EIT

Lifetime healthcare benefits of Tredyffrin Township Police Association result in $40M unfunded liability — What’s the Solution?

I attended the public meeting this week to discuss the township’s proposed preliminary 2013 budget.  About 10 residents attended plus township supervisors Michelle Kichline and Mike Heaberg (Heaberg is a member of the Finance Committee) and Acting Township Manager and Finance Director Tim Klarich.

Over the course of two hours, various topics were discussed with Klarich and the two supervisors, providing answers and background on numerous issues.  The townships’ $40 M unfunded medical liability and the open issue on the labor agreement between the township and the police union, Tredyffrin Township Police Association (TTPA) were of particular interest to me.  The ‘elephant in the room’ for the township’s 2013 budget and major obstacle (and the reason for the township’s $40M liability) is the ongoing arbitration with the police contract and their lifetime health benefits.

Since January 2012, the contract between TTPA and Tredyffrin Township has been in arbitration; the 3-year police contract expired the end of 2011. Kichline was quick to point out that both sides want an arbitration decision but unfortunately, for 10+ months, the process has been held captive, waiting for a ruling from independent arbitrator, Michael Zobrak from Aliquippa, PA.  According to PA Department of Labor & Industry website, Zobrak’s fee is $1200 per diem (however, his page was last updated in 2007).  Interesting to note, there is no requirement for the arbitrator to be an attorney — Zobrak’s education background includes BA, Geneva College and M.Ed, U of Pittsburgh.

According to Kichline and Klarich, Zobrak has held meetings with the attorneys representing the township and TTPA.  It was unclear how many meetings have been held and/or how often.  Although I am sure both sides hope that a resolution is forthcoming, there was nothing definitive stated as to when that might happen. For the record, I called Zobrak’s office and left a voice mail – I will update if I receive a response.

The biggest roadblock in collective bargaining contract disputes these days is health care benefits (in addition to salaries). Certainly health care benefits were an important component in the recently settled T/E teacher contract negotiations.  Appreciating the current economic environment, the teachers agreed that their generous healthcare plan of the past was no longer possible, changes were made in their teacher’s contract accordingly.  Considering the healthcare provisions of the former TESD contract, made it even more surprising to learn the details of the health care benefits of TTPA.

If some residents were bothered by the health care benefit package contained in the previous TTEA contract, I think they would be shocked at the level of TTPA health care coverage.  Currently, all Tredyffrin police officers receive free full lifetime health care benefits for themselves and their families after 25 years of service to the township.  At present 52 retired police officers and families, receive full free healthcare in Tredyffrin Township.  In addition there are a number (not sure of the exact count) of currently employed police officers that are in the 25+ years of service who will receive this  lifetime healthcar coverage under the conditions of the existing contract.

The lifetime healthcare benefits of TTPA constitute the township’s $40M unfunded liability.  According to Kichline, the lifetime health care benefits afforded members of TTPA in their current contract, is not found in most other area municipal police contracts. Here was an interesting twist — I assumed that any change to the current health care benefit of TTPA would affect new hires only (similar to what is being discussed in Harrisburg as it relates to the pension situation, where changes would not affect those employees already in the system).  It is possible (however, probably not likely) that the independent arbitrator could change the lifetime healthcare benefits to affect not only new hires, but also include TTPA members already receiving these benefits. As I have previously stated re the state pension, I support changing the benefits for new hires but not for those employees already in the system.  I am of the same opinion that the same should hold true for members of TTPA.  The healthcare benefits should only be changed for new police department hires – however that means the township still has the $40M unfunded liability ‘noose’ around its neck!

We spent much time during the meeting discussing the township’s $40M unfunded liability.  In the proposed 2013 preliminary budget, Klarich has increased funding from $250K to $500K as a way to start to buy down this debt.  A couple of the residents in attendance were advocating for a greater yearly contribution, say $2M annually, as a way of addressing the $40M debt.

Personally, I think there should be a degree of concern that this enormous liability of $40M could have an adverse effect on the township’s current AAA bond rating.  On the other hand, is it reasonable to expect that Moody’s would view the township’s yearly $500K contribution favorably and continue to award the township with its gold star rating?  Remember at $500K/year, it will take the township 80 years to reach that $40M mark.

Knowing that the township has an open issue on the TTPA labor agreement and the $40M unfunded liability, what is the answer?  I get it that we all want to keep the highest level of service in our community and pay nothing additional for those services, but practically speaking that is not possible.  Beginning in 2015, the state is requiring all municipalities to include their unfunded liability in its accounting.

There are few avenues available to the township to handle the staggering debt beyond an increase in our real estate taxes … except for the option to institute an Earned Income Tax.  Unlike the School Board, the township supervisors would not need a voter referendum to institute this tax.  The topic of EIT was brought up at the meeting, there appeared to be little interest in furthering the discussion.  Although not seen as a favorable option by some, shouldn’t there be serious consideration given to an EIT?

How many Tredyffrin residents work in another jurisdiction that has an Earned Income Tax?  If they do, the EIT dollars the Tredyffrin resident pays stays in that jurisdiction because our township does not have an EIT. There has always been much misunderstanding about who would pay an EIT but unearned income, such as Social Security, interest, dividends and pensions are exempt from the tax unlike an increase in property tax which affects all homeowners, whether they are on a fixed income or not.  I have struggled to understand why it is that the supervisors are reticent to consider the option – especially considering that most of our neighbors have an EIT and many of our residents are already paying this tax.  Millions of dollars leave Tredyffrin in EIT payments, helping to subsidize the budgets of neighbor’s budgets.

The proposed 2013 preliminary budget for includes a 5.5% tax increase in addition to a decrease in the police staff. Part of the rationale behind not replacing police staff is that any new hires will come in under the conditions of the last TTPA contract, which includes the lifetime healthcare benefit.  If the arbitrator were to come back with a contract that removes the lifetime healthcare benefit, it would be financially better for the township to wait until after the new contract is signed before hiring new police staff.

Again, no one wants to pay additional taxes but how much longer will it be OK with Tredyffrin residents to see their services reduced in order to balance the township budget?  What happens if the $40M unfunded liability jeopardizes township’s AAA bond rating? And what about capital improvements, ongoing maintenance and infrastructure needs of our community? With residential and commercial real estate transfer revenue way down, what is the funding solution for Tredyffrin …  if it isn’t raising real estate taxes or instituting an EIT?  What’s the answer?

What about the Tredyffrin Township resident who pays EIT to another municipality when it could be helping this community?  How does that resident feel – below are comments from John Petersen, a resident who pays EIT to a neighboring municipality:

Ever since the Tax Study Commission Report of 2006 was released, I’ve called it an intellectually dishonest exercise. I said that and continue to say that because of the factors that were willfully ignored. The unfunded pension liability under discussion was one of those factors. Back then, the unfunded liability was estimated to be around $25MM. As predicted, in a short amount of time, that figure has doubled. I remember Bob Lamina prophetically saying at a BoS meeting that this issue was the most significant one facing the township and the township will have to face up to this impending reality.

I pay an EIT – as do thousands of Tredyffrin residents. I for one am tired of being disenfranchised by this government – a government run by the TTOP proletariat that refuses to discuss an EIT. Not that the points have to be enumerated again, I will do so here:

  • Many pay an EIT already
  • Surrounding governments plan their budgets around the fact that Tredyffrin DOES NOT levy an EIT (read as we subsidize other townships)
  • Had an EIT been levied years ago, part of the unfunded liability could have been paid off
  • An EIT is the only means of providing property tax relief
  • At least one large company (Shire) is leaving Tredyffrin for East Whiteland (that does levy an EIT)

Indeed, there are some who will be adversely affected. Those who live in and work in Tredyffrin. I believe that to be an extreme minority of people. Regardless, the realities of the situation are such where an EIT must be discussed.

I won’t bother getting into who one particular political organization has sucked the oxygen out of the room re: stifling the conversation or how the opposing party has succumbed to fear by adopting the same philosophy re: the EIT.

Bottom line – I pay tax dollars that could make their way to Tredyffrin. The local government is denying that right and in the process, disenfranchising those like me who already pay an EIT.

Maybe at long last, there can be an honest discussion.

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Decision Time – Will T/E School Board Directors Vote in Favor of an EIT Voter Referendum Question?

Monday night is a case where I would like to be in two places at once . . .

Tredyffrin’s township finances and the proposed 2012 budget is on the Board of Supervisors agenda at 7:30 PM while the T/E school directors will hold a Finance Committee meeting at 6:30 PM followed by a special school board meeting at 7:30 PM to discuss the EIT. (Both school district meetings will be held in Conestoga HS cafeteria). I will attend the Board of Supervisors meeting and I am counting on my friend Ray Clarke to attend the school district meetings.

In reviewing the agenda for the T/E Finance Committee meeting and the draft minutes from their October 17 meeting, I read the following:

Education Committee Recommendation:

At the prior Finance Committee meeting the Committee was informed that the State reinstated $1.3 million in funding that was not included in the District’s 2011-12 budget. In light of this information, the Committee authorized the Superintendent to restore education program cuts made in the 2011-12 budget. Dr. Richard Gusick presented the proposed reinstatements of budget cuts to the education program and explained that they were already reviewed by the Education The Finance Committee asked that the proposal to reinstate these budget cuts be presented at a future Board meeting.

I am confused. Although I was aware that the State had reinstated $1.3 million in funding to the T/E school district, I was not aware there was a decision as to whether (1) restore the district’s education programming cuts or (2) add the money to the fund balance.

According to these minutes, the Finance Committee (or Education Committee?) authorized the money go to restoring education program cuts. Restoring which programming cuts? Latin in the Middle School? Foreign language in the elementary school? Technology purchases? Specifically, which education program cuts did the committee authorize restored? In addition, are we to assume that the option of adding the $1.3 million to the district’s fund balance is off the table for consideration? These are questions for the school board directors at Monday’s meeting.

I also noted that the Finance Committee meeting minutes indicate that the school district will wait until 2012 to release a RFP for the outsourcing (if needed) of custodial services. It is not clear at this point if custodial outsourcing will be on the budget reduction strategy list.

Immediately following the Finance Committee meeting tomorrow night, the school board will hold a special meeting at 7:30 PM to consider notification to Tredyffrin and Easttown townships of the intent to levy an EIT. November 16 is the deadline for the School Board to provide the townships with notification so the board will be taking a vote at this special meeting. The school board will vote on whether to include EIT as a voter referendum question on the primary election ballot on April 24, 2012. For school districts to levy an EIT requires voter approval. The maximum that TESD could levy is 1%. If approved by voters, all residents, including renters, in Tredyffrin and Easttown Townships would be taxed at 1% on earned income. If an EIT were to be approved, the townships have the legal option to request one-half of the 1% collected by the school district.

Leading up to Election Day, we watched as EIT become the ‘buzz’ word of the local campaign season. Early on, the local Republican Party took a stand against an earned income tax and furthered the issue by labeling the Democrat candidates as EIT supporters. Feeling the pressure, all the Democratic school board candidates responded that ‘they’ were personally opposed to an earned income tax.

The politicizing of the EIT prior to the public presentation of TESD’s tax study group troubled me. The EIT became a political football between the local political parties and in my opinion, damaged the community’s ability to completely understand the EIT as presented by the tax study group. Not to mention the confusion that occurred at the polls on Election Day! Three different precinct judge of elections have reported to me that there were some confused voters — asking where the EIT question was on the ballot. Based on the campaign mailers and political signs, many in the community came to the polls on Election Day expecting to vote on the EIT issue.

Now that we are on the other side of the election, how can newly re-elected school board members Karen Cruikshank (D) and Jim Bruce (R) now vote in favor of taking the EIT issue to the voters. I do not know whether re-elected Easttown school board member Pete Motel (R) made a public statement one way or the other re the EIT. Based on the pre-election political hype of the EIT, the vote count of the school board members will be interesting. Will we see the school board members following the lead of their political parties?

If the school board members vote in favor of an EIT voter referendum question on the April primary ballot, do many of us really think that the residents would vote in favor of this new tax. During the school board budget cut strategy meetings, there were residents asking for tax increases vs. further educational programming cuts.

Faced with the possibility of further programming cuts in the next school district budget, would there be sufficient support from voters for an EIT?

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Is EIT the answer for T/E School District — Tax Study Group Presents their Pros & Cons

Election Day is Tuesday and based on campaign mailers, signs and general rhetoric that we were voting on the Earned Income Tax.  The EIT is not an issue for us on Election Day, at least not this election.

Much of this campaign discussion on the EIT stems from T/E School Board decision to form a Tax Study Group as part of their budget development process.  The goal of the committee of eight volunteers, including Michael Abele, Michael Benning, Rita Borzillo, Marie Falcone, William Mullin, Terri Smith, Andrew Snyder and Edward Stevens, was to study the effect that an EIT would have on the residents and the school district and provide the pros and cons.

The Tax Study Group held 5 public workshop meetings and presented their findings yesterday at two public meetings.  Based on the Tax Study Group’s findings, the school board will make a decision whether to include the EIT question on the April 2012 ballot. If the EIT question is placed on the primary election ballot in April, community members will hopefully be able to make an informed decision.

Although I was not able to attend the EIT meeting due to a prior commitment, it is my understanding that both were well attended.  I am on record as saying that I believe the process for a fair and open discussion of the Earned Income Tax has been tainted by the last few weeks of campaign politics from school board candidates.  Serious economic issues are going to continue to affect our school district and cause many challenges to the school board facing the 2012-13 budget and teacher negotiations.

If you were unable to attend either of yesterday’s public meetings by the Tax Study Group, the EIT presentation will be aired on TETV, Comcast Channel 14 and Verizon Channel 20 at 9 PM daily from November 4 through November 14.

Ray Clarke attended yesterday’s Tax Study Group and offers his candid remarks from the presentation:

The Tax Study Group matinee played to a packed house – probably a hundred or more residents in attendance. I whole-heartedly encourage anyone interested in the fiscal and educational future of T/E to attend the evening performance. Of the 30 slides, two thirds are devoted to background – really important to place the discussion in its proper context. The pros and cons of the EIT were fairly presented, although not weighted nor compared directly to alternatives (it was not the TSG mandate to do that). The audience seemed engaged throughout, and the questions at the end added much to the discussion.

The elephant in the room: what will be the attitude of the Townships? Will they take 50% of any money the voters may want to apply to their children’s education? Easttown and Tredyffrin may be very different, and I think we all need to have a very long memory about campaign promises made by Tredyffrin Supervisors. (The $30 million TESD fund balance did not go unremarked as a short-term support).

A lot of hard work and thought went into the research and analysis, and in developing a communication that is accessible to everyone. Shows how important the process was and what a travesty it is to try to short-change it. Hopefully many voters will be able to see the evening performance or the video and draw their own conclusions.

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Tax Study Group to Present EIT Findings . . . Will Yellow Signs by Republican Candidates Influence Residents?

As part of the budget process for the T/E School District, a Tax Study Group composed of community volunteers was formed to determine the impact of an earned income tax (EIT) on residents and the school district.  The goal of the group was to identify the pros and cons of an EIT for residents and then present their findings in a public presentation to the community.  The Tax Study Group will offer its findings on Thursday, November 3 at 1 PM at the T/E Administration office, 940 W. Valley Rd, Suite 1700, Wayne and again at 7 PM at the Valley Forge Middle School, 105 W. Walker Road, Wayne.  Please plan to attend so that you can make an informed decision on EIT (in the event it is on the Primary Election ballot in April 2012.

I have expressed my disappointment that the Republican candidates (school board and supervisor) took an advance stand against an earned income tax prior to the presentation of the Tax Study Group.  In fairness to the process, and to the volunteer’s time of those serving on the study group, why not wait until after the presentation of the EIT before publicly declaring that you are against it.  The severity of our school district’s economic situation requires that all options be explored – the presentation by the Tax Study Group on the earned income tax is one of those options.

An ‘As I See It’ article written by John Petersen, resident of Paoli appeared in the Main Line Suburban newspaper a couple of weeks ago.  The article was written shortly after the first bright yellow, ‘no EIT’ signs began appearing in the township. Because the article was not included on Main Line Media’s online site, I could not provide a link on Community Matters.

It is with permission from the author, that I include the article below:

As I See It: Those little yellow GOP signs: proof the GOP does not respect you

If you have been driving around Tredyffrin (since this is not a walking township), you may have noticed a new type of yellow growth sprouting up all over the place. Naturalists have classified it as Fungi Reipublicae. In fact, these yellow growths are actually a new version of the yellow GOP signs that we saw in 2007. These signs come in two flavors: “No Earned Income Tax” and “Top Ranked Schools.” Both cite that you should “Vote Republican”. Let’s break down the claims.

No Earned Income Tax

This sign would have you think that there is an active question in front of the voters and that if you vote Republican, you will be saved from the evils of an Earned Income Tax. Let’s set aside the fact that many already pay an EIT for a moment and instead, concentrate on the straw man argument that Tredyffrin GOP is perpetuating. In fact, there is an earned income tax study committee that has been commissioned by the school board. That committee was first suggested by Republican school board member Kevin Mahoney. To review, there is no active tax question in front of the voters and the only group that is studying the feasibility of an EIT in Tredyffrin was suggested by a Republican.

Top Ranked Schools

It’s true, T/E Schools are quite good. The Tredyffrin Republican Committee would have you believe that Republicans, and Republicans alone are responsible for our “top ranked schools.” In fact, there are a number of Democrats on the school board. I guess they have nothing to do with the successes. Fine, let’s give all the credit to the Republicans. But if we do that, let’s examine the whole cloth. Of Lower Merion, Radnor and T/E, is T/E the best? In terms of facilities, absolutely not. While T/E has retrofitted old buildings, both Lower Merion and Radnor have made a commitment to invest in infrastructure, the type that is required for children to get a top-notch public education in the 21st century. As for test scores, college acceptance, etc – Lower Merion and Radnor are at least as good as T/E.

How about labor relations? T/E is definitely not at the top of the class there? How about fiscal responsibility? T/E is about 9 Million in the hole. You know all of the sweetheart deals for teachers the Republicans are complaining about? Guess what, it’s the Republican led school board that has consistently given the unions what they wanted. At the same time, they are not keen on paying for it. Those same Republicans have consistently raised our property taxes year after year. And yet they are the same people who claim to be protecting us from the evils of an earned income tax.

Any organization that would try and sell the political rhetoric that we see in these yellow signs clearly does not respect their customer. The Republicans believe that we are all too stupid and too quick to fall into the fear trap. The Republicans are banking on the fact that we will believe the scare tactics that the other side is just out to tax and spend our money. Seems to me, the Tredyffrin Republicans have done a good job of that on their own already. They don’t need help from anybody! And never forget, the Tredyffrin Republicans is the party of Bob Lamina, and Paul Olson. If that is not enough reason to give the Tredyffrin Republicans a vote of no confidence, I don’t know what is.

John Petersen
Paoli, PA

 

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TESD’s EIT Tax Study Group . . . You Have until Midnight Tonight to Apply!

I attended the TESD Public Information Committee meeting yesterday . . . primarily to fully understand the selection process for committee members and the mission of the Earned Income Tax (EIT) Tax Study Group.

Several months ago, the T/E school board decided to create a citizen tax study group and sent postcards to Tredyffrin and Easttown township residents asking those interested to fill out an application and submit it to the school district –  tonight at midnight, June 15 is the deadline.

According to the application, “This citizen group will study the effects that an Earned Income Tax (EIT) would have on the School District and its residents. Following its study, the Tax Study Group members will present the pros and cons of an EIT to the School Board and the community. Tax Study Group members must be willing to be introduced publicly as the Tax Study Group and be willing to present information at one or two televised meetings. The Tax Study Group will meet up to eight times in September and October 2011.”

The EIT tax study group application contains 19 questions ranging from age, gender to level of education, profession, whether or not you currently pay an EIT and two important questions (in my opinion) Why do you wish to be a member of the Tax Study Group? and what particular expertise could you bring to the Tax Study Group?

Part of the Public Information Committee meeting agenda was to look at the selection process of the nine members that would form this tax study group. At the meeting, the school board members began constructing the process.  As a means of distancing themselves personally from the members that were to be chosen, it was determined that it would be a blind, random choice based on specific criteria.  For the sake of anonymity and fairness, the school board members would not know the names and addresses of the applicants.

I sat and listened as the five board members attending the meeting (Debbie Bookstaber, Karen Cruickshank, Kevin Buraks, Anne Crowley and Betsy Fadem) prepared their list of criteria in order of priority. Their order of priority of criteria for selection on the tax study group is:

1.  3 members of the group to be Easttown Residents; 6 members of the group to be Tredyffrin residents.
2.  There should be a mix of people who (a) currently pay an EIT elsewhere; (b) those who are residents and work in the district and for which an EIT would be a new tax and (c) those residents that are retired and therefore would not be paying an EIT.  It was suggested to include 4 members that currently pay an EIT and to include 5 members for whom an EIT would be a new tax.
3.  2-3 members should have school age children in T/E
4. Age of applicant
5. Gender of applicant
6. Renters
7. Business background

There were only 3 audience members at this meeting (1 Easttown resident and 2 Tredyffrin residents) and I sat rather impatiently listening to their criteria; not quite believing that what I viewed as the most important baseline criteria was not mentioned. As they were completing their list of criteria, I reminded them that at the school board meeting when this was originally discussed, it was agreed that the tax study group would be ‘apolitical’.  I mentioned that the application had not addressed the poltical issue but recalled that Kevin Mahoney specifically suggested that current school board members and township supervisors as well as candidates for the school board and township supervisors be excluded from the group. I asked how those specific would be excluded if the names were not to be known in the selection. 

To their credit, the board members immediately placed that at the top of the criteria and assured me that staff would pull any of those applications. Seeking further clarification, I asked about ‘former’ school board members or ‘former’ township supervisors – were their applications suitable.  Yes.  What about applicants with connections to the local political parties, were their applications suitable.  The answer was yes.  This suggests that Democratic or Republican committee people (or those individuals closely associated with local political campaigns) are suitable applicants for the tax study group.  Attempting to further explain this study group needs to be apolitical, I suggested that when the 9 members of the group are known, the public will recogonize if these individuals are in the category of ‘political’.  I have attended enough school board, finance and budget meetings to know that if 25 residents show up to any of these meetings, that is a lot of interest.  Therefore, when I learned yesterday, they have received 150 applications, I do not think it is a stretch to assume that there may be some politics going on.  I want this to be a very positive and informational experience for the community; not a tax study group that is tainted with politics.  I am hoping that this Community Matters post will give the board time to reflect before the members of the tax study group are chosen.

The other troubling aspect of the criteria selection was that the 2 questions at the end of the application – Why do you wish to be a member and what particular expertise could you bring to the group were overlooked and may be all but forgotten in the selection process.  It is important to have qualified people as members of this tax study group. We live in a community that is rich with residents with skills, background and expertise, so shouldn’t that be a major factor in the selection? In addition, ‘why’ someone wants to participate is also very telling and should be factored in the choice. 

As for the actual process of the selection – it is my understanding that the decision will be made at the Finance Committee meeting on Monday, June 20.  The residents chosen for the tax study group will be called and asked of their willingness to participate. All applicants will be put in to individual groups and the names randomly chosen.  They feel that renters are needed in the mix and to date, there is not a single renter among the 150 applications.  If you are a numbers person, happen to be a renter and want a seat at the tax study table, the odds are in your favor.

I hope that the EIT Tax Study Group selection process goes well and that residents are offering to participate for the right reason.  I suggest the process be documented prior to the selection of the members; otherwise, residents are going to look at the school board members if there is a problem.

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Calling Applicants for T/E Citizen Earned Income Tax Study Group . . . Can its Membership be Apolitical?

We learned at the last T/E School Board meeting that the school board had decided to create a citizen Tax Study Group to study the Earned Income Tax (EIT).  Postcards with details concerning the application process were mailed and I received mine today.  The Tax Study Group is open to Tredyffrin and Easttown residents and the group is charged with researching the pros and cons of an EIT.  The group will meeting up to eight times through September and October and then present their findings to the school board and to the community.

According to the post card, interested residents are asked to complete the Tax Study Group application online at www.tesd.net by June 15, 2011. Community members chosen will be notified after June 21.  Seeking to include a diverse group of residents, questions on the application range from level of applicant’s education; children in the district;  to employment status (whether you work in the school district or not, retired, etc.).  Applicants are also asked why they wish to be considered for the Tax Study Group and what specific expertise you would bring to the study group.

A discussion point presented at the school board meeting, but not mentioned on the application, is in regards insuring that members of the  Tax Study Group selected are apolitical.   To explain, school board member Kevin Mahoney suggested that the Tax Study Group needs to be apolitical; no political candidates or elected officials should not be included in the group.  However, I note that there is no mention of that point on the postcard or on the application. I support Mahoney’s suggestion, and believe for the EIT process and discussion to be the most valuable it should exclude a political bias.

I have a few questions about the Tax Study Group that is not available on the school district website – How many residents will be on the Tax Study Group? Will members include a balance of Easttown and Tredyffrin residents?  What is the exact selection process and criteria?  At the school board meeting, it was announced that the study group would not include any school board members, but will they make the selection of the study group members? I want the selection process and the membership of the study group to be apolitical (as was suggested) how will the school board seek to achieve this goal?

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Looking to T/E Teachers for ‘Shared Sacrifice’ – Pay Increase Waiver not Salary Freeze

School districts across the state are scrambling to plug projected budget gaps stemming from deep cuts in state funding and TESD is no different. The use of “shared sacrifice” has become a common and oft-repeated phrase in today’s political discourse. As school district budget deadlines loom, we are see that teachers (fairly or unfairly) are finding themselves of in the limelight on this topic.  In my view, we do need to boldly address our deficit crisis, but we need to do it in a way that is fair.

Last night’s TESD Finance Committee meeting had a very different tone than the last school board meeting. As the school board and administration discussed the few remaining available budget strategies, I had a sense that the school board was digging in its heels, expecting a ‘pay increase waiver’ versus a ‘salary freeze’, which the teachers union previously offered.  Although the T/E teachers union (TEEA) states the value of their salary freeze offer is $2.5 million, the school board counters that the freeze does nothing more than extend the teacher contract by a year and ultimately costs the district more money.  Encouraging the teachers union in the path of shared sacrifice, the school board prefers the teachers consider a pay increase waiver which, if I understand correctly, requires opening their current contract.

Credit needs to be extended to TEEA for their offer of a salary freeze to the school district. For some teachers, they believe that by offering a salary freeze, they are sharing the sacrifice. Let’s remember that Gov. Corbett suggested that teacher unions offer a salary freeze to their school districts to help with budget deficits. (I don’t recall his using the words, ‘pay increase waiver’.)  Yes, there is a budget crisis in school districts across the state; but I admit that I have difficulty with the breaking of a contract, which was negotiated in good faith by the teachers.  If contracts mean nothing then should we all go home and break our car purchase contract, our mortgage contract, and every other contract we signed in good faith where we expect both parties to be honorable.   What about ‘negotiating’ after the contract is fulfilled . . . ?

Looking at discussion from the other side, the school board is struggling with the remaining budget shortfall.  So . . . what do they do?  In their minds, they believe that the teachers should help with a ‘pay increase waiver’ (shared sacrifice) which according to their calculations could net $3 million.  At the meeting I had a sense that the school board is listening to the public and are interested in keeping the process transparent.  They offered that they have heard from TENIG, the non-instructional union, and are reviewing the offer.  Keeping the community ‘in the loop’ will prove a win-win for the school board, the teachers, and ultimately the taxpayers.

Setting aside the timeline debate of the April 14th TEEA teacher union offer letter of a salary freeze, and the rejection of the offer by the school board, last night the Finance Committee presented their side of the argument in favor of a pay increase waiver.  According to their analysis, the school district budget projection for 2011-12 is as follows:

  • Budget Projection as of May 2, 2011:      $3,170,509
  • Budget Projection (TEEA and TENIG Pay Increase Waiver:   $170,510
  • Budget Projection (TEEA Proposal Letter):         $946,122
  • Budget Projection (Custodial Outsourcing):        $2,370,438

Following the Finance Meeting, I asked Pete DePiano, president of the teachers union for his thoughts.  Here is his response,

“The 450+ members of the Tredyffrin/Easttown Education Association will stay true to their integrity in attempting to come up with a final cost savings offer for the district’s consideration.” 
 
Pete DePiano
President, TEEA

DePiano’s response tells us that the teachers are continuing to work on possible solutions to help with the budget crisis. Open and honest communication between the teachers union and the school board will aid greatly in the ongoing budget discussions. I want to believe that both sides can work together for the sake of the kids and the community.

Ray Clarke kindly offers his comments on the Finance Committee meeting below:

  • The TEEA proposal is judged to be worse on a 5-year time horizon than the status quo, because the projected $2.05 million of savings in 2011/12 is offset by salaries in the following years that are $0.5 million higher than they would otherwise be, due to two years of step movement rather than one. The higher salaries also trigger proportionate benefit cost increases, but there appear to be no fundamental differences between benefit programs, premium contributions, etc. in either scenario.
  • The salary “waiver” has the greatest impact on the district because the saving occurs every year. Although the model was presented without tax increases, it looks to me that, under this scenario, very modest increases in taxes (property or EIT) and gradual use of the “PSERS stabilization” fund balance could allow the district to fund the retirement fund beyond the five-year time horizon.
  • The Board did appeal again to the community to make their voice heard with legislators regarding the PSERS problem, and our frequent academic economist commenter also reminded us once again of the fundamentally bankrupt public pension plans. A couple of data points: the recent “fix” assumes an 8% investment return, and provides retiring career teachers with my estimate of an equivalent $1.25 million annuity. Just to keep this simple, here are the options:

 1. Reduce the liability by undoing the multiplier increase for all, not just new hires (the decrease needs a change in the state constitution, unlike the increase…)

2. Increase taxes:
a) statewide  (Marcellus gas, personal income, corporate income, etc.), or
b) locally (property, income)

3. Redirect spending from somewhere else. Like where? Pick your poison! What would Dinniman and Kampf propose?

  • There was a very unsatisfying discussion of a possible Activity Fee, punting it along to next week’s board meeting. Needless complications about different bases for charging. The bottom line: salaries and transportation for (non-mandated) extra-curricular activities cost the district $1.14 million a year. 80-85% of students participate in at least one. Nobody is making any argument that these activities are not totally worthwhile. A universal charge could be simply administered. So the issue is straightforward: do these continue to be funded by all taxpayers, or do families with high school and maybe middle school students bear a little more of the cost? Hopefully the full Board can have a discussion along these lines next week.
  • The timeline for an EIT study seems very compressed. The Board is considering appointing a study group; they need to get on that right away. If an EIT makes enough sense to put to a referendum, there’s a November 16th deadline for notifying the townships of that intent.
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Important Tredyffrin-Easttown School District Meetings . . . Includes Earned Income Tax (EIT) Discussion

For many residents, the upcoming election on November 2nd has captured your attention but there is interesting news from the T/E School Board that should not be missed.  A couple of important School Board meetings — tomorrow’s Finance Committee Meeting at 7:30 PM at the high school and the following Monday, October 18, an EIT Information session.

Topics included on the agenda for the Finance Committee Meeting:

  • Projection Model
  • Capital Sources and Uses
  • 2011-2012 Budget Calendar
  • Earned Income Tax
  • Print Shop and Printing Costs
  • Fund Balance Designation – information about the $6M accrual for untaken sick/vacation entitlement

The Finance Committee will be setting the stage for the following week’s special presentation on the EIT. 

I applaud those School Board members responsible for the October 18th public Earned Income Tax presentation.  The School Board is bringing in a third-party, a representative from the Pennsylvania Economy League to provide information about the implementation and effect of an EIT. 

This is an important meeting because the School Board will make a decision at its October 25th meeting about whether to advise the Townships of its intent to place an EIT on next May’s ballot as a voter referendum.  This notice is non-binding, and would allow the Board, the Townships and community time to fully consider the matter.

We understand that the School Board represents us, the residents.  If you do not want the School Board members to make decisions in a vacuum, than I think more of the community needs to be engaged.  There are hard decisions facing the school district in the 2011-12 school year. How do you want the Board to fund the ever-increasing deficit and the ballooning pension situation . . . increase your property taxes, cut educational programs in the district, impose an EIT?   Leaving the situation as a ‘status quo’ is not an option.  I am 100% supportive of exploring all options and democratically deciding on the best option.  Before anyone jumps in and says no one wants an EIT — and that previously the public was overwhelmingly opposed to it, we need to recognize that our options are becoming increasingly more limited.  Would you prefer a large property tax increase?  If you take an EIT and property tax increase off the table, . . . what’s left?  Educational program and staffing cuts?  Is this the answer?

We may be seeing the tip of the iceberg as more and more of the school districts are facing similar economic challenges.  Methacton School District is set to go on strike Friday, October 15.  Teachers in that Montgomery County school district have been working without a contract for over a year (contract expired June 2009).  Although wages is the main issue, other contract differences include medical premiums, the length of the work year, and the payment of postretirement medical benefits. Methacton’s School Board accepted the findings of a nonbinding fact-finder’s report this fall; but the Methacton Education Association, the teachers union, rejected it. 

I think that the TESD teachers contract is up in 2012. (Please correct me if I’m wrong).  It is going to be interesting to see if the teacher contract negotiations of Lower Merion, Radnor and Great Valley will influence our district.  The current TESD teachers contract allows for a 5% yearly increase in wages, correct?  With several School Board members terms up in 2011, it is going to be interesting to see who will decide to stay and seek re-election.  With teacher contract negotiations and the pension situation, could be a challenging 2012 for School Board members.

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Tredyffrin’s Financial Workshop . . . How to Close 2011 Budget Gaps

This Saturday, September 18, 8:30 AM at the township building, there will be a public Board of Supervisors financial workshop.  The agenda includes:

  • 2010 Review
  • 2010 year-to-date revenue/expense review and end-of-year projection – Tim Klarich, Finance Director
  •  Budget Advisory Working Group implementation update – Mimi Gleason, Township Manager
  • Five-Year Capital Plan (2011 – 2015) – Mimi Gleason, Township Manager
  • Public input about priorities for 2011 budget

We know from the TESD finance committee that the school board is planning a public meeting to discuss an EIT in October.  How does the township intend to address what could be a looming 2011 financial deficit in the township budget?  Hold the line on a tax increase because it’s election year?  Or, as the supervisors did last year, will the decision be to continue to cut jobs and services.

Is it possible that the same supervisors who cut the fire funding in the 2010 budget will restore the fire funding in the 2011 budget?  Can the township function with further cuts?  Is it possible that the band-aid solutions of 2010 will continue to work in 2011?  Perhaps the new finance director will offer some creative approaches to cost reduction. At least one of the newly elected supervisors ran on the platform not to raise taxes . . . the 2011 budget will be her first to review.  I look forward to her budget analysis and recommendations.

Devon resident Bill Bellew offered the following letter to the supervisors that appears in this week’s Main Line Suburban newspaper:

Message for Tredyffrin board

To the Editor:

The following letter was delivered to the Tredyffrin Township Board of Supervisors.

Ladies and Gentlemen:

On Sept. 18 you are conducting an open meeting for financial planning as you put together the 2011 budget for Tredyffrin Township. I do not envy you the task at hand as more potential cuts appear to be coming.

The stepping-off point for 2011 is the removal from the Sewer Budget of anything to do with streetlights and signage. Before I go another word: this has a tax-increase impact, and some politicians do not like to say they raise taxes. Well, for a number of years this has worked and we who pay into the sewer fund have borne the brunt of “no tax increases.” Once you get the streetlights/signage line item out for all to see, then you can do real budget preparation.

I have paid into the sewer fund each year since it was first established. The fee hardly ever changed since the ’80s until recently because it was well planned up front. That changed “x” number of years ago, about the time the board decided to put streetlights and signage in the sewer-fund budget. It has gone up and down a few times this decade.

The change in the sewer budget is needed for two reasons: first, lights and street signs have absolutely nothing to do with sewers; and second, only those hooked up to the sewers are paying for lights and signs for every household in the township. For sure, everyone north of the turnpike is not hooked up and that is not of the residents’ doing but rather the BOS.

Our sewer fund stipulates that any dollars collected for the fund can’t be transferred to another budget item. The fund is meant to provide the reserves necessary to keep the sewer infrastructure strong year after year. This year’s Board of Supervisors needs to make a resolution to return the fund to its original state of sewer-related items only.

Start with this, and then deal with the consequences of a tax increase. Try this on: return the sewer fees to the original amount and offset it with a tax increase if necessary. You did the opposite last year, so why not make it right this year?

Sincerely

William F. Bellew, Devon

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As We Enter 3rd Quarter of 2010 . . . Where Does the Township Stand Financially? Have 2011 Budget Discussions Started?

Back on December 13th, I wrote of the need for residents to fully understand Earned Income Tax (EIT).  We are now in the 3rd quarter of 2010, and there is evidence that the 2011 township budget is going to face even greater challenges than this year’s budget.  I went back and found the post; below is an excerpt.  Nearly seven months later, I think it is important to re-visit the discussion. 

Although some Community Matters readers may disagree, I continue to believe that an open, honest discussion with the public of all revenue sources needs to be an integral part of our local government. We can not afford to wait until November to begin the 2011 budget discussions.

At times misunderstood when campaigning, I often suggested that the township needed to explore Earned Income Tax (EIT) as a possible revenue source.  There was (and continues to be) a lot of inaccurate information circulating about Earned Income Tax.  An example of misinformation occurred at the last Board of Supervisor Meeting, when Supervisor Chair Warren Kampf indicated that those individuals who lost their jobs would pay Earned Income Tax (if Tredyffrin were to have an EIT).  I hope that Mr. Kampf did not intentionally try to confuse the public with his words;  the fact is that individuals receiving unemployment benefits would not pay Earned Income Tax; unemployment benefits are not subject to EIT.

I thought it might be useful to list examples of income which are not subject to Earned Income Tax:

  • Retirement Pensions
  • Disability Payments
  • Active Military Pay
  • Unemployment Compensation
  • Insurance Proceeds (non-business)
  • Workmen’s Compensation  
  • Bequests
  • Stock Dividends (non-business)
  • Gifts/Lottery Winnings
  • Social Security
  • Interest (non-business)
  • Military Bonuses

Earned Income Tax is based on gross wages, salaries, commissions and other earned compensation. As stated numerous times, approximately $3 million is being paid to other municipalities by Tredyffrin residents.  If an EIT were in place, this revenue would return to the township.  Dave Brill, Township Finance Director, has offered that the potential township revenue could be as high as $8 million (should Earned Income Tax be instituted). 

Assuming that we get through the township budget discussion on December 21 with the proposed draft budget more or less intact, I still contend that the 2010 budget is nothing more than a Band-Aid solution to a far greater financial problem.  I believe that the township will limp along through 2010 with the budget in place.  However, without financial foresight, this time next year the township will be faced with a far greater problem than the reinstatement of $20K to the Fire Department.  The 3 new supervisors all campaigned (and were elected) on the ‘no new taxes’ mantra and they will probably take office on January 4 with that promise intact.  However,  it doesn’t take my London School of Economics education to believe that their promise will be short-lived.  Financially the township is in a very precarious financial situation and we are going to witness firsthand the result of shortsighted financial planning.

I know that this posting of Earned Income Tax discussion will bring opposing comments, and I actually encourage the dialogue.  Tredyffrin’s 2006 Tax Study Commission and voter referendum overwhelmingly were against imposing an EIT.  Warding off that particular argument, clearly 2010 can not possibly be compared economically to 2006; it is a vastly different financial climate facing this township.  I may have been one of the voters in 2006 who opposed an EIT; believing that the township at that point did not have severe financial needs to warrant that taxation approach.  However, if in 2009 this township’s annual budget of $37 million can not fund $20K to our firefighters, something is dramatically different in this current picture.  Each and every taxpayer needs to take a careful look at the proposed 2010 township budget — I believe the future is going to require more than simply tightening our belts as has been suggested by some of our township leaders, as a response to our economic problems!

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