BOARD GAMES: Dear F.U.S.E. Members…

I was surprised to find myself highlighted in your last union newsletter. At issue were comments I made at the last Board of Education meeting; comments that were clearly misinterpreted by many of the people who heard me that night.

It is true that I am critical of the last union contract signed in 2011. However, I do not blame the Union for the school district’s current fiscal difficulties. What Mr. Daly missed in his letter to you – and this should not be a surprise since he wasn’t there and didn’t hear me speak – was that I blamed the process that brought us that contract.

At the time your last contract was being negotiated, the State government was working to enact a property tax cap. This cap put a 2% ceiling on annual property tax increases unless residents vote to override that with a 60% majority vote. Any contract discussions should have contemplated how this would affect the money we have to spend. But because the school administration does not do a multi-year budget forecast, all the parties at the table were flying blind in their talks. They had no idea what was about to hit us.

The contract agreed to by the District and the Union included a 2.1% wage increase in 2012-13 and a 2.5% wage increase in 2013-14 above the step increases already included in the contract. Those step increases cause wages across the district to rise roughly 3% every year. It is true that each individual member sees his or her salary increase 9% once every three years. That averages to 3% per year. To the extent that some people see the step increase in year 1, others in year 2, and still others in year 3, on average it results in the District’s wages rising roughly 3% across the board every year.

Let’s go back to the 2011-12 budget and grow wages along two paths: the first path with only step increases and the second path with step increases plus the additional wage increases negotiated in that contract. In 2012-2013 the additional wage increases added $2.6 million to the budget. In 2013-14, the current budget being discussed, the additional wage increases add $6.0 million to the budget. Those would have been the additional cost increases if staffing levels were kept flat.

The table below compares how the salaries would have increased in each of the two years under the two paths: step increases only and step plus wage increases. The bottom line reveals the maximum increase in tax revenue under the property tax cap. All figures are in millions of dollars.

As you can see, the step increases alone consume all of the property tax increases allowable under the cap. The additional wage increases caused our costs to exceed the growth in tax revenue.

When costs grow faster then revenues, you either need to change the way you do things to be more productive or you need to cut people. Changing our work practices takes time and planning and, as noted above, nobody saw this coming because they don’t do multi-year budget forecasting. So, when presented with a multi-million dollar shortfall, the administration cut people: about 27 positions in the current year and another 44 positions projected for next year.

I am very unhappy about these staffing cuts and you should be too. They could have been avoided had the last contract been structured differently.

Would you have voted for the contract if you knew that it would result in the layoffs of your colleagues and the shifting of work to lower-cost hourly workers who are not properly trained to perform your duties?

What I said at the Board of Education meeting was that all parties to the negotiations should have the numbers at their disposal so they can have an honest and open discussion about how the tax cap affects our ability to pay for staff. And while I specifically mentioned the union contract, these discussions must also include ways to cut administrative overhead. The 2012 Citizens Advisory Committee report had some suggestions for cutting costs at the Administration level, and I encourage the Union negotiating team to use that report as a resource.

Here are my suggestions for moving forward:

1. Start formal discussions about the next contract now. We have one year left on the current contract and there is no reason to wait to start planning for the next one.
2. Have the Administration create a baseline 3-5 year budget forecast based on projected 2013-14 staffing levels. This forecast would include expected wage increases from the steps and benefit increases based on historical trends.
3. Create multiple “what-if” scenarios from that base case, including the prospect for breaching the tax cap.
4. Be creative in reducing costs. Flexing work hours, changing individual responsibilities, and reducing “soft benefits” can make a big impact on our cost trends.
5. Consider presenting two contracts to F.U.S.E members for vote: one would have the annual school budget increasing in line with the tax cap which would mean cost sharing by employees and administration, and the other would assume residents vote to breach the tax cap to fund additional wages and benefits, with the full knowledge that if voters refuse to breach the cap there would be additional layoffs.

If we are going to protect the integrity of the school system, we need to change the way we go about our business. That will have to begin with the people in charge of making these decisions having an honest conversation about our situation with all of the relevant facts at their disposal.

Adam D. Egelberg, CFA

adamegelberg@gmail.com