Archives for category: Cuts and layoffs

from Bloomberg, a useful list:

  1. Giving out raises faster than revenues are growing.
  2. Giving out raises and increasing benefits when revenues are falling.
  3. Giving out raises and benefits retroactively.
  4. Allowing employees to cash out unlimited amounts of sick leave when they retire.
  5. Providing lifetime health care for retirees.

In San Jose, these mistakes have resulted in a sharp drop in number of public employees per 1000 residents:

(click on chart to enlarge)

The basic issue we face is simple arithmetic:

Taxes are capped at two percent, but the contract promises 4.

According to an estimate provided by the Assistant Superintendent, under the new contract the average teacher in Irvington will receive roughly a 4% increase in compensation each year until June 2016 next school year.*

Four is not two. That is the problem.

Although “four is not two” is obvious, percent change is not. With percent change, a number that sounds “small” can actually be “large” if it represents a large percent change (and vice versa).

Here is the way I’ve started to think of it:

Under the Irvington contract, if you pay a teacher $100K this year, you have to pay him or her $104K next year, on average.

That is a 4% increase, but we are capped at 2, so you have to find $2K in cuts to ‘pay’ for the raise.

Hence: layoffs. Some teachers are laid off so that other teachers can have 4% raises.

But if you paid a teacher $1.00 — just one dollar — for an entire year’s work, you would still have the same problem. The contract would require that he or she be paid $1.04 next year, and you would have to find two cents in cuts to pay for the 4-cent raise. Four isn’t two, and four never becomes two no matter how “small” the numbers you’re dealing with.

In short, the absolute dollar amount doesn’t matter; it’s the percent change that counts. So the problem isn’t that Irvington teachers are earning “too much;” the problem is that the yearly increase in their compensation is twice the tax cap. The increases are increasing too fast. 

THAT is the issue, and we can’t ‘cut’ our way out of it.

Yes, we can close Main Street School and potentially save a great deal of money. But in terms of the tax cap, closing Main Street School is a one-time deal. We wouldn’t need layoffs the year we closed Main Street, but the very next year we’d be back to square one because teachers are still getting 4% increases, and four isn’t two. To my knowledge, there’s no provision in the law allowing districts to ‘bank’ big savings in one school year to apply against the tax cap the next year. **

Yes, we can raise class size and save money, but that, too, is a one-time bonus to the budget. We would avoid layoffs that year, but the next year we’d be back to cutting.

Yes, we can cut electives. Again: a one-time bonus.

In each of these cases, cuts reduce spending, but they don’t fix the rate of increase. As long as we have a union contract in place that guarantees average annual increases of 4%, we can’t meet the tax cap without layoffs. The contract is funded by layoffs.

The logic of percent change also means that encouraging older teachers to retire so we can hire much less costly young teachers actually makes the problem worse because new teachers receive Step increases every year (usually 3%), while older teachers don’t.

We have only two possible solutions:

  • Persuade the union to agree to cap raises at 2%
  • Raise taxes by roughly 5 to 6% every year (a 4% budget increase is a 5 to 6% tax increase because of tax certs.)

It’s conceivable there is a third option: generate enough revenue outside of the tax levy to make up the shortfall. Perhaps parents could fund raise as they do in California (where property taxes are much lower and must be shared with all schools in the state – very different situation) or the district could rent out Main Street School and increase the rent enough each year to make up the shortfall —- ?

* update 5/26/2012: Looking at the terms of the contract again, I’m wondering whether 4% is too low an estimate for the year after next, when the one-year freeze on “increments” (steps) comes to an end.

** Apparently you can “bank” a savings from year to year up to 1.5% (of the budget you would have been allowed under the cap? Not sure; I’ll look it up. I don’t know how the sale of property applies to the budget.) The principle remains the same, however. If you bank a savings, you must use it to pay 4% compensation increases the next year, and the problem begins anew.

What people who do not have children in the schools pay
to educate the children of people who do
How we got here
4 is not 2
Budget vote
Core Knowledge: curriculum & property values