Teacher 'buy-outs' a partial solution to budget woes?
The Perham-Dent School Board went behind closed doors Dec. 10 to talk strategy regarding the upcoming teacher salary negotiations.
"Buying out" higher paid, veteran teachers, was one of the topics for the closed meeting.
Another two-year contract will be on the bargaining table in the coming months. With the school facing about $800,000 in cuts over the next year-and-a-half, the contracts are certain to be closely scrutinized this year.
A second meeting in a week, dedicated specifically to budget cuts and revenue, was held by the Perham-
Dent School Board on Dec. 10.
The board is proceeding cautiously, and will be budgeting in 2009 for a zero percent increase in state funding.
Enrollment will be projected conservatively, at a loss of 50 students. Based on per pupil aid, that represents a reduction in revenue of more than $300,000.
Under the conservative scenario, the school will try to retain reserves of about $100,000--which is only one percent of what the school's auditors recommend.
"Our objective is to offer the best education we can, while staying out of statutory operating debt," said Superintendent Tamara Uselman in an interview.
One of the critical unknown factors is what the state will do, noted Uselman. Facing a huge shortfall, there is serious concern that the state will begin "unalloting" aid to schools--as much as 10 percent, based on preliminary discussions in St. Paul.
"If so, our budget will be no good and we'll have to start all over," said Uselman.
After the public meeting concluded, the board met in private to discuss the contract negotiations.
Though the board members and administrators could not reveal information discussed at the closed-door, strategy meeting, it is safe to predict that the board will be drawing a conservative line when negotiating salary contracts with teachers and support staff.
Teacher "buy-outs:" is one expense cutting strategy that was discussed behind closed doors.
The concept is simple: Through financial incentives, convince experienced, higher-paid teachers to resign or retire--and replace them with less expensive, younger teachers.
It is a delicate tactic, because any money used to "buy off" teachers must come from the general fund--which is woefully small in Perham. Also, the school needs to save more money than it spends on buy-off incentives or the strategy is not worth it.
Under state law, a school is allowed to spend up to $17,000 per teacher as an incentive to retire or resign.
"It is highly unlikely we would be able to solve our budget concerns through attrition (retirement of staff), though what is true in all businesses is true in schools: you save money when more expensive labor is replaced with less expensive labor," stated Uselman. "So, each, retirement would help the budget, yet we do not believe we have a large number of staff who have met or will meet the rule of 90. This is when an employee's age plus years of service is equal to 90."
In fact, Uselman estimated that the number of teachers in Perham-Dent who would qualify would be about a half-dozen.
There is also a provision that a younger teacher, with 15 years of experience, could receive an incentive to resign. But they would not qualify for full retirement benefits, and they would have to leave the profession for at least three years.
"While it is true a teacher could retire prior to reaching the rule of 90, it is probably not financially feasible for most to do so unless they are planning another career in a different field," explained Uselman. "In this case, the teacher postpones drawing Teacher Retirement Association pension for a few years. If the teacher retires before reaching the rule of 90, that teacher would have a pension retirement that may be half of what it would be had they worked a few more years and reached the rule of 90. Thus, it is often more attractive to work the additional years rather than receive a more minimal pension."
The Teacher Retirement Association is a fund that employees and employers pay in to over the years of service in public education. Teachers pay in to it, so do principals, superintendents and the employing school district. This money creates a pension fund.
"The board recognizes that the contributions of senior staff have been very valuable over the years and it is obvious that the district has financial needs and very serious budget issues," stated Uselman. "Thus, the board is open to creating severance packages... In the end, retirement has to be something the teacher desires and can afford. The severance may be the key to making that work for some senior staff."
Eight school staff first on layoff list
The Perham-Dent School Board is acting fast in its difficult task of cutting $300,000 before the end of the school year.
Eight layoffs were expected at the Dec. 17 school board meeting, all of them support staff.
Kitchen staff who will be laid off are Cindy Huwe, Rose Carey and Barbara Lofren.
Cleaners Pamela Freiberg and Karen Reese will be laid off Jan. 5; as well as secretary Kathryn Wangsness.
Done on June 15 will be secretaries Melissa Graham and Deb Januszewski.
The board was scheduled to approve these layoffs Dec. 17.