Pattye Benson

Community Matters

Looking at Local School Districts, Does the Buck Stop with Taxpayers?

As Tredyffrin-Easttown School District works through the 2011-12 budget, it is interesting to watch how other school districts are handling their budget shortfalls, particularly in light of the public education cuts in Gov. Corbett’s proposed budget.

This week the Radnor School District and the Radnor Township Education Association reached a tentative agreement for a new teacher contract. The collective bargaining negotiations between the school district and the teacher union have been going on for over a year. Details of the contract will not be released until after the teachers union presents the contract to its members for ratification early next week. As our school district neighbor, I wonder if their contract will have any influence on TESD teacher contract discussions.

Another neighbor to TESD, the Phoenixville Area School District (PASD) has major budget issues. As the dust settles from the cuts contained in Gov. Corbett’s proposed budget, a tax hike of 8.75% is needed to close the gap – twice as much as the district had anticipated. Previously, the school district budget included a 4.43% tax increase but with the loss of state funding, they will require an additional 4.32% . . . a tax hike of 8.75%!

At the Pottstown School District meeting this week, their school board took a stand with three interesting votes:

  1. The school board rejected the idea of “forward borrowing” of $23 million without voter approval. (The district has authorization for $28 million for work on the district’s elementary schools and the vote would have increased that borrowing amount by $23 million).
  2. The school board approved the extension of a contract for mid-level administrators and principals that freeze their salary for one-year. (Cost savings: $30K)
  3. The school board accepted an offer by the district’s three top administrators to freeze their salaries for one-year. (Cost savings: $15K)

Prior to the vote, the school district was considering a 4-year contract for administrators and principals to include a minimum 1.5% salary increase plus potential merit pay increases. According to the district superintendent, following the announced funding loss from the state was announced, these employees volunteered to take pay freezes for one-year. Gov. Corbett’s proposed budget will provide $3.1 million less state funding to the Pottstown School District.

For comparison sake, I checked on the salaries of administrators in the Pottstown School District. The top 10 highest paid administrators in the Pottstown School District earn in the range of $102K – $119K per year; their superintendent has a base salary of $152K.

The Pottstown school board hopes that the administration’s one-year pay freeze sends a message to the teacher union, Pottstown Federation of Teachers. According to Pottstown Mercury, , Pottstown School District president thanked the administrators for the one-year salary freeze, “I want to thank you for pulling your belts a little tighter for us, I hope some of the other school districts around here see what you’re doing for us, how you lead by example.” There is an unresolved contract between the district and the teachers union. The teachers are currently without contract and last month rejected the independent fact-finders report that the school board accepted unanimously. Sound familiar . . . Unionville-Chadds Ford School District currently have a similar situation with their teachers union.

I guess TESD can take solace in knowing that we are not alone. With school districts facing looming deficits in their budgets and increasing expenses, Corbett’s proposed budget does not offer much hope for help from the state.

Corbett’s campaign promises included no tax increase but it seems to me that he has just pushed that job down to the local school districts. School districts are expected to balance their school budgets, but how? Not much in the way of choices . . . school boards are forced to make education cuts or they raise taxes. Does no responsibility lie in the shoulders of our elected officials in Harrisburg? How can they expect citizens to pay more in property taxes than they can afford?

Or . . . does the buck just stop with the taxpayers?

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  1. The cause of the problem and the solution to the problem is HERE; not in Harrisburg.

    The cause of the problem is above marketplace labor contracts. The solution to the problem is labor contracts in-line with the marketplace – contracts that moderate salary and benefit increases. Control of the contract is HERE; not in Harrisburg. The school board just has to stand firm, endure labor action and say NO.

    But I’d like to illustrate how hard that is. I’ve been corresponding with a board member from a district that just settled a teacher contract. The board was enduring labor action and had been holding out for an economically sustainable contract (funded within projected Act 1 constraints), but they caved. In the following edited email this board member admits to “kicking the can down the road” for someone else to deal with. This is something I find unacceptable and something I hope the new TE board will not do.

    I believe you are correct that [our district] will likely run into budget issues with the new contract. We have not seen any other district [….] gain a teacher contract tied to the index, and we didn’t get there either. The contract terms included several other large savings which will help us […]. Even with other savings, we are projecting that we will likely be over the index and will need to take appropriate action at that time. There are still many unknowns for our budget with new Governor in next year or two – we took action now to solidify our positions with staff – and we’ll navigate through what the legislature sends our way (in partnership with the staff) in the best way possible for our district.

  2. I hear what you are saying citizenone — and I agree that this school board cannot afford a ‘kick the can down the road’ attitude. But on the other hand, I don’t think this situation or solution should be completely heaped on the school board (and teacher union). I think there needs to be a degree of accountability from our elected officials (beyond the school director level). Corbett has spoken with his proposed budget, what about our other elected officials? Do they agree/disagree with the proposed budget & the intended public school funding cuts.

    From reading your comment, I am guessing that you do believe that the burden of responsibility should be shared beyond the local school district, correct?

  3. CitizenOne makes an interesting point, but so does the email writer. They got something, so they gave up something. It’s about give and take. Work stoppages are not just disruptive, they are divisive.

    One of the psychological keys to this comes in the article Pattye posted — where freezing salaries results in a cost savings…..what? That means that Pottstown admins and whatever believe accepting a wage freeze, which is what many in the non-union world would gladly accept in lieu of layoffs or pay cuts, think they are helping. What? Freezing your pay is not helping. That’s a managerial decision, but because of the psychological nature of annual raises, taking a pay freeze in some way is a savings.

    Last year the TESD pondered a pay freeze for administrators, but in the end gave them a raise for meeting goals etc. “Morale” maintaining. Pay freezes are not a favor. Pay increases ARE a reward — but so are bonuses which do not compound the problem. But in the land of retirement, no one wants bonuses because it doesn’t up their pension. If someone needs a “thank you” for some extraordinary effort, give them a bonus. Clearly one time bonus. It doesn’t add to the base and it doesn’t compound.

    But again, don’t get used to the idea that a pay freeze is a favor. That’s where the strategy of negotiating fails us all.

  4. First, let’s remember that state money and local money still comes from us. There is no magic pot of money that Corbett is refusing to give us. Funding for education comes from either our left pocket or our right pocket and I’m equally concerned with both sources.

    In essence, by cutting the state source of revenue Corbett is putting more decision making power into the hands of the local citizenry. Raising taxes to the Act 1 Index won’t raise enough money to balance the Corbett cuts and school boards will be forced into referendums more frequently – thus giving more control to the citizens. I like this shift in control. The TE school board, the school board mentioned in my posting above and most other school boards are unable to say NO to the unions. Maybe the citizens will be able to say NO.

    Anon asked, “I am guessing that you do believe that the burden of responsibility should be shared beyond the local school district, correct?” I’d rather most, if not all, decisions be made locally. Why would I want someone in Harrisburg making a decision for our local schools?

    1. Works conceptually, but as long as the state/feds mandate certain things (along with IDEA and special ed ), and they do not take away the right to strike, they are asking local boards to produce results that they cannot produce on their own. Likewise the requirement that bidding is done by prime contractors — not general contractors — and that they require prevailing wage bidding etc . Graduation requirements and PSSA testing that diminish local control as far as forcing districts to teach to tests that are developed politically. So — people in Harrisburg are making more decisions than just how much money to give our district. I’m not sure that reducing state funding to districts is the most clear cut way to the efficiency this economy will require.

  5. There are many good comments here. I like SO’s point about getting away from the mindset of automatic pay increases being an entitlement. Perhaps that’s a hold over from days of high inflation. However, you can see why anyone would be reluctant to have their salary indexed to Act 1 – you’d be consigning yourself to no real income growth. (Note that in the short term there have to be real DECREASES after a decade of increases double the rate of inflation, though).

    What we need is an mechanism for compensation increases that reflects the growth in income in the community available to pay the compensation. There are indexes of private sector real incomes that might be a good starting point.

    So how to tie revenues to that? The academic gentleman who spoke at the Finance Committee had it right when he said that a funding system that relies on property values (housing continues to spiral downward) is not sustainable. An benefit of state funding ($14 million in 2010/11 to T/E don’t forget), which adds a smidgeon of personal and corporate income tax to education funding. That’s why an EIT makes so much sense. And if Harrisburg sends money, perhaps it should have a proportionate influence?

    And if the local citizenry is to really have a say, then we have to move away from the practice of union contracts being presented as a done deal. Could proposed contracts and their impact be tied into tax referenda? At the very least, the Board has to have an opportunity to hear from voters before approving anything.

    Finally, I would like to applaud what I am seeing at Dr Motel’s Facilities Committee. On Friday, proposals to deal with the maintenance and storage issues were subject to rigorous questioning. There’s a recognition that capital is not free, and that past actions should not determine what’s best going forward. It seems that there will be a fix that minimizes incremental cost, offers improvements to working conditions and positions the district to make optimum use of its investment along Old Lancaster Road.

    Also on Friday here was a large turnout of Devon Elementary families with an hours or more of questions about a hypothetical 2012/13 redistricting to accommodate Devon’s growth without adding facilities.

    And one other noteworthy item: the $3 million IT plan is still not ready from prime time, despite being on the Facilities Committee Agenda – another good sign that the right questions are being asked.

  6. Ray, I have to disagree with a few of your statements.

    However, you can see why anyone would be reluctant to have their salary indexed to Act 1 – you’d be consigning yourself to no real income growth.

    You are correct that the total salary paid by the district to the teachers only goes up by the inflation index, but due to attrition the average teacher sees above inflation increases. Retirement by teachers at the top of the salary matrix frees up substantial funds to finance normal step movement (real income growth) for those in the middle of the matrix. For those at the top of the matrix, they have supposedly become master teachers, have already reached their contribution plateau and deserve no real income growth. (I am not trying to defend the salary matrix compensation scheme)

    The academic gentleman who spoke at the Finance Committee had it right when he said that a funding system that relies on property values (housing continues to spiral downward) is not sustainable

    The funding system based on assessed property value is sustainable contrary to popular belief. Note that there is a big difference between the movement of RE market values and assessed values. For evidence, the market value of homes has dropped maybe 10% or 20% while the assessment base has dropped maybe 1% or 2%. The adjustment of the Common Level Ratio compensates for market swings, keeps the assessment base fairly constant and allows the district revenue to grow with the Act 1 Index.

    I actually liked the EIT (or PIT) idea associated with Act 1 when there was a guaranteed dollar for dollar reduction in RE taxes. Today, I see the EIT as just more money for the board to spend.

  7. Many interesting comments above. But has everyone forgotten that the state budget includes no tax on extraction from Marcellus shale and for certain tobacco products? We are not expecting corporations to pull their fair share of costs incurred in this state.

    And the issues are not all local – the pension costs can only be solved in Harrisburg, where they were passed in the first place under the Ridge administration. Corbett is proposing a bill that would force any property tax above the Act One limits to go to referendum, which would assure massive cuts to our schools.

    Last, this incessant teacher bashing is just not productive. Even if teachers did take a pay freeze (maybe even for several years like federal employees), pay part of their health benefits, we would still be facing a shortfall until the pension situation is fixed. And it wasn’t the teachers’ union that passed the current pension levels.

    We have one of the finest school systems in the country in part because we have been able to attract the finest teachers. People move here, and our property values hold up because of the school system. And our children can enter the workforce with a twenty-first century skill set that helps the local and national economy.

    Yes, we need to shift from a local system of taxation that relies too heavily on property taxes. But until we get over thinking the unions are the only problem, and that any change in taxation is just more money for the board to spend, we are precluding real solutions. We need to press Harrisburg for structural changes, and we need to stop making the teachers the villains and instead engage in some creative problem solving.

    1. Nona,

      Thank you for your thoughtful comment. If you have been following this blog you will no doubt be familliar with me. If not, I would just point out that I was on the T/E school board from 1999-2007. Much of that time I was the Legislative Chair. I spent years speaking out on these very issues. More recently, I have done the same on this blog. At times, I feel a bit like a lone voice crying in the wilderness, since many of the participants here are really into not only “teacher bashing” as you put it, but also “board bashing”.

      In any event, it is nice to hear someone point out the fact that there are major aspects of this problem that were created in Harrisburg and can only be solved there. A few comments from me:

      1) Given the economic situation, a certain amount of adjustment is not only fair but inevitable. Techers will have to contribute towards their health care, for example. However, you are quite correct that we need to attract and retain high quality teachers in order to preserve the excellence of our schools. A balance must be struck, at the end of the day we need to maintain the relationship with our teachers.

      2) The pension system is truly one of the major budget busters passed along by Harrisburg to the local taxpayers. It needs to be reformed, and that can only be done by the legislature.

      3) Perhaps the legislature could do something to make health insurance more competitive in PA and hence more affordable, since insurance is highly regulated by the state.

      4) State funding to education needs to increase. In the late 1970’s, the state provided 50% of the cost of public education. Now it is 34% (that’s on average, T/E as an affluent district, only gets about 10% of its annual budget from the state). Now, folks in Harrisburg will tell you that they have increased (until Corbett anyway) the state funding. That is true, but costs have increased faster, so as a percentage of total costs, state funding has declined.

      I believe that the state should provide more funding. A reasonable tax on oil shale production, for example, could possibly relieve some of the reliance on local property taxes.

      5) I also think the state legislature should review all mandates and determine which could be repealed without harming education.

      The reason I keep blogging here is to encourage readers of this blog (no matter how much they may blame local boards or teachers) to also write to our state representatives about these issues.

    2. I’m still inclined to my theory that Corbett has set up this choice as a way to be “forced” to accept a tax on Marcellus shale gas.

      As to the union not passing the current pension levels – true. So it would have no problem rolling back the 25% increase for all employees, not just new ones?

      On the sustainability of relying exclusively on property taxes – again, yes, the use of an unchanging assessed value provides stability, and everyone’s happy while the property bubble continues. But now it’s deflating and lower market values are leading to lower assessed values (in aggregate down 1% in T/E). The CLR will have to go up to get the assessed values back up – effectively another tax increase making local services a higher and higher percentage of asset values.

      1. Ray — Is it permissible for the PSERS to rollback the increase for existing employees? Seems like they could accrue the 2.5% a year for the years that is law, and then go back to accruing some other number once the law changes, but I thought the changes Drucker supported only called for changing the multipler for new employees.
        The hard part for me about property taxes is that when values are declining, not much is selling, so it’s a double whammy because of the drop in transfer taxes, and no one is building causing a drop in interim taxes. But the fact remains, doesn’t an EIT require voter approval (?) for school districts….and it’s just hard to fathom that ever gaining any kind of traction. While the people that pay it would be okay with the idea obviously, the majority that do not pay it would never willingly step up to do so — the original bill was designed to trade off dollars and it still failed.

        I appreciate your diligence in attending meetings and reporting to us. As you have witnessed when I try to participate, it’s too hard for me to listen to their answers….I keep looking for the man behind the curtain.

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