Tredyffrin Easttown Non-Instructional Group

TESD 2013/14 budget discussions underway; including outsourcing of services

Ray Clarke attended last night’s TESD Finance Committee meeting and provided his notes from the meeting.

Reading over Ray’s notes, it appears that members of TENIG (Tredyffrin Easttown Non-Instructional Group) are once again going to find themselves front and center for the 2013/14 budget discussion.  In prior years, it often looked like the TENIG custodians were the target in the school district’s budget woes.  Privatization through outsourcing was seen by some as a way to preserve the classroom and its programming, but at what cost?

Outsourcing services that historically have been in-house functions with long-time employees is a major shift in institutional culture.  How does the possible cost savings of outsourcing compare to the quality of job performance and productivity?  How does one measure the safety factor that comes with the connection that current custodians have developed with the schools and the students?  It is difficult to measure the ‘safety’ intangible to in-house custodial services, plus many of the employees live in T/E and their families are part of the community.

For the 2012/13 school year, the custodial workers offered a 10% reduction in their salaries and they did not take the 4.5% increase, which were contained in their existing contracts.  In real dollars, the cost savings to the District was $197K in salary reduction, plus the additional percentage contractual savings for a total savings of approximately $285K.  By giving back, TENIG’s custodial workers helped the 2012/13 budget and the additional bonus of saving local jobs.

Beyond the custodial workers, it looks like all of TENIG will be under the microscope for possible outsourcing in the 2013/14 budget. The plan is for separate RFPs for each of the various TENIG job functions – security, kitchen, clerical, etc. in addition to the custodial workers. The possible outsourcing of TENIG workers is still in the early stages of the budget process,

The following are Ray Clarke’s notes, along with his thoughts from the Finance Committee Meeting, 12/10/12:

The main topic of Monday’s Finance Committee meeting was the 2013/14 budget, in preparation for the January 7th Board vote on whether to apply for Exceptions.

The basic discussion framework is the projection model we’ve seen before, based off an estimate for the actual current year results.  Since this 2012/13 estimate drives every out-year, its accuracy is critical – yet the numbers do not inspire confidence.

Total 2012/13 expenses are estimated at $107.8 million, $2.5 million less than the budget.  The difference is driven by $1.5 million lower benefits cost (estimated by our benefits consultant), $0.4 million from the new TEEA contract plans, and $0.5 million net salary savings from “breakage” offset by 3 additional FTEs.  So the year’s imbalance turns from negative to positive, which is the good news.

However, expenses are still $6.1 million (6%) higher than the year just completed.  No-one at the meeting was able to provide a breakdown of this increase.  I think that the PSERS increase is about $2 million of the number.  Where’s the other $4 million going?

One clue might be that the total healthcare and benefits expense for the following year is projected in the model to be flat (0% increase), based again on the consultant advice.  Could it be that this year’s expense is overstated in the model?  I don’t think this can explain the whole $4 million, though.

So, it’s hard to put much faith in the projected 2013/14 imbalance of $2.8 million as a basis for discussion of next year’s tax rates.  Moreover, this number also includes the one time TEEA bonus ($1.1 million?), which should not be built into the tax base.

It hardly seems worth spending much time on the model for the years beyond 2013/14, except to note that refinements in the current version include:

  • Total healthcare costs increasing at 9% per year (previously 10%, 15%)
  • Special Education costs split from “other”, and projected to grow at 7-10%, vs 2-3% for other
  • PSERS expense will increase by $1.4 million next year, then $1.1 million, then $1.2 million, and then level off.
  • An additional 6.2 teachers are projected to be needed next year to meet enrollment growth

A number of “budget impact items” were listed but not quantified.  On the saving side, these include outsourcing not only TENIG functions, but also aides and para-educators.  Each TENIG job function would be bid separately in an RFP which would, for example, allow discretion to select a supplier that met standards for benefits.  I didn’t catch how the educational staff “out-sourcing” would work, but I gathered that it would allow the district to avoid the PSERS expense.  On the increase side, the topic of adjustments (in base salary or one time) for non-contract employees is on the table.

Bottom line: we are clearly going into the next budget cycle with a smaller problem than in previous years (no contracted near double digit compensation increases).  At the same time, though, we seem to have been lulled into being much less prepared and thence likely to vote for an Exception application with information even more imperfect than it needs to be.  (Yes, Exceptions don’t have to be levied if approved ……) .

Separately, at the beginning of the meeting, Chair Fadem asked for the financials to be presented as more of a “vanilla” summary.  Not sure that’s the direction the district should be going in.

Outsourcing of Custodial Services Would Save T/E School District Almost $1 Million . . . Should this Cost-Cutting Measure be Considered?

Last night was the T/E School District’s Finance Committee Meeting.  One of the solutions offered to help close the looming deficit for the 2011-12 school district budget is the outsourcing of the custodial services. Outsourcing of the custodial service is expected to save the school district an estimated $950K in the budget.  Last night, several members of the district’s custodial union (many of whom are township residents) attended the meeting to make the case to preserve the current custodial arrangement. 

From Pete Bannan’s article in today’s Main Line Suburban newspaper on TESD Finance Committee Meeting, Pete reports:

” . . . All the school-board members were present for the meeting and the pleas during the public comments did not fall on deaf ears. Finance chair Kevin Mahoney said the school board wasn’t doing this to save money but is required by state law to balance the budget.
 
“The options are evaporating,” said  Mahoney. “The governor’s budget turned a $2.2-million shortfall into a $3.6-million shortfall.  It’s simply a matter of economics.”
 
Mahoney said no decisions had been made. The proposal is due April 4 and the board has 120 days to review it. Mahoney also said the school board is open to ideas and constructive ways  to reach its goals. He suggested the public contact elected state officials, such as State Rep. Warren Kampf, State Sen. Andrew Dinniman and Gov. Tom Corbett, and ask for real pension reform. . . “

 Ray Clarke attended the Finance Committee meeting and offers the following notes for Community Matters readers.  As always, I am grateful for Ray’s attendance at school district meetings, his analysis and then for sharing them with us!

Monday’s Finance committee meeting vividly illustrated the problem TESD finds itself in.  

Very many TENIG (Tredyffrin Easttown Non-Instructional Group) members and others spoke about the value of the current system with experienced, stable, professional and flexible staff, compared to the risks of a possibly cheaper, but high turnover, less trustworthy, and less committed external provider.  There was also commentary about the impact on diversity.  There was much talk about membership in the T/E Family, and a wise – but unfortunately innocent – CHS student suggested that a family would sit down and work out a fair solution for all its members, rather than focusing on one group.  (No prizes for guessing the elephant in this particular family room!)

The out-sourcing analysis does offer a glimmer of hope, though.  The district has issued an RFP, responses due May 4, which then must be given to TENIG by May 11.  TENIG is allowed 120 days to respond.  Let’s assume that out-sourcing would really save the $950,000 estimate.  Now, the district has already identified overtime and substitute strategies that would save $150,000 with the existing staff.  Is it wishful thinking that the staff could use their professional experience to identify further cost-saving practices, and offer compensation roll-backs and benefits adjustments that could move the impact over 50% towards the expected cost savings?  Taxpayers might be very willing to pay a premium for service assurance.

After 90 minutes the committee got down to a review of budget projections.  The $1.3 million impact of the PA budget was confirmed, with the $1.1 million reduction in Social Security reimbursement to the 15% “aid ratio” being the real surprise.  Apparently it has been at 50% for as long as anyone in the room could remember.  I would think that this might be subject to lobbying: where is Kampf on this one?  It apparently squarely targets districts like TE that have a low aid ratio.

There was agreement to move ahead to crystallize a number of strategies listed with low or moderate impact on the education program.  The biggest ones:

- Change the prescription provider: Impact $250,000
– Eliminate raises for all non-union staff: $395,000
– Integrate Applied Technology into Elementary Core: $300,000
– Plan for a 5% increase in medical costs (vs previous 10%): $412,500
– Fees for extra-curricular activities: $80,000

The result of all of this is $2.3 million of fairly solid strategies (including all the above except the last) and $0.45 million of more speculative ones (including the last).  The current scenario assumes $0.15 million of the specualtive ones, for a total of $2.4 million of strategies.  Add in Act 1 and Exception tax increases of $3.2 million (3.8%), subtract the $1.3 million state cuts, the $8.9 million deficit comes down to – a mere – $4.6 million.

Board policy does place some limits on use of the Fund Balance, but one obvious use is to pre-fund approved programs implementation-limited by contractual attrition rules.  There was an example presented of how $1.1 million could be designated in this way in 2011/12.  (I worry that there might be a little double counting with the above $300,000 AT elimination – does that need attrition?).

It’s fairly clear that the $29 million Fund Balance could absorb the $4.6 million draw down, but beyond that the picture is bleak.  Annual deficit projections of $10 million or more (after Act 1 tax increases, driven by benefits) show that the district can not afford even flat TEEA salaries without the fund balance being wiped out in 2 years.

Here’s where the State House Bill to allow teacher furloughs to balance the budget comes into play.  According to Dr Waters, that would allow action even with a CBA in place.  However, Dr Brake reported that although the bill was up for Committee hearings, those hearings were abruptly cancelled (!).  But the legislative process does continue, apparently.

We know that there are some actions involving furloughs that are already approved as having minimal educational impact.  Others, like modest increases in class sizes, might be similarly low impact.  Getting to $10 million can hardly be done without real impact, though.  When it comes down to students and jobs versus union compensation, we might find out who is really part of the TE Family.

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