There was a T/E Finance Committee meeting last night and although the entire school board was present, the Finance Committee is Betsy Fadem (Chair), Kevin Buraks, Jim Bruce and Rich Brake.
There were several interesting discussion items for me – Ray Clarke’s notes follow mine. There was much discussion about the school district’s decreasing real estate tax revenue. We learned that for 2011, there have been 147 successful residential real estate assessment appeals ($217K) and 41 successful commercial appeals ($352K) for a combined total of $570K in lost tax revenue. The largest commercial appeal was by Vanguard who was successful in five separate appeals. There was discussion about the school districting appealing the decisions on some of these successful commercial appeals. The example of Mealey’s Furniture and Big Lots was used – where a commercial real estate owner could have appealed their tax assessment while their real estate was vacant, received a lower assessment and then the property is leased and its value goes back up (but the commercial owner remains at the lower assessed rate). The case could be made by the school district that the assessed value of the commercial real estate has gone up and they should now pay more.
Appealing some of these commercial decisions could be a way to generate additional revenue for the school district. However, what was unclear was the ‘cost’ of these appeals to the school district (financial and staff time). In Harrisburg, there is discussion on requiring nonprofits organizations to pay real estate taxes. This was not discussed at last night’s meeting, but should this change occur, there is some new tax revenue to the school district. I wonder what kind of revenue could be generated from real estate owned by nonprofit organizations.
Another possibility for generating school district revenue was to shorten number of days on the school calendar. Apparently, TESD’s current school year is 9 days longer than the state requirement. For each non-teaching day, the district would save $200K in teacher and benefit costs. Shortening the school year by 9 days would yield $1.8 million in district savings. This is an interesting cost-savings approach and clearly the district cannot cut all 9 days. Some of those extra days are in the calendar if snow days require their use. But does it need to be 9 extra days — the last few days of a school year are not productive so what about cutting those half-days at the end of the year from the calendar.
(Note: It is not entirely clear to Ray Clarke and myself re the 9 days. Ray understood that strategy had to do with the 9 in-service days of the teachers ‘only’ and decreasing those in-service teacher days versus my understanding that the strategy involved decreasing the number of calendar school days. Ray has a call in to the school district for clarification and I will update when the information is available.)
A ‘new’ budget strategy under review for FY2012-13 was listed as ‘reduce equipment budget’ – $300K. I was clueless what ‘equipment’ this referred to – turns out the administration is suggesting reducing IT equipment purchases for the district. This is confusing because computer equipment was on the chopping block for the FY2011-12 budget and then when Corbett returned funding to the school districts (TESD received $1.3 million) the T/E school board discussed the putting the computer equipment back into the budget. Ultimately, the $1.3 million was added to the fund balance. So now here we are again with another round with IT equipment and a strategy to reduce the budget by $300K. Where is the school district’s long-range technology strategy? Taking technology ‘on and off’ the budget each year is not a strategy!
The outsourcing of the custodial services carried over from last year’s budget strategies and at $950K remains the most significant line listing of possible savings. The school district was able to save the in-house custodial services for the FY2011-12, helped greatly by the union members not taking raises for this year. As reported last night, their members are working with the school board on ways they continue to lower costs. More information should be available in January.
Ray Clarke’s comments from the Finance Committee Meeting:
At Monday’s meeting the TESD Finance Committee decided – I think – that it will recommend that the full Board on January 3rd 2012 not limit the 2012/13 tax increase to no more than the Act 1 Index increase of 1.7%. However, there seemed to be a sentiment that the tax increase in the Preliminary Budget (required therefore to be made available by January 5th) be capped at the Index plus Exceptions (a total of a 3.3% increase). Anything more would require a referendum.
A few observations:
- The property tax rate goes up as the base goes down. Successful appeals have cost over $0.5 million in revenue for 2012/13. The Index increase raises $1.5 million. The Committee did not pay much heed to the linkage.
- The Committee plans to raise property taxes through “Exceptions” that compensate for the increase in PSERS expenses just about dollar for dollar, while sitting on $15 million of taxpayer money in the Fund Balance earmarked for exactly that purpose and with no plan whatsoever as to when the money might be used.
- With the $3.3 million tax increase and visible budget strategies worth $0.7 million, the 2012/13 deficit is projected to be about $2.5 million. On top of the quantified strategies, there was a report of constructive discussions with TENIG (for savings at some percentage of the $950,000 out-sourcing estimate) and the option to cut up to nine teacher in-service days, worth $0.2 million per day. It appears that these numbers made the Committee comfortable that any gap after the 3.3% property tax increase could be covered from the Fund Balance.
- Notable that the largest expense decrease is $300,000 from reduced IT hardware spending. Is that the same line item that was last recommended for an increase to use of some of the $1.3 million state windfall? Is there an IT strategy at all??
- There was mention of a sentiment inHarrisburgto again reduce the social security match, and also to even reduce the PSERS match. Not quite the direction desired by the advocates of a state solution to the problem!
- The cost of the current benefit plan was mentioned in passing. $19,000 per year for family coverage. I have to think that a majority of union members would be willing to restructure the plan, if it meant more cash compensation and an overall benefit to the district. There was no discussion of any change to the status quo salary/benefits projection in the financial model.
It should be noted that this recommendation does not preclude the tax increase being lower than the Index plus Exceptions, but we know how that works!
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>>>Some of those extra days are in the calendar if snow days require their use.<<<
I do not think that this is true Pattye. In recent years there have not been ANY snow days built into the student school schedule. The "vacation days" that may become "school days" are identified on the calendar (oddly enough those changed last minute last year also). But the point is that beginning with the first snow day a student vacation day is lost, and my impression has been that those "make-up" days were staff vacation days as well?
So why would the schedule have any non-required days, much less 9 of them? As you have correctly pointed out, the last week of school is a throw-away anyway.
Thank you for your comment — I have just added a note to the post. There is some confusion on this topic and it is entirely possible that it is my misunderstanding and the 9 days refer to 9 teacher only days. Frankly, I didn’t know that the teachers were at school 9 days without the kids. I knew that there was a couple before the school year started and a couple after it ended but didn’t realize that it could be as many as 9 days.
One small comment regarding the last days of school — if you cut 10 days, the last days would still be a throw-away…it’s the nature of “finishing up:” And yes — snow days are added to the calendar (or at least they have been for about 10 years). The purpose of having them in the contract year backfires when they don’t get used….and teachers — you know — the professionals that they are — get paid by the hour, by the day — but in the end (if they strike), they get paid by the year….a full year’s salary.
>>the last days would still be a throw-away…it’s the nature of “finishing up:”
That is ridiculous. Are you asserting that there is no way to have EVERY day that the students are in the school be effective teaching/learning/testing days??
Yes — that’s what I am suggesting. Go visit the day before Winter (almost called it Christmas) Vacation — the day before Spring Break Vacation….the day before a long weekend…..these are kids and there is no measure of productivity in place. The inservice days to start and finish the year are to set up the room and take it down. The inservice throughout the year are for buliding development — you see — you cannot just call a faculty meeting. You have to put it on the calendar and pay them to be there. Not because they would insist on it, but because their contract has those “working conditions” in place.
I’m not trying to be ridiculous — I’m suggesting that winding down has an effect. Ask your kids when they start watching movies…..their lives are scheduled every damn minute of every day. Do you really think those final days of school must be packed full?
I do not disagree that those days prior to vacation weeks and summer breaks are not very effective days, I know it is true and that troubles me also. My issue is that it is just accepted that these days are useless – seems you are ok with it on the pretense of the kid’s busy lives and needing a break from packed full school days.
Agreed that kids have a full schedule, but if they truly need a break how about they not be in school participating in a throw away day that cost the taxpayers money – but instead have the day off and spend time with their families, a vacation maybe. Aren’t there more student days on the schedule than are required?
The current teachers contract contains 182 teaching days — the state requirement for students is 180 days.
Reducing the work year by 9 days is not a realistic strategy. It would require agreement from the union since the work year is defined in the contract. Why would the teachers ever agree to reduce their compensation by 5%? Remember that “status quo” guarantees that a teacher’s salary cannot be reduced.
Here is the explanation of the work year. From the contract:
The teacher work years, commencing July 1, 2010 and July 1, 2011, shall consist of 191 days. One hundred eighty-two (182) of these days will be scheduled as instructional days for students…. Nine (9) days of professionally related activities for the 2010-2011 and 2011-2012 school year will be allotted as described below. For the entire staff, one (1) work day immediately prior to the
first instructional day, one (1) work day immediately following the last instructional day, two (2) days to be divided between staff development activity and professional responsibilities related to assessment, one (1) full day in-service day. At the elementary level, 3.5 days for parent conferencing and one half-day for staff development; at the middle school level, 2.5 days for parent conferencing and 1.5 days for staff development; at the high school, two (2) full days for parent conferencing and two (2) full days for staff development.
Keith — Thank you for the explanation. Due to the teacher’s contract, I was confused last night as how it was even possible to lessen the number of professional days but yet it was offered as a $200K per day budget strategy. Is it possible that lessening the 9 professional days could fall under the umbrella of ‘demotion of professional staff for economic reasons’? Also, there was not explanation offered as to how the $200K per day was derived.
We’d have to consult a labor lawyer to know for sure if reducing teacher work days is possible and under what conditions. My understanding is that any unilateral reduction in days would be considered a “lock-out” and trigger expensive unemployment claims.
The $200K per day calculation is probably:
$100K salary and benefits for the average teacher work year
= about $200K per day
The cost per day is what they calculate it to be — $200,000 per day is the number they have calculated (total salary divided by 191). The “extra days” have been accumulated over the years as ways to give raises without announcing the full percentage increase. Not in the past two contracts I don’t think, but in many in the 80s — salaries would go up X percent announced, and then they would add 2 days to the calendar — each day being worth around 1/2%. Made the PR easier to take.
Keith is right in my opinon — reducing the number of days would require negotiation — but it may be a management right — only the solicitor could respond to that.
They clearly are using fund balance for PSERS — the program — they cannot raise taxes beyond the limit unless they designate the increase to be for a specific exception (PSERS)….so it’s the same thing as raising taxes to fund the program and using fund balance to pay off PSERS — except the games Harrisburg plays doesn’t allow them to raise taxes to fund the program.
I find it almost amusing that they would a nnounce $19,000 per “family coverage”. My family’s coverage is cheaper than that — must be because my family coverage has deductibles and higher co-pays. This is the failure to think out of the box — and because the administrators compare what they want with what the teachers get, I’m not sure where the incentive will come to set a number for benefits and THEN see what it will buy.
But I’ve said that before. Odd that I did an RTK for benefit costs and was told it would take an extension of time and they would likely need to charge me to provide it….yet somehow they produced information for the meeting. WHY is this board so damned secretive — so untrusting of the public? They are us. We are them. It takes a village to pay for these programs — you would think they would welcome input from the village as to how to fund them.
So much going on here!
I’ve had confirmation from the district that the aggregate commentary here has it right re the budget strategy: “The option that was discussed was an example of the use of the furlough or demotion that would result in a reduction of teacher in service days.” This may well be allowed by the laws and regulations, but of course that doesn’t mean that the union would not file grievances, strike, etc.
The $19,000 healthcare premium number was mentioned in passing rather than “announced”, but TR’s suggestion that a plan with higher deductibles and co-pays (plus a higher member contribution than the current 5%) would make so much sense.
It’s interesting that UCFSD also had a budget meeting last night and also presaged an “index plus Exceptions” property tax increase. The difference is that this is very close to balancing the budget, but TE is still $3.25 million in the hole. (UCF is about two thirds TE’s size). I wonder if Keith can help us analyze the differences?
As you might expect, the difference between UCF and TE is labor costs. All school district budgets have about 75% dedicated to salaries and benefits. About 50% of the total budget goes to compensate the education association members (teacher’s union). Also realize that the teacher’s contract becomes the template for the other 25% – support staff contract (TENIG) and the administrator’s contract (Act 93 group).
TE’s union contract has salary levels, yearly increases and benefits all above those in UCF. UCF has had three different contracts over the past 5 years and has been able to adjust to the tightening economic picture; TE has had one contract negotiated 4 years ago with compensation in-line with the economy when it was “rosy”.
There are some other differences, but the teacher’s contract is the big one. A balanced budget is very difficult when contracted compensation is increasing faster than the Index plus exceptions. The only “levers” to balance the budget are running down the reserves, a referendum, and employee furloughs.
With the continuing uncertainty of state support (basic education subsidy, PSERS reimbursement, SS reimbursement) and real estate reassessments, I’m a fan of one year contracts negotiated concurrently with the budget. It’s impossible to predict the future and board members tend to become too generous with raises in later contract years hoping for better economic times that don’t materialize.
You are right that the teacher compensation is a big difference. Even though the budget assumes no contractual increase, the full year impact of this year’s (7%+) current contract increase deferred for six months increases the salary line by ~$1.5 million (excluding the TENIG increase). The benefits line increases by the same amount – fueled by possibly generous estimates of increases of 10% for medical and 15% for prescription. Of course, I think there is agreement on CM that there is a need, and there are ways, to restructure that benefits line.
Your idea of concurrent budget and annual contract negotiations is an interesting one. The State timetable requires the Board to lock in a “no-greater-than-index-plus-exceptions” tax increase in early February, when negotiations are just getting going. A nice way of setting a cap or forcing the public trade-offs that TR advocates.
Of course, TE also needs to a) offset some tax increases through use of some of its Fund Balance (taxpayers’ money), and b) get better control of its purchased supplies and services than the 3-5% annual cost increases assumed in the projection model.
I view the $20M+ fund balance as a curse rather than a blessing. Most people look at it and think TE has a pot of money that can solve the current budget shortfall. But using the fund balance to close a persistent budget imbalance just makes things more difficult in future years. If there is a $3M shortfall this year, there will be a $3M+ shortfall next year and a $3M+++ shortfall in every future year. Using the fund balance allows the board to procrastinate.
The best way to handle the fund balance would be to refund the amount above $5M (held for emergencies) and give a one-time refund to the taxpayers. But there is no legal way to do that.
Right on….which is why it should be used ONLY for limited or one time expenditures. It was accumulated to take care of the PSERS temporary spike — which got to be more than temporary. So instead the district can legally ask for “exceptions” to tax increases to raise taxes to cover program items that they will then use the fund balance to pay for. Each year they do these “one time” cost cutting measures only exacerbates future tax problems. Remember that about $7M of the fund balance is escrowed for retirement obligations (another thing I did an RTK for and have not received). It is my understanding that despite a stated intention to do so in 2001, the board has not shut off the ability to accrue sick pay for administrators, so each year they need to add to the kitty to pay that off. I may be wrong on that, but I know that the escrowed balance goes up each year….so we shouldn’t eye the fund balance as money we can use for compensation….though the average teacher will NEVER understand or believe that.
If there is $7M in escrow for future retirement obligations then it should show up as an Assigned Fund balance in the proposed Preliminary Budget form PDE-2028 legally required to be passed and publicized by January 5th. Otherwise, if the entire fund balance shows up in the Unassigned Fund Balance it really is not dedicated to any specific purpose and can be used at the discretion of the school board. I imagine the January 3rd meeting is specifically scheduled to pass the proposed Preliminary Budget.
There is no coherent strategy for the management of the Fund Balance. The result is a mish-mash of state laws, accounting rules, board policies and board regulations that are used only to justify the sequestration of $30 million of taxpayer money while continuing to ratchet up the property tax rate.
It’s been noted here that the district gets exceptions to allow for tax increases to pay for the PSERS increase (a “designated” $15 million of the fund balance), and it pays-as-it-goes in the operating budget for the OPEB liability (another $7 million plus of the fund balance)
I brought this up at Kevin Mahoney’s last Finance Committee meeting and he moved the issue along to the incoming Finance Committee. That Committee is to discuss its goals at its next meeting on January 9th, and I think it would serve us well to attend to make sure this is given priority. They need to develop a management strategy that serves the interests of the taxpayers, not the convenience of the Board.
I challenge the Personnel department to price out a reasonable benefit package — deductibles, co-pays and network controls. Plan to spend about $14,000 max for family coverage. Show people what that buys.
Now — offer every other plan and tell the employees what it would cost them to purchase for themselves if they didn’t want higher copays or deductibles. It makes the pricing difference quite real.
Now — 450 eligible employees saving $5,000 (obviously not all have family coverage — so I’m still waiting for the benefit information from an RTK submitted 10 days ago), is $2.25M — so take 75% of that to account for those not getting the plan to yield $1.7 M. This is insurance — not free health care. Do it in public. Show the community what we spend on a plan that has X, and what we could provide for $2M less. Then point out the alternatives — furloughs, calendar changes, and more. Some of it is a no-brainer, and I don’t think the union individually would ultimately object — “it costs them more” but they would not lose jobs.
Here’s a clue on the difficulty of the benefit plan: WHen the administration dropped the defined benefit and went to a defined contribution, they were all given 15% of the first 90,000 of their salaries, to a maximum of $13,500. That was more than the cost of the teacher defined plan. Many did not need benefits and were able to put it into a 403b of some sort. The ones that did bought reasonably priced plans and banked the balance.
Now the administrative plan offers $16,500 OR the teacher plan. That means the board has lost the whole purpose of not offering first dollar insurance. The purpose of defined contributions is to recognize benefits as compensation, and to educate the employee about spending their own money — even if advanced by the employer. In the real world, most enroll in a plan based on their own cost analysis. The fact that the Admins now have the choice of the teacher plan means they have lost the message ….”they get more” is ludicrous, because the cost controls go out the window when no one cares what it costs for an excessively rich plan.
So — the board needs to define its strategy and move forward with a plan….not just hit or miss.
What is the general opinion of accumulating a fund balance to handle a PSERS spike, and using that spike to apply for “exceptions” to the Act 1 increase? Doesn’t it seem a bit shady?
We can discuss the peripheral problems such as fund balance, PSERS and benefits, but the real, immediate problem facing the board is closing the $3M imbalance between revenues and expenses.
The board has taken the EIT option off the table. There are 3 remaining options.
1.Cut expenses (employees)
2. Increase revenues via an Act 1 referendum
3. Use the fund balance (procrastinate)
I’d call for a referendum. Truthfully describe the reason (prior generous teacher contract coupled, reassessments), the alternatives and the possible future implications. Then, let the citizens weigh in with their vote for either higher taxation or employee cuts.
I’d go to the union first — publicly – with a benefit package that would cost $2-3M less. Show them what they could buy — because insurance isn’t about free healthcare — just affordable health care.
I like your idea of a defined district contribution for benefits. That won’t happen this year. The union will correctly point out the large fund balance that can be used to balance the budget. Besides, the union has already “sacrificed” with a pay freeze for 6 months. Above, you mentioned a strategy of , “Then point out the alternatives — furloughs, calendar changes, and more.” The board could threaten to furlough 30 or 40 teachers to balance the budget, but that’s improbable and it won’t work. The PSEA has shown time and time again in multiple districts that they will “sacrifice their young” (accept furloughs) rather than agree to a compensation decrease. And think about hoards of angry parents yelling about increased class sizes.
Bargaining for the next contract has to start by the end of January. (150 days before June 30th) I wonder who is on the bargaining committee and what strategy will be employed.
This is why the board needs to make a proposal and put it out to the public. And then they have to have the young teachers understand it. While the PSEA happily dumps younger teachers, many of the younger teachers in TEEA have mentors, are former students, and are really the energy of the union. Older teachers will not want to see them go down. That’s why there needs to be a FAIR proposal as far as value, not cost. If they can price out a benefit plan that provides insurance — not $5 copays and $200 deductibles — but a reasonable plan that requires a reasonable co-pay and covers normal issues, then the fund balance is moot. It’s like saying what you can afford because of equity in the home. But it also means the board cannot ask for an exception for PSERS knowing they have accrued a fund balance to handle the PSERS excess. The union will be fair if the board is fair. I believe that. The LOCAL union.