Feature

Trimming Costs in Personnel & Health Care

A suburban school district pursues two promising approaches for preventing employee expenses from spiraling upward by Ronald D. Valenti

Even in the best of times, budget development in a school community poses an enormous challenge. But these times are hardly normal. Global markets are shaken badly. Our nation’s economy is in recession. State legislatures are seeking sharp reductions in the current fiscal year.

 

Months of financial turmoil likely will make 2009 the ugliest year in memory for school officials to meet the three-part budget test — delivering quality education programs in a cost-effective manner while remaining sensitive to taxpayers’ ability to pay. The old rules no longer apply.

 

Across-the-board budget cuts and even more draconian measures, such as the elimination of interscholastic sports programs and reductions in student transportation, will not be sufficient to meet the longer-term demands of cost containment and lowered property taxes.


ValentiRonald Valenti, retired superintendent of the Blind Brook-Rye, N.Y., district, sees potential cost savings in differential staffing and caps on heath care benefits.



The challenge for 2009-2010 and the years to follow requires systematic structural change in the way we organize schooling, particularly in the once untouchable areas of personnel and employee benefits, which now command approximately 70 percent of school spending.

When asked why he robbed banks, Willie Sutton shot back, “Because that’s where the money is!” In this unforgiving environment of fiscal accountability and taxpayer resistance, school officials must consider rolling back personnel and employee benefits because that’s where the money is, while not retreating on instructional integrity and program quality.

Cost Containment
School officials and policymakers can employ two promising approaches. The first is the differential staffing model that adds part-time teacher aides to the current mix of full-time teacher aides and teaching assistants. The educational and supervisory benefits of this model will be examined, as well as its reduced costs, specifically for health care.

Second, a partnership arrangement negotiated with teachers and administrators will show how the collective bargaining model can achieve financial sharing of future health care increases in one of the fastest-growing components of school district budgets.

In both models, the core emphasis is on reaching beyond short-term, cosmetic fiscal adjustments and institutionalizing more permanent, structural changes that reduce future health care costs to school districts.

Traditionally, Blind Brook-Rye, a 1,500-student, high-performing and high-wealth school district in Westchester County, N.Y., had been appointing full-time teacher aides when a student’s academic, emotional or behavioral needs warranted additional assistance on the child’s individualized education plan. This automatic, near-Pavlovian response from the special education department was partly attributable to the district’s unstable leadership (three directors were appointed within three years) and the enormous pressures to settle matters to parents’ satisfaction, absent an impartial hearing or legal action. Under siege, the district yielded to parental threats by resorting to full-time special education teacher aides.

These numbers ballooned to 30 by summer 2003, costing nearly $900,000 in salaries and employee benefits, including full health care. In 2003, this expense alone accounted for nearly one-third of the $3 million special education budget, whose growing tab constituted about 12 percent of the entire school budget.

When I was appointed superintendent in July 2003, with school board approval, we put in place a short-term attrition plan to reduce full-time aides. This traditional cost-saving response of reduction by attrition was intended to minimize the political impact of a change in culture, while we recruited new and more permanent leadership for special education.

Nearly three years later in spring 2006, the number of full-time aides was reduced by 10, a remarkable 33 percent reduction that saved well over $250,000 in salaries, and health and benefit costs.

Adaptable Staffing
Although reduction by attrition worked modestly well, we needed to do better.

Fortunately, a new and invigorated special education leadership team, following the dictates of No Child Left Behind, concluded correctly that the instructional needs of special-needs students differed substantially from their behavioral needs, and thus required a more adaptable staffing design.

Additionally, the escalating mandate to provide safety and security in our post-9/11 environment, combined with a growing elementary school enrollment, prompted requests for greater versatility in supervising general and special education children, particularly during their morning arrivals, afternoon departures and lunchtime recess periods.

Both of these forces (differential staffing and flexible supervision), when viewed through the lens of fiscal stewardship, formed the foundation for a paradigm shift that began with the 2007-2008 school year. This rearrangement went from having full-time teacher aides only to a blend where teaching assistants complemented both full-time and part-time teacher aides to constitute an integrated services approach.

While the political challenges of confronting union resistance and parental opposition deserve more extensive treatment, let it be said the center held because the district’s goals were both compelling and transparent. Simply stated, children’s interests trumped all others. However, the process was not pretty.

Thankfully, after extensive discussions with the school board and special education directors, the administrative team stuck to their conviction that differential staffing was both educationally and fiscally more sound than the current design. Nonetheless, the drumbeat of public criticism from the civil service union, representing teacher aides, and some special education parents was relentless at each public budget hearing between March and May 2007 when the public voted on the proposed budget. Several influential parents convinced our Parent Teacher Association to take a neutral stand and not support the school budget as it traditionally had done.

Unfortunately, battle lines were drawn. Attrition is a safe alternative commonly used and accepted by the public sector. But restructuring, even when the educational merits outstrip the downside of personnel reductions, is far easier to achieve in the private sector.

Despite the organized opposition and PTA neutrality, the budget passed with nearly 70 percent public approval. In my judgment, taxpayers were listening and supported our attempts to subordinate special interests to cost-effective quality schooling. But it was an uphill climb with a heavy backpack all the way.

Differential staffing best serves students’ instructional and behavioral requirements. Flexible supervision, delivered by part-time aides whose schedules are not regulated by suffocating contract regulations, best serves their safety and security needs.

The replacement of full-time teacher aides with part-time aides also made fiscal sense. First, it increased the productivity of each full-time equivalent position by 30 percent. This was due to the increase in the number of weekly work hours per position, which went from 30 hours (one full-time aide) to 39 hours (two part-time aides). Therefore, two aides, each working 19 hours per week, replaced one full-time 30-hour aide. By increasing the hourly pay rate for part-time aides to $20 per hour, $7 more than the original $13 hourly compensation, a large untapped pool of qualified candidates emerged. Second, this restructuring also eliminated the health care costs of 10 full-time positions, generating a net savings of more than $200,000 in the school budget.

Financial Gains
While the interests of students remained primary throughout this change process (and continue to do so), additional benefits to students should not preclude taxpayer benefits. In fact, if there is an overriding 21st-century national imperative for school leaders and policymakers, it is precisely to formulate programs that enrich student learning while reducing taxpayer burden.

The initial salary savings generated by replacing full-time with part-time positions was $71,000. More dramatic savings, totaling $130,000, were realized in reduced benefits (health care, pension, etc.) generated by transforming full-time into part-time positions.

Aggregate savings of $200,000 for a district with a $36 million budget was not inconsequential because it represented nearly 10 percent of our year-to-year annual increase ($2.1 million) and nearly 1 percent of our 2007 tax levy hike (5.4 percent).

The school district accomplished its initial goals. The differential staffing model strengthened program capacity, increased the productivity of teacher aides and reduced costs. The district will continue to evaluate the longer-term impact on program quality and fiscal stewardship.

Bargaining Health
Historically, business and industry led the way in inaugurating employee benefits such as retirement plans, sick leave and insurance coverage. It was not until 1950 that public education, due to the low wages generally paid to teachers, supplemented salaries with fringe benefits. Because these benefits were eventually tax-free, together with good working conditions and improving salaries, they increased job satisfaction and became motivators of efficiency and heightened productivity.

In the past decade, however, the costs of Social Security, pension contributions and medical insurance have increased significantly. Since 2003, the health premium costs of Blue Cross/Blue Shield, a major health provider for government employees, have surged 48 percent. In other words, a family plan that was $9,737 in 2003 is $14,379 now. Social Security contributions, up to a maximum of $97,500, were 15.3 percent of salary in 2008 (7.65 percent by employer, 7.65 percent by employee). This overall escalation in benefit costs now has shifted the entire collective bargaining process away from salary discussion to a negotiation of benefits.

Because school districts have no control over certain benefits, such as Social Security, and only limited control over pension and retiree expenses, the negotiating field has focused on health insurance, which is now the new 800-pound elephant in the room.

Initially, most districts paid 100 percent of all employee health premium expenses. Over time, however, school officials gained a small foothold by demanding limited dollar contributions from each employee and eventually negotiating percentage contributions toward premium costs. A review of percentage contributions throughout Westchester and Rockland counties in New York state revealed that of the 55 school districts reporting, 45 required employees to make a percentage or dollar contribution. Of those that negotiated a percentage, the contribution ranged from 5 percent to 15 percent of the premium costs.

With burgeoning increases in health premium expenses, however, even this incremental approach has proved inadequate. In negotiations with the Blind Brook-Rye Teachers Federation, the school board sought a more dramatic approach, insisting all future premium increases be shared equally by teachers and school district.

The board’s plan was simple. Freeze the current percentage contribution at 11.5 percent of the 2007 premium. For a family plan, the teacher contribution was $1,693 (11.5 percent of $14,722). Any additional costs over the duration of the four-year agreement would be equally borne by the school district and teacher. Assuming the average annual increase is 10 percent, a teacher’s rate of contribution would escalate proportionally.

For example, if the family plan premium in New York increased by 40 percent from $14,722 in 2007 to $20,610 in 2011, teachers would handle 50 percent of the annual increase beginning in 2008 and pay over that period the annual base premium of $1,693 in addition to one-half of the increase each year.

Based on this partnership formula, the school district’s contribution to health insurance would be considerably lower over the four-year period. This formula, originally negotiated for the largest bargaining unit of teachers and teaching assistants, will become a major demand when negotiations begin later this year with the smaller administrative and civil service units.

Both approaches — differential staffing, which reduces the number of employees receiving full-time benefits, and collective bargaining, which increases the employee’s share of health care costs — promise to help districts control costs while maintaining solid support for the education of our students.

Ron Valenti, retired superintendent in Blind Brook-Rye, N.Y., is assistant dean of graduate education and adjunct professor of school finance at the College of New Rochelle in New Rochelle, N.Y. E-mail: rvalenti@cnr.edu