This is a bold proposal and it will be interesting to see if there is any comment or discussion from TEEA. 

The other ‘get my attention’ moment of the evening was Dr. Waters suggesting that the district would explore  ‘demotion’ and ‘furlough’ as possible ways to close the shortfall.  He cited PA School Code 1151 in regards to demotion.  I did a bit of research and determined that Section 1151 of the School Code provides for the demotion of professional employees. While this section does not make mention of demotions for economic reasons, case law has established that school districts are permitted to demote professional employees for economic reasons, so long as such demotions are not arbitrary and capricious under the law. Expanding the provisions of Section 1124 would similarly allow school districts to furlough employees for economic reasons.   

What would this mean for the school district budget?  Far less staff would be affected and programming would be maintained.   It appears that by law, the school district superintendent would be empowered to review the entire school system as a whole to identify where reduction in staff could occur.  Very interesting news.  I sensed a real determination from Dr. Waters that he was doing everything in his power to help with this budget deficit.  Although he certainly did not say that he would evoke demotion or furlough measures, there will be further discussion on the subject.

Although there was much other discussion in regards to cost-cutting measures, these particular suggestions were ‘new’ to me and caught my attention.  I left the meeting last night with a real sense of the seriousness of the financial situation and of the battle to close the $3.5 million remaining shortfall. 

I would strongly suggest that State Rep Warren Kampf and Sen Andy Dinniman need to play a role in our local school district issues – I’d like to see a public forum with their attendance.  I believe that I recently read that Kampf attended a Phoenixville School Board meeting (or one of their subcommittee meetings?).  If Kampf or one of his staff workers is reading Community Matters, I am making a public appeal that he attend a T/E School Board meeting. . . . aside from serving as our State Representative, Kampf lives in the T/E school district and I would like to see him personally involved in our school district’s budget issues.

Ray Clarke also attended the budget workshop and provided his editorial comments..  It is interesting to have both perspectives of the evening and I thank Ray for his notes below: 

Tonight’s TESD “Budget Workshop” did not really live up to its title, but was nevertheless an informative, if a little selective, exposition of the underlying forces driving the district’s finances – and driving them to steep deficits.

  • The real estate-based gravy train has run off the rails – the tax base is declining and there’s no sign of recovery in transfer taxes
  • The state is exacerbating the problem – reduction in the social security reimbursement, flat special education funding despite increasing enrollment, and a tax increase formula that will limit property tax increases to around ~1% for at least the next couple of years.  There’s even talk of eliminating “Exceptions” and reducing the PSERS match – but that last would just be insane.
  • As it is, PSERS will be the biggest expense increase – up $1 million each year for the next two years, $1.5 for each of the two years after that and $3.5 million in 2015/16
  • The district has reduced staff by 60 in the last two years, but the vagaries of grade and school specific demographics will require a staff increase next year despite likely flat enrollment.
  •  New news: there are tools within the PA School Code that would allow for selective staff “demotions” to meet budget deficit situations.  This may be a way to implement previously attrition-dependent changes such as the teaching period changes at the high school.
  • With all known realistic strategies and a 3.77% property tax increase including the now-approved exceptions, the 2011/12 deficit would still be $3.6 million
  • Other ideas continue to be studied: $400,000 of reasonably tangible and realistic notions, and maybe an equal amount of less tangible but possibly realistic ones. A few multi-million dollar ideas with profound impact on the culture and educational quality are further on the list, but seem likely only in extremis
  • Which brings us to the big issues, laid out individually by the administration: outsource custodial services and obtain a “pay waiver” from both the TEEA and TENIG.  There was no indication that the Board has received any proposal from the unions, much less one that would forgo (“until better times”) $3 million of pay increases.  However, there was considerable emphasis on the need for shared sacrifice, and it is starkly apparent how such a move could bring the deficit somewhat back into range.  There was no commentary from the TEEA – unlike from the TENIG representatives, who, as at previous meetings, appealed to emotion rather than the pocket book.  As that process evolves, it would be great if TENIG could quantify the cost savings they claim they could bring to the district.

Bottom line: my view is that the district continues to make the best of the hand it has (including of course, the cards picked up from generous previous contracts and other decisions).  The key question: what will the unions do to show that they can remain relevant, and be part of the solution, not part of the problem?

And even if the deficit can be reined back some, PSERS remains the issue.  

There was an interesting chart that documented the Employer Contribution Rate from 1988 to now.  The rate started out at 19%, declined for 13 or 14 years to 1% (thanks to a booming stock market), at which point the benefit multiplier was increased to 2.5, COLA rules changed and bubbles burst, whereupon the ECR started up again, to next year’s 8.65% and then 33.37% by 2015/16 and for the next decade, even after last year’s Harrisburg “fix”.  Employee contributions have been consistently 7.5%. 

So, how to fix this (and the related SERS for state employees)?  Any solution will likely have to be approved by taxpayers.  If the problem is dumped in the local lap, the increases are fundamentally unaffordable without a referendum: be it for, say, 10% property tax increases or an equivalent EIT.  Even if Harrisburg rose to the occasion, that might also involve a courageous appeal to voters: for a change in the Constitution (“Any unilateral substantial change in public employee pension benefits that constitutes a “net detriment” to the employees is a constitutionally impermissable impairment of the employment contract”), or for issuing a Pension Bond to deal with the unfunded liability. 

Now there’s something to write to Dinniman and Kampf about!

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6 Comments

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  1. As I understand the law Section 1151 (demotion) is only applicable to administrative employees and will have limited effect on the budget situation. For instance, a demotion might be from principal to asst. principal with a reduction in pay. I don’t think demotion applies to teachers. What would teachers be demoted from and to?

    [Reply]

    Pattye Benson Reply:

    My understanding is that ‘demotion’ could occur by demoting full-time employees to part-time employees. Couldn’t a full-time teacher be demoted to part-time employment depending on demand?

    [Reply]

    citizenone Reply:

    I hadn’t thought of the full time to part time demotion.

    It would be nice to hear how the superintendent would apply demotions, the savings envisioned and whether a labor lawyer has been consulted. Suppose a high school teacher was only teaching 5 of 6 periods or 4 of 6. Could that teacher be demoted to part time? I doubt it and if it were attempted I see it being grieved by the union. That’s where the labor lawyer is valuable.

    [Reply]

  2. I’d like to hear what the teachers think about this. I think it sounds like a great win-win. More flexibility for classes and scheduling, cost effective, and potentially very desirable for some teachers. Wouldn’t there be some teachers interested in working part-time due to younger children or ill relatives, pursuing additional education, nearing retirement and wanting to reduce their time commitment? At different times of my career, I would have loved to work part-time.

    Looking forward to what the admin finds out and presents regarding this option.
    (BTW: I find the term “demotion” demoralizing.)

    [Reply]

  3. Since we don’t have kids, I really don’t know much about TESD, other than it’s excellent reputation.

    But what really struck me when reading Pattye’s synopsis is that we are going to see more and more costs being pushed down to local governments, first from the feds and then from the state.

    There is definitely going to be a backlash locally – I just wonder if all the people who complain about “big” government and high federal and/or state taxes understand that local governments will have to foot the bill eventually.

    [Reply]

  4. I guess my problem with this has more to do with Ray’s analysis of the issue. Not that Ray’s take is wrong, but there are so many things stated as absolutes that we, as taxpayers, should be tired of having forced upon us.

    *****
    The district has reduced staff by 60 in the last two years, but the vagaries of grade and school specific demographics will require a staff increase next year despite likely flat enrollment.

    ******
    Why? Why can’t we have slightly larger class sizes. Apparently, that system worked just fine when my parents and I attended school (and I attended T/E). Maybe — other than b/c of union rules — we don’t have to staff up if we increase class size slightly.

    *************
    As it is, PSERS will be the biggest expense increase – up $1 million each year for the next two years, $1.5 for each of the two years after that and $3.5 million in 2015/16

    ****************
    Once again, Ray is right and there is nothing that can be done about existing obligations. However, next contract this gravy train should end. A large number of legislators want to change the system, now we have to have the school board and taxpayers join that fight.

    *************
    There was no commentary from the TEEA – unlike from the TENIG representatives, who, as at previous meetings, appealed to emotion rather than the pocket book.
    ************
    After this contract, the union should be shown the door. They are now proving — beyond a doubt — they are in this only for themselves and their power, not the kids as they like to claim. (NOTE: this is against the union, not teachers)

    [Reply]

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