Pattye Benson

Community Matters

Rising healthcare costs … the explanation for outsourcing strategies?

Economic times and tight school budgets have school districts scrambling to find ways to cut costs, and the ‘outsourcing’ chopping block continues as a major target. Proclaiming cost-savings for cash strapped schools is the driver behind school district outsourcing decisions – and there appears to be an outside company available for virtually every classified service.

There’s nothing wrong with researching the outsourcing idea; otherwise how will the School Board know if they are getting the best services at the best prices. That said, I do object that the notification letter from the District was mailed to TENIG without any mention at a School Board meeting. It struck me odd that the president of the teachers union rather than the president of the School Board disclosed this information. Don’t misunderstand, I am grateful that TEEA president Laura Whittaker brought the public up to speed on the outsourcing process. But I don’t think it should be her job to keep ‘us’ in the loop. It’s important that the public be in the loop during the Board’s ‘discovery’ process as it relates to the outsourcing bids, but also to important that the Board list to resident input on the topic.

The fact is that all the school districts are in a tough situation and that some form of outsourcing has become an avenue for some districts to save money. Over in Pennsbury School District, members of their support staff, PESPA (Pennsbury Educational Support Professional Association) have taken their cause to the community. With prominently displayed yellow lawn signs, PESPA are delivering strong words to their School Board, ‘STOP Pennsbury from Outsourcing’. Well-organized, the union is fighting back through a website dedicated to outsourcing, which includes an online petition with over 1200 signatures.

According Bucks Local News, Pennsbury’s business manager Dan Rogers (equivalent to our Art McDonnell) is claiming that they could save about $21 million over the next 5 years by outsourcing custodial services, maintenance workers, paraprofessionals, IT support technicians and instructional aides. An additional $4 million could be added through the sale of buses and equipment. PESPA represents about 600 support staff members – they continue to work under the terms of their old contract, which expired in 2011. Fascinating to note that the chief negotiator for the Pennsbury school board is Jeffrey Sultanik (remember he was the negotiator for T/E School Board with our teachers union).

Sultanik is quoted at a School Board meeting saying, “ …the only way the Board would not consider subcontracting is if the union is willing to make significant salary and benefit concessions.”

Bucks County’s Quakertown School District support staff, Quakertown Education Support Professionals Association (QESPA) fighting back against the privatizing threat of 100 custodians and cafeteria workers. Armed with 1,500 signed petitions from community residents, QUESPA members want their Board to know that taxpayers do not the high quality of services provided to the children to be given away to an outside private company that will bring strangers into the schools. QUESPA’s current contract expires the end of June but Board is underway in their solicitation of proposals from private outside vendors – believing that it could help save money on food and retirement benefits.

In southern Chester County, the driving force behind Brandywine Heights Area School Board’s decision to authorize an RFP to outsource paraprofessionals is the Affordable Health Act that will take effect in 2014. Currently, in the Brandywine Heights district, the paraprofessionals work 6 days a week, 30 hours a week and are considered part-time. However, under the Affordable Health Act, all workers who work 30 hours or more are eligible for benefits.

Kennett Consolidated School District (KCSD) is slightly ahead of TESD in the process. Having already sent RFPs out for outsourcing custodial staff, they are now reviewing the bid received from Servicemaster, a worldwide provider of custodial services. According to data provided, outsourcing of custodial services would save KCSD approximately $400K in 2014, with higher projected savings in years ahead. KCSD is set to make a decision this month on privatizing custodial services and are planning a similar review of outsourcing proposals of instructional and teaching assistant staff in the next few months.

I thank Keith Knauss, School Board director for Unionville Chadds Ford School District (UCFSD) for supplying the following background information for discussion:

” … As background, in 2009-10 TE had 312 full-time support personnel and 78 part-time support personnel. That’s the most recent year available from PA Department of Education.

Those 312 full time support personnel are entitled to salary and benefits defined in the current TENIG contract.

Let’s examine the district’s cost to employ a hypothetical 10 month, 190 day, 8 hour per day, Clerk Typist for this year and next.

2012-13 2013-14
Salary $31,981 $33,410 $21.04 to $21.98 per hr (4.5%)
FICA @7.62% $1,218 $1,273 7.62% half reimbursed by the state
PSERS $1,976 $2,835 12.36% to 16.97% half reimbursed by the state
Healthcare $18,700 $20,196 est. family coverage, 8% inflation
Holidays, Sick Leave $3,703 $3,868 10 paid holidays, 10 sick days, 2 personal days
Total $57,579 $61,582
% incr 7.0%

There are two factors that might lead school directors to investigate outsourcing.

First, the cost increase from this year to next is estimated to be 7%. This a problem when the district’s revenue is constrained by the Act 1 Index that is estimated to be 2.2% next year.

Second, the cost of benefits is far higher than in the private sector. The PSERS retirement plan and associated cost has been under discussion several times in this blog. What hasn’t been discussed is the cost of healthcare. According to the Kaiser Foundation, the national average family plan costs $15,745. The employer pays $11,429, the employee pays $4,316. This is compared to TESD where the family plan is estimated to be $19,000. The TESD pays $18,700, the support staff employee pays $300. The district’s cost of healthcare for support employees is estimated to be $7,000 above the national average.

As always, I try to be thorough and accurate. I have purposely not advocated for any solution or made any determination as to what is fair. Constructive criticism is welcome….”

Thank you Keith for this information. Accepting that the District’s ‘hands are tied’ re PSERS costs (at least for the short-term), clearly the focus needs to be redirected towards healthcare costs, where the opportunity for change does exist. I have been vocal in my support of TENIG, but as was the case with the teacher contract negotiations, healthcare costs are negatively affecting the budget bottom line. The teachers provided healthcare concessions in their latest contract and I am hopeful that given the opportunity, the TENIG members may do likewise.

Share or Like:


Add a Comment
  1. Take your eyes off the numbers for a moment and look at the bigger picture. Having worked for a company that outsources EVERYTHING that is not core to their business (and, coincidently, was located in T/E for a number of years before moving to Oaks), the benefits are far more than financial. When you outsource functions to a company who’s primary business is that function, you are getting a better service. A few examples: 1) Administrative Assistants – Given the changes in technology, including voicemail & email, communication no longer need go through a third party. Further, the person you are trying to reach will likely answer the phone. This includes the CEO, CFO, and customer service.
    But what about the other things an Admin does that we don’t want to pay expensive executives to spend time on such as travel arrangements, copies, letters. Mmmm…who does travel better than a travel company? By outsourcing to American Express, not only do you have travel professionals planning your trip, you have the 800 pound gorilla, with their reputation, and buying power. Cannon is a Titan in copying, duplication, binding and professional publication. They are also masters of logistics. Trending peeks and valleys is critical to their core business. Need a ten copies of a color presentation in ten minutes? No problem. Copier not working? If the onsite people can’t fix it, they’ll have a replacement in an hour. (Yes, they will work on-site if needed, and outsource background checks on employees to the experts.)
    Administrative personnel are but one example of a “job” ripe for outsourcing, yet it is not even on the table in our schools.
    Further, “why wasn’t this caught sooner?” is a recurring question. You can bet that Kraft keeps a very close eye on milage and gas expenditures. Transportation is, after all, their expertise.
    Our schools are in the business of education. Let’s keep the focus on our core business. Everything else is ripe for putting in the hands of other professional firms. companies are always looking for good people, too, and tend to hire those “displaced” workers when they get the business.
    Oh, and by the way, they know the price of a kid’s retainer and don’t toss it in the trash.

  2. Guy,

    You make some points that look good on paper.

    This is not a business. If we hand off this much responsibility to an outside source, we begin to lose control. A school system, with 6,000+ kids is not a place you want to lose any control. Kids may not be treated the way we want them to be treated and the management may not handle decisions the way we would and we may not approve of the way they handle decisions. Total control may not be as important in a business as it is in a school system. Especially this one.

    This will be a point of consideration for new families moving in this district. They won’t like it.

    I haven’t even mentioned the security issues (even if they are vetted) and the quality of work is known to be lower. And that is a fact.

    1. 1) not “an” outside source, several. Again, experts in their fields.
      2) loss of control? Not so. Due diligence and a contract coupled with professionals in vendor relations offers far better “control” than a board with limited time or an administrator wearing many hats.
      3) families moving into the district are concerned about education. Shareholders and boards of directors are extremely discriminating about decisions.
      4) why would you expect an outsourced provider to treat children poorly? I recall a teacher in New Eagle who was charged with harassing a child with special needs. Yes, he was “cleared, but finally fired for cause a few years later. When you outsource you have a contract that lays out expectations and cause for termination. The teacher’s union makes firing a teacher an excruciating process.
      5) background checks can be negotiated, as can everything else.
      5) residents in the township are disgusted with cutbacks in language and the arts. Property values are directly effected by quality of education. Let’s put our money there.
      Think it through; you GAIN control, not lose it!

      1. Flawed logic??? We put up with a teacher bullying a special needs child. After the incident was “closed” (settled), the teach continued to harrass children. Thes we third grade students, 8 year olds! Children were hiding und their desks. One little girl walked home rather than face the wrath of this monster. He arbitrarily put kids in “low math” if he didn’t like them. Fortunately, the results of the PSSAs come out early in fourth grade and students with “A”s in his class who clearly showed the apptitude on standardized testing were moved.

        Yet, you are concerned that by outsourcing, we are inviting villans into our schools. We already have them.

        If you cannot connect the dots on my comments, clearly you graduated from Conestoga. I can’t waste my time teaching you to think.

  3. Thanks Pattye and Keith for the background and information on how others are approaching this topic. I wish the District would begin to “structure” the issue for those in the community who have an interest. Certainly they know how many employees would/could be affected (I thought it was 170 but KK mentioned 312)…total compensation and benefits levels involved…possibly a statement on what they would do to insure the continued employment of any affected class of employee. From their last meeting, it seems the timing on any decision will be early 2014 so it’s really just part of the normal contract negotiation cycle as the current TENIG contract only runs to 6/30/14.

    John’s probably right about commodity functions vs. core functions. I keep thinking this process will involve the same employees in the same jobs and maybe at the same rate but still providing a savings to the District. I could be one knows and very little if any information has come out officially. I’m guessing it’s going to be that way for quite a while.

    It’s also interesting to me to see the unintended consequences of the PSERS contribution. In an attempt to begin to catch-up on an underfunded pension plan; a disincentive to keeping employees on the payroll has been created. By Outsourcing the above hypothetical employee, the employer would save at least the mandated pension contribution.

      1. TENIG president characterized the membership as “more than 150” in her comments to the Board of Ed on March 18.

    1. Made me laugh out loud at my desk!! Quantify is the key. The District has not been able to balance a budget in 3 years…they have a chance this year. Over that time, taxes are up 8.87%. Is this the best way to close the gap? Who knows…we don’t even know what (or if) savings we’re talking about. Could all be a negotiation strategy anyway.

      Seems like other Districts have done a lot more to define the various departments and associated costs. We’re in the dark here. Certainly the District has some idea of the potential savings involved. They at least know the scope of the total expenditures involved. Don’t know why that data is so classified… I understand not negotiating in public but we’re no where close to that. The Outsourcing Strategy has been on the Budget Strategies worksheet this entire year. I asked Finance in January if they would begin to structure the issue for the public. They didn’t want to “kick the hornets nest” or “have signs at their meetings”… Seems to me that keeping interested parties in the dark is kicking the hornets next. How does TENIG feel…that’s pretty obvious…they talk. How about making a statement regarding their continued employment no matter the result?

      1. Some people say citizens don’t go to meetings and won’t get involved.

        When asking the finance committee to structure the issue for the public, the answer given is, “we don’t want to kick the hornets nest” or “have signs at out meeting.”

        This is an inappropriate response to any taxpaying citizen much less one that goes to meetings and clearly wants to contribute and be involved in the process.

        Maybe this is why citizens committees fizzled out.

      2. Keith and Pete Connors,

        Please read Neal’s post above (March 19th at 2:28) describing how citizens are kept in the dark and told that “they don’t want to kick the hornest nest” or “have signs at thier meetings” when asked if they would frame the issue for the public.

        As Neal says, “we’re in the dark here.” Don’t know why the data is so classified” I understand not negotiating in public but we’re no where near that.”

    2. Neal,

      I understand and appreciate that outsourcing the TENIG employees may “save at least the mandated pension contribution.”

      I’m curious if you have or ever had children in the school system. Have you ever stepped foot in a school building, observed the process, talked to a secretary, seen any TENIG employeee interact with administration or teachers. Have you ever witnessed them handle a phone call, manage an angry parent or watched a custodian chase down a run away kid. Until you have, it’s easy to “dehumanize these people (as John said) and dismiss them as numbers on a spread sheet.

      1. SL, I don’t have children in the District and I’ve only been in the schools for night school, friends children’s sporting events and the like. So, I am interested to read the comments of people with real world experience. I posted that sentiment here on 3/2:

        Interesting “news” here and I’m glad Laura mentioned it in an open meeting. I’ve been asking the Board in Finance Committee to give the community some information of this budget strategy. They have been hesitant as..I guess..any talk of outsourcing will be next fiscal year and have no impact on this budget cycle. I just wanted the basic parameters…how many employees involved…total compensation/benefits we are talking about…estimate of potential costs savings…the ability to re-deploy affected employees? Was also interested in hearing the discussion as I’d like to listen to all sides of the issue. You guys know me by now..I’m pretty “balanced budget-oriented with reasonable tax levies” which makes it more important for me to hear the other side of the strategy. Remember, the 2013-14 budget currently has a $3.2 MM deficit position. $1.5 MM of this can be filled by the Act 1 tax increase leaving $1.7 MM currently slated for Fund Balance contribution. What’s the culprit? In my opinion, it’s the $7 MM spending increase projected for next fiscal year. I’m all ears when it comes to strategies that can close this gap. Right now, this is the ONLY strategy the Board has listed for 2013-14 but now they say it’s not going to impact this budget cycle. We’ll see if additional strategies comes to light in the Budget workshop Monday night.
        As far as this issue/strategy is concerned: unfortunately we haven’t been given enough information to evaluate it. Pattye estimated it could produce $1 MM in savings. I think the number is much higher. Last year’s $1 MM savings estimate dealt with the janitorial staff only. I don’t think this group is all of TENIG although they may be the largest employee class. If this strategy deals with all members of the bargaining group; the potential fiscal impact could be $2 or $3 MM…we don’t know. I did read the TENIG contract and it does obligate the District to seek placement for any employee “Outsourced”. The other big unknown when I look at this involves the pension contribution. Are all these employees part of PSERS? If so, outsourcing would save the District 12% (this number is scheduled to keep rising fairly dramatically) of the total of all these salaries on an annual basis. That may be a big number…we don’t know. These savings would be a reality (to the District) even if the affected employees made the same salary next year or even a slightly elevated salary. It could be that the same employees (100% redeployed to outside contractors) making an elevated salary in future years could still produce savings to the District (in the form of decreased pension contributions). Is that fair to them…to be discussed when we have real information/data? There are certainly two sides to this coin.
        Does all this mean I support the strategy…no/not yet; we don’t know enough about the details of the plan to even weigh in. I understand all of the discussion regarding fairness….its all highly relevant. As a taxpayer, I also care about fairness to my fellow taxpayers. As such, I’m interested in hearing both sides of this equation. If there’s a safety concern here, that would outweigh (in my opinion) a financial benefit. I’m guessing that issue can be dealt with by having the same workforce…but, again, no one knows the plan.

        Hardly dehumanizing…Still don’t have enough information to evaluate the issue.

        1. Neal, One of TENIG’s support staff mentioned a budget strategy to me a few weeks go and to my knowledge it has NEVER been discussed by the Board. The suggestion was a 4-day work week for the summer months for staff. Instead of 5 -8/hr. days during the summer, it goes to 4 – 10/hr. days. The School Board of Spring Ford School District, Montgomery County has approved this 4-day schedule for 8 weeks, June 21 – August 8 starting this summer. Their Board has calculated a savings of $100K by closing the schools from Thursday night to Sunday night. They attribute the $100K savings will be recognized with reduced trash pick-up, less sewer, water and electricity usage. The employees will still work 40 hours during the summer but longer days and have the added benefit of 3-day summer weekends. They also explained that the summer maintenance projects would get more accomplished with the longer days. Now one may argue that what’s a $100K savings but here’s a strategy that is an opportunity to cut costs by utilizing a 4 day week with minimal impact on students and staff. Why hasn’t this ever surfaced as a budget strategy??? It makes me wonder if there are other types of strategies out there that school districts are utilizing — is the Board and/or staff actively pursuing other cost-cutting methods (other than going after the nonprofit organizations).

        2. Pattye,
          The 4 day workweek is being used in many districts. UCF is piloting the 4 day workweek this summer and the estimated savings is $21K. The pros and cons are listed in this document.

          The $100K savings mentioned above is probably overstated. From the document:
          Eleven districts showed substantial savings ranging from $5,000 to over $100,000 with the mid-range being about $30,000.

        3. PB,

          Again, there may be $114 MM ways to reduce spending. I don’t know a lot about this strategy but if it helps…

          Currently the Finance Committee has no published strategies to reduce expenses for 2013-14 but that could change. Next Budget Workshop is 4/1 and it deals with the expense side of the equation..

  4. The TENIG (170 members) does not represent all the support personnel (300+). From Pattye’s original post about outsourcing –
    “TENIG members are the secretaries, custodians, maintenance workers, kitchen staff and security personnel. Although aides and paraeducators are not members of TENIG, their jobs are also on the outsourcing ‘chopping block’ as budget impact items under consideration.”

  5. The information on TESD came from a PDE report covering 2009-10 where there were 312 full time and 78 part time support staff.
    Each district accounts for support personnel differently so I have no idea how many belong to the TENIG union and under what job categories. A RTK request would reveal that information.
    Since employee compensation comprises over 70% our budget, UCFSD publishes a monthly report on personnel.
    Pennsbury is the even more transparent with monthly publication of every employee’s salary and benefits. Note that many support employees have benefits exceeding salary.

  6. since aides receive NO healthcare benefits, it is not in the equation for TESD. Someone said perhaps if this is all outsourced, the current employees will just be picked up by the outsourcing agency with different pay/bene packages but a lot of the employees would remain.

  7. Yow-zah, that’s an incredible amount of information from Pennsbury!
    Keith, a question for you: Part of the Affordable Care Act imposes a employer tax on “Cadillac” health care plans. Given the cost of some of these healthcare plans vs. the national average…would they fall into the Cadillac category? Clearly I haven’t read the 3,700 pages of the new Law but I thought you may have some insight on this.

    1. The current TENIG healthcare plan might fall into the Cadillac category. I don’t know for sure. However, I don’t see this plan being extended in any new contract. The teachers have already agreed to a more reasonable plan and I expect the TENIG would follow suit.

      1. John,

        “Cadillac” is a descriptive term used nationally since the early 1990’s to describe high cost healthcare programs. Obamacare institutes a 40% excise tax on family plans that exceed $27K (Cadillac plan) starting in 2018. If TE’s medical plan costs $18K in 2013, it could easily exceed the $27K limit by 2018.

      2. JP,
        I agree that the superintendent’s contract is a Cadillac contract. I agree that the prior contracts with the teachers and support staff were poor. I agree the board could do a better job of being transparent and communicating.
        Contrary to what you say above, the board does not give “as good or better plans to administration” The support staff has a superior plan with lower contributions. The teachers have the same plan as the administrators. After the modest raises the administrators received I have a hard time thinking the board is interested in “redistributing $’s to the administration”. We discussed it before and we might disagree, but I think the board did an excellent job with the recent teacher contract.
        It’s interesting that there is so much opposition to the board just investigating the outsourcing option. Would people be happier if the Board just ignored the possibility of substantial savings?

      3. Keith,

        You ask in your above post……….Would people be happier if the board just ignored the possibility of substantial savings?

        Just because the administrators and therefore the board of Directors can, by virtue of their power, fire the support staff and hire them back at reduced wages, doesn’t mean they should. Modest raises or not, there is no strategic integrity in granting the administrator segment raises within two weeks of announcing the possibility of outsourcing The TENIG segment because we can’t balance the budget. It makes no sense and can’t be substantiated by fact.

        The administrators and board of directors have found that confused and uninformed citizens, often end up forgetting about decisions that don’t make sense. They are taking a bet that citizens will lose interest or not find out about it at all and that TENIG workers will cave in and accept the inevitable.

        In a previous post, Guy mentioned that administrative personnel is ripe for outsourcing. Shouldn’t the board look at this as a possibility of substantial savings? If your answer is that the quality of work will be lower, then logic dictates the quality of work will be lower for any segment that is outsourced. If this claim is true, at the very least, shouldn’t we investigate how this effects their market value?

        There is no reason to out source any segment. This mess could be taken care of easily and expediently.

      4. Shining,
        You wrote several paragraphs. You told us [again and again] that you disagree with the administrative pay raises. You told us about uninformed and confused citizens. You told us that another possible savings strategy might be to outsource some administrative functions. But you never never answered the central question.
        Would you be happier if the board just ignored the possibility of substantial savings from outsourcing support staff functions?

      5. I don’t know if I would be happier. I think that is a strange word to use in this context. It wouldn’t bother me if they ignored the possibility of savings from this strategy but I suppose it’s their right to do it and they’re going to do it. Since it’s one of the only strategies we have heard about, I guess they’re taking it pretty seriously. Does that answer your question?

        Also, I think you unwittingly twisted my words again. I said nothing about administrative functions. The term I used was administrative personnel. Please reference Guy’s post a few days ago.

      6. Yes, you have answered my question.
        I find it interesting that you, or anyone for that matter, would oppose the board investigating this cost saving measure. The ostrich and sand metaphor comes to mind.

      7. Keith,

        They are hard working, decent people who have earned the trust of the community and I’d like to see them treated with respect.

        1. So are the employees at the local Paoli Acme, but too many people have switched to Wegmans…so those decent people are going to lose their jobs after ACME has trimmed costs. Is efficiency not as important as self esteem?

        2. There is no correlation between efficiency and self esteem. That is incorrect.

          This is about being treated with dignity and respect. We entrust these decent hardworking people with our children.

          Our schools are in our community. TESD is not a business.

        3. Respect is mandatory. What board/administrative actions would you ask for to indicate respect during the investigation phase?

        4. This is the crux of the issue. There is no respect and there is no dignity in this process. And to add insult to (tax) injury, the administrative segment (which we now know can be outsourced) grants themselves raises and bonusues within 2 weeks of announcing the start of this investigative stage.

          TESD is not a business. It is a school system nestled in the arms of a caring community whose members value and respect employees in all segments of the school system.

          I don’t want any segment to be out sourced. It isn’t necessary.

  8. $7,000 above the national average? I knew when I worked in the private sector as an admin, I should have moved over to work for TESD. My benefits would have been better. It was one thing to “give away the farm” back when times were great (financial/real estate values) before 2008; but now? No way. When will this stop with the TESD? Pay raises when many are foregoing raises, etc. It’s also time for the SD and both townships to institute an EIT.

  9. If you are going to attack, let’s be a little less Lee Atwater…
    Dan Waters has one son who graduated from college several years ago. The then board president awarded Waters a benefit similar to the senior personnel at Univ of PA Med. Ctr. Only in their wisdom,they failed to understand the state constitutional provision that did not allow the tuition help to go away, so it was added to his compensation. I do not believe Dr. Waters negotiated for it, but he voluntarily offered a wage freeze after that happened and it holds today. perhaps this bears out the idea of asking questions of candidates about philosophy as well as determining what level of knowledge they bring to the role. Just signing up to run leaves the district exposed to amateur hour.

    likewise I do not believe Dr. waters has a Cadillac health plan. He has a defined contribution. All admins did until the teacher plan got so expensive and overloaded with perks (there is NO deductible in the plan) that the Admins asked to match it. Again, there was little expertise on the board to understand the ramifications, and they played that change to the ACP.

Leave a Reply

Your email address will not be published. Required fields are marked *

Community Matters © 2024 Frontier Theme