Pattye Benson

Community Matters

Keith Knauss

Should the recent court ruling ordering Lower Merion School District to rollback tax increase make a difference in the way TESD School Board manages taxpayer money?

Tonight, Tuesday, September 20th is the TESD Finance Committee meeting, 7 PM at the TE Administration Offices, 940 W Valley Rd # 1700, Wayne, PA . Residents encouraged to attend — your voices do matter!

With an agenda of 110 pages, the community is fortunate to have residents willing to review the information in advance of meetings. Ray Clarke provides the following commentary regarding the agenda (click here for agenda).

There are a couple of items that the community might want to pay particular attention to in the light of the recent injunction ordering Lower Merion School District to roll back this year’s tax increase.

To recap, the Montgomery County judge found that LMSD (quoting from the injunction) deliberately over-estimated deficits, failed to predict surpluses, represented to PDE that costs for Special Education and retirement could not be covered without a tax increase, and transferred Fund Balance to assigned accounts to avoid the statutory cap of 8% of the annual budget while still raising taxes. The judge found that LMSD’s Fund Balance commitments were funded out of the budget each and every year.

These findings will seem very familiar to those following the affairs of TESD. Moving to the agenda:

Item 6, Bond Discussion: TESD is considering repayment of $18 million of higher interest bonds – arguably a sensible move – but by issuing yet more bonds at mostly 4%, when there is $32 million of taxpayer money sitting in the General Fund, supposedly “committed”, earning about 0.75%.

Item 7, Capital Funding/Fund Balance: Seemingly to support this plan (only one option is presented), the district is re-publishing its Fund Balance Policy and Regulation (not always consistent with each other), along with the commitments from 2015/16, presumably to establish commitments for 2016/17. There is no analysis of the capital spending plan.

A couple of questions:

– Does TESD plan to continue the Fund Balance fiction that brought judicial sanction on LMSD?

– Are we going to borrow another $18 million we don’t need at the second “generationally low rates” in two years? (About a percentage point lower than those last generationally low rates). And pay underwriters and lawyers $150,000?

Unionville-Chadds Ford School Board director resigns, claiming Board has transparency and communication issues

The Unionville-Chadds Ford School District in southern Chester County is a high-ranking school district and often enjoys the same elite national standing for student test scores, etc. as the T/E School District. As an example, high schools from both school districts received gold level standing in the 2013 US News & World Report with Conestoga ranked #5 and UCF ranked #10 in Pennsylvania high schools. Because of their similar academic achievement levels and their geographic proximity (both in Chester County) the two school districts are often compared on Community Matters. Additionally, readers of CM may be familiar with regular commenter Keith Knauss, a member of the U-CF School Board, who often offers his experience and personal insight in our school district related discussions.

This week saw a surprise resignation of U-CF school board director Holly Manzone. On the surface, Manzone’s decision is not significant for TESD residents, but in reading the resignation letter (that includes the reasons for her departure), her words contained an eerie familiarity. During the recent League of Women Voters debate, most of the T/E school board candidates used buzzwords like trust, transparency, and open communication and morale issues. All but one candidate supported the need to improve the communication relationship between the Board and the residents. TE School Board president Kevin Buraks, who is seeking re-election, disagreed with his fellow candidates and stated during the LWV debate that the Board already provides an open forum for the public and that there are no morale issues in the District.

In her resignation letter, Manzone acknowledges the excellent quality of the Unionville Chadds Ford School District but criticizes the U-CF School Board for what she says amounts to ‘rubber stamping’ decisions of the Administration. Claiming that the U-CF School Board is a model for ‘poor governance’, meetings ‘scripted’ and decisions ‘baked’, Manzone states that she can, “no longer continue to participate on the Board on this basis without violating my principles and disturbing my conscience. I cannot allow my continued presence on the Board to connote agreement with these practices.” Manzone listed the following six issues in her resignation from the U-CF school board:

  • “Open discussion is frowned upon and dissent is squelched at both the public and executive meetings.
  • Meetings, especially public meetings, are often orchestrated, with many “pre-meetings” and phone calls behind the scenes to prevent genuine public discussion of contentious issues and avoid any embarrassment to the administration or the Board, i.e., “no dirty laundry.”
  • Executive sessions are over-used. If there is a way to characterize a topic so that it can be discussed privately in executive session, it is. Engineering topics in this way may allow the district to comply with the letter of the Sunshine Law, but it surely violates its spirit.
  • Community members raising issues are often themselves considered the problem. Energy is expended complaining about these individuals rather than focusing on improvement.
  • Access to underlying data and original documents is withheld, even if it is not confidential. “Confidentiality” is used as an excuse to withhold access to broad categories of data, without foundation.
  • Information is shared unequally, with not all Board members receiving the same background for deliberations. Also, private “votes” are held without canvassing all members.”

Manzone is not seeking re-election; and decided that to take her issues with the UCFSD Board public in her resignation statement. I have read some of the comments to Manzone’s resignation letter — several Board members (including Keith Knauss) have come out strongly against Manzone’s allegations. Conversely, Manzone does have her supporters, particuarly members of the public who have attended school board meetings. (To read the comments in the Unionville Times, click here.)

Similar to the issues raised by Manzone, we have heard several T/E School Board candidates voice concerns and suggest the need to improve the communication, transparency and trust issues in the District. My takeway — whether it is UCFSD, T/E or any other school board — open dialogue between school boards and the residents they serve is essential to building mutual trust; citizen input should be respected and welcomed.

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.

What do the sidewalks at St. Davids and Former Police Chief Andy Chambers have in common?

What do the St. Davids sidewalks and former Police Chief Andy Chambers have in common? There is an eerie similarity between a vote of the Tredyffrin Township Board of Supervisors on January 25, 2010 and a recent T/E School Board vote of January 7.

January 25, 2010 BOS Meeting: Even though there was a signed land development agreement between Tredyffrin Township and St. Davids Golf Club requiring sidewalks, the Tredyffrin’s supervisors approved the return of $25K escrow money to the country club; removing the sidewalk agreement. Besides suggested Home Rule Charter violations surrounding the return of the escrow money, there was the procedural problem that the proposal had not appeared on the BOS meeting’agenda. Against the objections of many residents and some of the supervisors, the motion carried 4-3. For the record, Bob Lamina, Paul Olson, Warren Kampf and EJ Richter voted in favor of the motion and Michelle Kichline, Phil Donohue and John DiBuonaventuro voted against the motion.

After much media publicity, many letters to the editor, accusations of Home Rule Charter and Sunshine Act violations, claims of deal-making and general resident outrage, the supervisors reversed and rescinded their decision at the following Board of Supervisors meeting in March 2010. Public comment is guaranteed by the Sunshine Act and the public’s rights were violated by the St. Davids sidewalk vote of January 25, 2010.

Fast forward to January 7, 2013: Instead of the township failing to notify the public of an intended motion on its meeting agenda, it was the T/E School Board who failed to notify the public. On January 7, the Board held a special meeting for the primary purpose to consider the 2013-14 preliminary budget proposal. At the meeting, the School Board voted to apply for Act 1 exceptions beyond the 1.7% allowable tax cap.

A consent agenda listed on the January 7 meeting agenda included the approval of December 3 meeting minutes, monthly financial reports, routine personnel actions, etc. but made no mention of anything safety-related such as enhancements or the hiring of a District safety consultant. However, as we later learned, the hiring of former police chief Andy Chambers as the District Security Consultant (hourly rate – $125) was approved … as it was ‘last-minute’ included along with the other items in the consent agenda. The agenda did not notify the public that the School Board would discuss anything safety-related at the special meeting, let alone the hiring of a ‘security consultant’.

Someone needs to explain to me how the actions of the School Board on January 7 are any different from the actions of the Board of Supervisors of January 25, 2010. Both of these examples speak to the process of our government. The fact is that the Board of Supervisors vote of two years ago was not about sidewalks in the same way that the School Board’s vote of January 7 is not about the hiring of Andy Chambers as the District’s security consultant. Rather, it is about transparency and open meetings; the basis for positive discussions between citizens and their elected officials. Government decisions should not be made in secret.

The Sunshine Act defines when government bodies must conduct official business in public and private, when they should allow public comment, and how and when to advertise meetings. Executive closed meetings can only be called for the following six reasons:

  • Discussions of matters involving employment or performance of officers or employees of the agency, provided that any affected individual is given the opportunity to request, in writing, that the meeting be held in public.
  • Meetings involving collective bargaining, labor relations, and arbitration.
  • To consider the purchase or lease of real property.
  • matters falling under the attorney-client privilege regarding litigation or issues where an identifiable complaint is expected to be filed.
  • To discuss agency business which, if discussed in public, would lead to the disclosure of information protected by law, including ongoing investigations and information exempt under Pennsylvania’s Right-to-Know
  • To discuss matters of academic standing or admission at state schools

Responding to follow-up comments on the topic of the Sunshine Act, Keith Knauss, school board member of the Unionville Chadds Ford School District (UCF) offered this comment on Community Matters —

The Pennsylvania Sunshine Act requires all public agencies to take all official actions and conduct all deliberations leading up to official actions at public meetings. If the board met in executive session and deliberated on hiring Mr. Chambers, then they probably violated the Sunshine Act even though the official vote was taken in open session. It doesn’t matter if it is a contract or not. We’re conjecturing that the board deliberated (illegally) in executive session and based on that deliberation, took an official action to disburse funds to Mr. Chambers. We, of course, can only conjecture since the meeting was closed to the public.
The current Sunshine Act took effect on January 3, 1987. This law replaces the old Open Meetings Laws of 1957 and 1974, Under the old law, public agencies were required to hold open meetings only if votes were taken or official policy adopted. This led to the frequent abuse of discussing and deciding issues in so-called “workshop” sessions, with the official public meetings being relegated to conducting formal votes on issues already decided in advance. The current Act requires that any deliberations leading up to official actions also take place at public meetings. Municipal governing bodies have no authority, either under the municipal codes or the Sunshine Act, to conduct “workshop” sessions.’

Question … At the upcoming January 28 School Board meeting, will the Board take responsibility for their January 7 action and reverse their decision to hire Andy Chambers as the District Security Consultant?

If the Board understands the Sunshine Act, and supports the importance of open meetings, the choice they make on January 28 will be simple. The Board accepts responsibility for the situation and takes the necessary steps to correct the situation; reversing the decision and then appropriately advertising the matter for public discussion.

T/E School District and Teachers Sign New 2-Year Contract

After 9 long months, the T/E School Board approved a new 2-year (2012-13 and 2013-14) contract between TESD and T/E Education Association last night. To read the contract summary of the teacher’s contract, click here. If you prefer to read the entire contract, click here.

Ray Clarke attended the Special Meeting of the School Board and the Finance Committee meeting which directly followed. In his review of the teacher’s 2-year contract, I thank Ray for offering the following highlights and his personal commentary on the contract. As expected the teacher’s healthcare benefits and salaries are the primary focus of the changes in the new contract.

  • The basic details are more or less exactly the same as the first 2 years of the District’s 3 year proposal (as Keith Knauss predicted here). Salary freeze, no matrix movement, furlough days equivalent to 1% salary reduction in 2013/14, slightly higher contribution to healthcare premiums and prescription drugs, two new (lower cost?) health plans, capped tuition reimbursement, and one time $2,500 per employee bonus (a “legitimate” fund balance use?) in 2013/14.
  • Net saving vs status quo/budget of $400,000 for the current year (2012/13); 2013/14 cost increases from that by $400,000 plus the $1.1 million one time bonus (but presumably a cost saving vs the status quo model).
  • The rest of the contract structure basically unchanged
  • No demotions in either year of the contract, but specifically on the table for the next contract
  • No resolution of the 6 period CHS grievance (a ruling in favor of the TEEA would require the hiring of 12 additional FTE – say $1.5 million ongoing cost (salary, benefits, PSERS) plus one time payment of I think I recall $3 million?)
  • The President of the TEEA is allowed to speak at TESD Board meetings
  • Family health benefits available to same-sex domestic partners

My general sense is that both sides went about as far as they could go this round. This contract is only for two years, at which point we’ll see how the economy and political landscapes have progressed, and the Board members Rich Brake, Kevin Buraks, Anne Crowley and Betsy Fadem will have had to choose their election platforms, if running in 2013.

Interesting that the standard bonus helps those at the lower end of the scale more than proportionately (my concern, if teaching is to remain attractive for the next generation in an environment of benefits slashed in favor of the currently tenured), and that lead negotiator Deb Ciamacca keeps her higher-end CHS constituency happy by keeping the grievance on the table.

Following the Special Meeting of the School Board, the regular Finance Committee meeting followed. Ray offers the following notes from that meeting:

The Finance Committee reported on the Act 1 index for 2013/14 – 1.7%. Slightly higher than expected – someone in the state bureaucracy (or government?) made a decision to change the calculation method (to include a longer period for averaging state weekly wage increases) that raises the index by 0.2%. Shenanigans?

The Finance Committee spent some time discussing how to establish that parcels currently listed as tax-exempt conform with recent PA Supreme Court rulings that narrow the availability of tax exempt status. More details remain to be gathered on exactly what these rulings are and what entities might be affected. I was pleased to see that while Committee chair Fadem was advocating a 13 part, multi-point data request be sent to all tax exempt property owners (mainly the townships, federal government, schools, churches, right-of-way owners and land trusts), Board members Brake and Motel were at pains to avoid an “undue burden” on both volunteer charities and the district.

TESD: Low Millage Rate … Does that Make it a Bargain?

Keith Knauss, a school board member in the Unionville-Chaddsford School District, and a frequent contributor on Community Matters has written an interesting article comparing the tax rates between UCFSD and TESD. As Keith points out, T/E residents are paying a substantially less millage rate for school taxes than UCFSD — 24.53 versus 18.65.

The academics between the two districts are very similar; always appearing together at the top of any state test results. So does this mean that for this community, we are getting a bargain when it comes to value of the school district. Our students come in at the highest testing levels but yet we are not paying at the same taxing rate as an equivalent district.

Thanks Keith for this article … your analysis forces us to see the situation in a different light. He concludes that the milleage rate does not indicate tax fairness nor it have anything to do with the school district management … and therefore meaningless as a predictor.

The Low Millage Rate Myth

Tax Capitalization, Tax Rates and School District Management

Common wisdom has it that a school district with a low millage rate is doing a better job of managing their finances than a district with a high millage rate. In fact, sometimes the low millage rate myth is used by school directors to justify large tax increases – “We’ve kept tax rates well below other comparable districts for years so a large increase this year shouldn’t bother you.” Sometimes the low millage rate myth is used by union leaders to justify large salary increases – “The district has one of the lowest tax rates in the state, so there is plenty of room to raise tax rates to pay for our salary demands.” A corollary to this myth is that residents in a high millage rate district are unfairly burdened with higher taxes relative to residents in a low millage rate district. Sometimes common wisdom is unwise.

Let’s compare two districts – Tredyffrin Easttown and Unionville Chadds Ford. I’ve chosen UCF and TE because they are very similar demographically and very similar academically. Both have excellent schools and similar academic results. The only striking difference is the millage rate. TE’s rate is 18.65; UCF’s is 24.53. Is TE doing a better job? Are TE residents getting an educational “bargain”? Is there room to raise TE’s rates to pay for teacher increases? Are UCF residents saddled with an unfair tax burden?

Let’s do a mental exercise. Let’s suppose there is a street that runs along the border of UCF and TE. A developer builds 20 new houses that are exactly the same. Ten are on the UCF side of the street; ten are on the TE side of the street. The builder prices them all exactly the same at $750K. The builder quickly sells five of the houses at the asking price of $750K and notices all five are on the same side of the street – the TE side. Why? It’s not the schools – they’re the same. It’s the taxes, of course. People are wise consumers and take into consideration not only the purchase price, but also the tax burden. The owner of the house on the TE side pays $2,425 less each year in taxes. (see calculation details below)

How much does the developer have to reduce the selling price on the UCF side to make the houses equally attractive? That requires the builder to capitalize the tax difference into the selling price. The present value of 25 years of $2,425 dollar payments is about $40,000. Thus, the developer has to reduce the selling price of the UCF homes by $40,000 to $710,000 so all the houses are equally attractive.

A year later, all 20 owners are at a block party. One of the TE residents says to a UCF resident, “Our school district is managed better because our millage rate is lower and we pay $2,425 less in RE taxes.” The UCF resident replies, “Not true; I’m getting the same great education for my kids and paying the exact same monthly amount to live here; you may pay $2,425 less in RE taxes, but I pay $2,425 less in mortgage (P&I) payments because of the lower purchase price”. Thus, taxes are capitalized into the selling price of homes and millage rates are a meaningless indicator of school district management and tax fairness.

Market Value: $750,000
Assessed value: $412,500 (based on the7/1/10CLR of 0.55)
TE School Tax: $7,695
UCFSchoolTax: $10,119

1. The builder has another way to make houses on both sides of the street equally attractive. Instead of reducing the selling price by $40,000, the builder could keep the selling price the same at $750K, but add $40,000 worth of upgrades (kitchen, patio, landscaping, etc.) to the UCF houses. Thus, you’ll find that the buyer, for the same selling price, can get “more” house in a high tax rate district. (yes, I know this seems counter intuitive)

2. For an interesting study of the effect of taxation and school quality on home prices see:
Homes, Taxes, and Schools: The Effects of School District Rankings and Property Tax Rates on Property Valuations in Richmond Heights,Missouri

T/E School District Teacher Contract Update … Special Meetings to Consider Fact Finder’s Report

Back on June 19, the contract negotiations between the T/E School District and the teachers union, Tredyffrin Easttown Education Association (TEEA) reached an impasse and both sides requested that the PA Labor Relations Board (PLRB) assign it to a ‘Fact Finder’. The neutral third-party was to review the proposals of TESD and TEEA and then make a recommendation.

On June 30, the contract deadline for the T/E teachers came and went with no new contract signed. As of July 1, the school district and the teachers union, TEEA entered the ‘status quo period. Status quo freezes the teacher’s salary at the 2011/12 salary until a new contract is signed. The teachers continue to receive their salary at the current rate until either (1) a strike or lockout within the terms the 1992 Act 88 or (2) they enter into a new contract. The teachers health care benefit plan remains intact (based on the expired contract term) during the status quo period.

The Fact Finder’s report was issued on July 30 and TESD and TEEA has 10 days to notify PLRB as to whether they accept or reject the report. The School Board and Administration are expressly prohibited from making any statements about the Fact Finder report until after PLRB releases it for publication. But PLRB will only release it for publication after either or both sides formally inform the PLRB that they are rejecting the report.

Here’s what I don’t understand – the School Board is holding two special meetings (August 9 and August 23) to consider the Fact Finder’s report. If the School Board is prohibited from making statements until the report is released and they only release it if one or both sides reject the report, how is it then possible that the School Board can now have special meetings to consider the report? Jeez, I must be missing something here on this process. Another question … is TEEA likewise prohibited from discussing the Fact Finder’s report. Keith Knauss, if you are reading Community Matters, can you help me understand how this process works.

I am curious, so I will attend this week’s special meeting on Thursday at 8 PM in the Tredyffrin Easttown Administration Office, 940 W. Valley Road, Wayne, PA.

TE School District … Teacher Contract Costing

Keith Knauss, Unionville-Chadds Ford School District school board member, and regular contributor to Community Matters, has written ‘TE Contract Costing’ that may help us all better understand the teacher-school board contract negotiations process and the reasons for certain decisions. I thank Keith for his research and for sharing the information with us. I have provided an overview below along with my comments. (If you have a problem reading the numbers in the tables, click on the graphic and a larger version will open in a new window.)

In his opening remarks, Knauss states …

“ … Understanding contracts has taken on new importance since Act 1 of 2006. Previous to Act 1, school boards could negotiate contracts and raise taxes to whatever level was necessary to balance the budget. Since Act 1, many districts have had to, with great reluctance, reduce staff and programs to keep budgets within the limits of the ‘cap’.”

Employee compensation is the major factor determining the size of a school district budget and, subsequently the real estate tax rate increase. If the District budget is to be balanced under the restrictions of Act 1, close attention must be paid to the terms of the contracts.

In the following table, Knauss presents the TE offer summary – the initial 1/9/12 offer by TEEA, the TE School Board 2/9/12 offer and TEEA 6/18/12 offer. The table indicates the average teacher compensation and taxpayer impact. According to Knauss, “The percentage increase in Average Teacher Compensation is more than the percentage increase of Local Tax Impact for 2 reasons … state subsidies and attrition.”

The following table reviews the salary and benefit packages of TE teachers. Krauss provides the approximate compensation (salary and benefits) for the average T/E teacher using the current teachers contract. The numbers are supplied by the District or are multiplications of the salary and the appropriate rate (PSERS and FICA).

Knauss presents the following Salary and Benefit table, offering that the “… Total Teacher Compensation is a straightforward multiplication of the Average Teacher Compensation and the number of Employees. Total Teacher Compensation is the money taken from the taxpayers (local and statewide) for the services provided by TE teachers.”

Here is an interesting graphic from Knauss, indicating the funding sources for teacher compensation. The major source of funding – local taxes and a secondary source of funding is from state and sales tax for half of PSERS and half of FICA.

Krauss looks at the effect of any contract settlement on the T/E taxpayers, and whether it can be financed within the Act 1 limits. He looks at two different costing methods – “One method looks at the total cost of the contract to all taxpayers, local and statewide; the other method looks at the cost of the contract to the local taxpayers to reflect the local tax impact of any other offer by ‘backing out’ the statement reimbursement for PSERS and FICA.”

The Local Tax Impact is calculated by “backing out” the state contributions to FICA and PSERS. Notice that the state contributes $3.0M in subsidies to lessen the Local Tax Impact.


When reviewing a teacher contract offer, Knauss supports the use of the following criteria:

  • Is the offer economically sustainable under Act 1 limits?
  • Are the compensation increases of the offer in line with the current economic climate?
  • Is the compensation appropriate to attract and retain employees of quality?

Knauss answers a question that many have wondered … what happens if the teachers and the school board cannot reach a settlement? Due to substantial differences between TEEA and TE School Board, the union requested fact-finding by the PA Labor Relations Board. The independent fact finder will review both TEEA and TESD proposals and then make recommendations … however, remember the recommendations are non-binding.

The current teachers’ contract ends on Saturday, June 30. If an agreement is not reached, the teachers enter the “status quo” period, meaning that they continue to teach … to the expired contract. The teacher’s benefits and salary remain the same as in the expired contract. It is obvious that the School Board would not want an extended ‘status quo’ status for the teachers because it precludes any change to heath care benefits, compensation, etc. Knauss points out, that although the teacher compensation is frozen at its current level in ‘status quo’, legally the District must absorb any increases due to PSERS contributions or healthcare.

However, the situation is different from the teachers’ standpoint. During better economic times, the teachers would not want their contract settlement in ‘status quo’ state because working under the expired contract would mean that they would receive no additional compensation for years of service increase. But what choice do the teachers have?

According to TEEA website, the teacher’s last offer included a reduction in health care benefits and salary freeze for the first year. In their rejection of the union’s offer, the School Board instead asked the teachers to take a compensation reduction of $8,000 per teacher – which equates to as much as 13% for some teachers. There is little surprise that TEEA rejected that District’s offer, opting instead to go to the PA Labor Board. Why would the teachers want a new contract … status quo also keeps their current salary intact and preserves their current benefit package intact.

Knauss provides a multi-year analysis, assuming status quo and average compensation. He presents his analysis in several slides, giving us an idea of what certain scenarios would mean to the average taxpayer. To read Keith’s full report, click here.

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