Employee Contract Costing&
Budget Implications
Keith Knauss
June 2012
Rev. 2/2/13
Guideline
Keep employee compensation increases (salary plus benefits) at or below real
estate tax increases
Said another way-
If you’re raising taxes by 3% this year then employee compensation should increase
no more than 3%
Contract Costing
• Here come the numbers
Teacher Compensation
• Approximately half of the budget
• Sets precedence for administrative and support staff compensation
Salary and Benefits2012-13 2012-13
Employees (FTE) 325.3 325.3
Salaries-$ -
- - - -
- -
-
Total Salaries Costs 25,442,511 78,212
Supplemental Contracts 664,205 2,042
BenefitsPSERS 3,116,549 9,581
PSERS Rate 12.36% 12.36%
FICA/Medicare 1,946,352 5,983 Medical/Dental 8.00% 3,765,741 11,576 Tuition 270,000 830
Worker's & Unemployment Compensation 95,000 292
Other - -
Total Benefits Costs 9,193,642 28,262
Total Costs 35,300,358$ 108,516$
Total Teacher Compensation Average Teacher Compensation
Funding SourcesLocal Real Estate Taxes
$32.8MState Taxes
$2.5M
Teacher Compensation$35.3M
Local Tax Impact vs. Total Teacher Compensation
$2.5M
2012-13 2012-13 2012-13Employees (FTE) 325.3 325.3 325.3
Salaries-$ -
- - - - -
- - -
-
Total Salaries Costs 25,442,511 25,442,511 78,212
Supplemental Contracts 664,205 664,205 2,042
BenefitsPSERS 1,558,275 3,116,549 9,581
PSERS Rate 12.36% 12.36% 12.36%
FICA/Medicare 973,176 1,946,352 5,983 Medical/Dental 8.00% 3,765,741 3,765,741 11,576 Tuition 270,000 270,000 830
Worker's & Unemployment Compensation 95,000 95,000 292
Other - - -
Total Benefits Costs 6,662,192 9,193,642 28,262
Total Costs 32,768,908$ 35,300,358$ 108,516$
Local Tax Impact Total Teacher Compensation Average Teacher Compensation
2012-13 2013-14 2012-13 2013-14 2012-13 2013-14Employees (FTE) 325.3 325.3 325.3 325.3 325.3 325.3
SalariesBase Salaries 24,620,112$ 25,214,801$ 24,620,112 25,214,801$ 75,684$ 77,512$ Step Movement (Vertical) 2.14% 532,571 538,370 538,370 - 1,655 Matrix Increase 1.00% 97,591 257,532 257,532 - 792 Education Increase (Horizontal) 0.97% 244,928 244,584 244,928 244,584 753 752 One Time Bonus $1,000 227,710 325,300 227,710 325,300 700 1,000 Attrition Savings 1.00% (280,401) (252,148) -280,401 (252,148) (862)
- - - Total Salaries Costs 25,442,511 26,328,438 25,442,511 26,328,438 78,212 81,711
% Increase 3.48% 3.48% 4.47%
Supplemental Contracts 5% 664,205 697,415 664,205 697,415 2,042 2,144
BenefitsPSERS 1,558,275 2,177,763 3,179,352 4,452,248 9,774 13,687
PSERS Rate 12.36% 16.75% 12.36% 16.75% 12.36% 16.75%
FICA/Medicare 973,176 1,007,063 1,946,352 2,014,126 5,983 6,192 Medical/Dental 8.00% 3,765,741 4,067,000 3,765,741 4,067,000 11,576 12,502 Tuition 270,000 270,000 270,000 270,000 830 830 Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 292 292 Other - - - - - -
Total Benefits Costs 6,662,192 7,616,826 9,256,445 10,898,374 28,455 33,503
Total Costs 32,768,908$ 34,642,680$ 35,363,161$ 37,924,228$ 108,709$ 117,357$
% Increase 5.72% 7.24% 7.96%
Local Tax Impact Total Teacher Compensation Average Teacher Compensation
Hypothetical Contract Offer EvaluationStep + 1% Matrix + $1,000 Bonus +5% Supplementals
For an explanation of Step, Matrix and Educational increases see Appendix A
2012-13 2013-14 2012-13 2013-14 2012-13 2013-14Employees (FTE) 325.3 325.3 325.3 325.3 325.3 325.3
SalariesBase Salaries 24,620,112$ 25,214,801$ 24,620,112 25,214,801$ 75,684$ 77,512$ Step Movement (Vertical) 2.14% 532,571 538,370 538,370 - 1,655 Matrix Increase 1.00% 97,591 257,532 257,532 - 792 Education Increase (Horizontal) 0.97% 244,928 244,584 244,928 244,584 753 752 One Time Bonus $1,000 227,710 325,300 227,710 325,300 700 1,000 Attrition Savings 1.00% (280,401) (252,148) -280,401 (252,148) (862)
- - - Total Salaries Costs 25,442,511 26,328,438 25,442,511 26,328,438 78,212 81,711
% Increase 3.48% 3.48% 4.47%
Supplemental Contracts 5% 664,205 697,415 664,205 697,415 2,042 2,144
BenefitsPSERS 1,558,275 2,177,763 3,179,352 4,452,248 9,774 13,687
PSERS Rate 12.36% 16.75% 12.36% 16.75% 12.36% 16.75%
FICA/Medicare 973,176 1,007,063 1,946,352 2,014,126 5,983 6,192 Medical/Dental 8.00% 3,765,741 4,067,000 3,765,741 4,067,000 11,576 12,502 Tuition 270,000 270,000 270,000 270,000 830 830 Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 292 292 Other - - - - - -
Total Benefits Costs 6,662,192 7,616,826 9,256,445 10,898,374 28,455 33,503
Total Costs 32,768,908$ 34,642,680$ 35,363,161$ 37,924,228$ 108,709$ 117,357$
% Increase 5.72% 7.24% 7.96%
Local Tax Impact Total Teacher Compensation Average Teacher Compensation
Example Contract Offer EvaluationStep + 1% Matrix + $1,000 Bonus + 5% Supplementals
Delta
2012-13 2013-14325.3 325.3
75,684$ 77,512$ - 1,655 1,655 - 792 792 753 752 (1) 700 1,000 300
(862) 862
- - 78,212 81,711 3,499
4.47%
2,042 2,144 102
9,774 13,687 3,913 12.36% 16.75%
5,983 6,192 208 11,576 12,502 926
830 830 -
292 292 - - - -
0
28,455 33,503 5,047
0
108,709$ 117,357$ 8,648$
7.96%
Average Teacher Compensation
Example Contract Offer EvaluationStep + 1% Matrix + $1,000 Bonus + 5% Supplementals
Salary Increase
PSERS Increase
Compensation Increase
2012-13 2013-14 2012-13 2013-14 2012-13 2013-14Employees (FTE) 325.3 325.3 325.3 325.3 325.3 325.3
SalariesBase Salaries 25,250,274$ 25,214,801$ 25,250,274 25,214,801$ 77,622$ 77,512$ Step Movement (Vertical) 2.14% 538,370 538,370 - 1,655 Matrix Increase 1.00% - 257,532 257,532 - 792 Education Increase (Horizontal) 0.97% 244,928 244,584 244,928 244,584 753 752 One Time Bonus $1,000 227,110 325,300 227,110 325,300 698 1,000
Attrition Savings 1.00% (280,401) (252,148) -280,401 (252,148) (862)
- - -
Total Salaries Costs 25,441,911 26,328,438 25,441,911 26,328,438 78,211 81,711
% Increase 3.48% 3.48% 4.48%
Supplemental Contracts 5% 664,205 697,415 664,205 697,415 2,042 2,144
BenefitsPSERS 1,558,275 2,177,763 3,179,278 4,452,248 9,773 13,687
PSERS Rate 12.36% 16.75% 12.36% 16.75% 12.36% 16.75%
FICA/Medicare 973,153 1,007,063 1,946,306 2,014,126 5,983 6,192 Medical/Dental 8.00% 3,765,741 4,067,000 3,765,741 4,067,000 11,576 12,502 Tuition 270,000 270,000 270,000 270,000 830 830
Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 292 292
Other - - - - - -
Total Benefits Costs 6,662,169 7,616,826 9,256,325 10,898,374 28,455 33,503
Total Costs 32,768,284$ 34,642,679$ 35,362,441$ 37,924,227$ 108,707$ 117,357$
% Increase 5.72% 7.24% 7.96%
Local Tax Impact Total Teacher Compensation Average Teacher Compensation
Contract Offer Evaluation Criteria
• Economically sustainable under Act 1 limits?
• Compensation increases inline with current economic conditions?
• Compensation appropriate to attract and retain quality employees?
2012-13 2013-14 2012-13 2013-14 2012-13 2013-14Employees (FTE) 325.3 325.3 325.3 325.3 325.3 325.3
SalariesBase Salaries 24,620,112$ 25,214,801$ 24,620,112 25,214,801$ 75,684$ 77,512$ Step Movement (Vertical) 2.14% 532,571 538,370 538,370 - 1,655 Matrix Increase 1.00% 97,591 257,532 257,532 - 792 Education Increase (Horizontal) 0.97% 244,928 244,584 244,928 244,584 753 752 One Time Bonus $1,000 227,710 325,300 227,710 325,300 700 1,000 Attrition Savings 1.00% (280,401) (252,148) -280,401 (252,148) (862)
- - - Total Salaries Costs 25,442,511 26,328,438 25,442,511 26,328,438 78,212 81,711
% Increase 3.48% 3.48% 4.47%
Supplemental Contracts 5% 664,205 697,415 664,205 697,415 2,042 2,144
BenefitsPSERS 1,558,275 2,177,763 3,179,352 4,452,248 9,774 13,687
PSERS Rate 12.36% 16.75% 12.36% 16.75% 12.36% 16.75%
FICA/Medicare 973,176 1,007,063 1,946,352 2,014,126 5,983 6,192 Medical/Dental 8.00% 3,765,741 4,067,000 3,765,741 4,067,000 11,576 12,502 Tuition 270,000 270,000 270,000 270,000 830 830 Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 292 292 Other - - - - - -
Total Benefits Costs 6,662,192 7,616,826 9,256,445 10,898,374 28,455 33,503
Total Costs 32,768,908$ 34,642,680$ 35,363,161$ 37,924,228$ 108,709$ 117,357$
% Increase 5.72% 7.24% 7.96%
Local Tax Impact Total Teacher Compensation Average Teacher Compensation
Example Contract Offer EvaluationStep + 1% Matrix + $1,000 Bonus
Economically sustainable under Act 1 limits?
No, the Index plus PSERS exception is currently in the 3% range
Compensation increases inline with current economic conditions? No, local compensation is currently in the 2% range
Compensation appropriate to attract and retain quality teachers?No, compensation is in excess of what is needed
Typical Contract Offers
• Nine additional contract offers will be examined to determine the approximate tax impact
2012-13 2013-14 2012-13 2013-14 2012-13 2013-14Employees (FTE) 325.3 325.3 325.3 325.3 325.3 325.3
SalariesBase Salaries 24,620,112$ 25,214,801$ 24,620,112 25,214,801$ 75,684$ 77,512$ Step Movement (Vertical) 2.14% 532,571 538,370 538,370 - 1,655 Matrix Increase 1.00% 97,591 257,532 257,532 - 792 Education Increase (Horizontal) 0.97% 244,928 244,584 244,928 244,584 753 752 One Time Bonus $1,000 227,710 227,710 - 700 - Attrition Savings 1.00% (280,401) (252,148) -280,401 (252,148) (862)
- - - Total Salaries Costs 25,442,511 26,003,138 25,442,511 26,003,138 78,212 80,711
% Increase 2.20% 2.20% 3.19%
Supplemental Contracts 5% 664,205 697,415 664,205 697,415 2,042 2,144
BenefitsPSERS 1,558,275 2,177,763 3,179,352 4,397,760 9,774 13,519 Medical/Dental 8.00% 3,765,741 4,067,000 3,765,741 4,067,000 11,576 12,502 Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 292 292 Other - - - - - -
Total Benefits Costs 6,662,192 7,604,383 9,256,445 10,819,000 28,455 33,259
Total Costs 32,768,908$ 34,304,937$ 35,363,161$ 37,519,554$ 108,709$ 116,113$
% Increase 4.69% 6.10% 6.81%
Local Tax Impact Total Teacher Compensation Average Teacher Compensation
Example 1Step + 1% Matrix Increase
2012-13 2013-14 2012-13 2013-14 2012-13 2013-14Employees (FTE) 325.3 325.3 325.3 325.3 325.3 325.3
SalariesBase Salaries 24,620,112$ 25,214,801$ 24,620,112 25,214,801$ 75,684$ 77,512$ Step Movement (Vertical) 2.14% 532,571 538,370 532,571 538,370 1,637 1,655 Matrix Increase 1.00% 97,591 97,591 - 300 - Education Increase (Horizontal) 0.97% 244,928 244,584 244,928 244,584 753 752 One Time Bonus $1,000 227,710 227,710 - 700 - Attrition Savings 1.00% (280,401) (252,148) -280,401 (252,148) (862)
0 - - - Total Salaries Costs 25,442,511 25,745,607 25,442,511 25,745,607 78,212 79,919
% Increase 1.19% 1.19% 2.18%
Supplemental Contracts 5% 664,205 697,415 664,205 697,415 2,042 2,144
BenefitsPSERS 1,558,275 2,156,195 3,179,352 4,354,624 9,774 13,386
PSERS Rate 12.36% 16.75% 12.36% 16.75% 12.36% 16.75%
FICA/Medicare 973,176 984,770 1,946,352 1,969,539 5,983 6,055 Medical/Dental 8.00% 3,765,741 4,067,000 3,765,741 4,067,000 11,576 12,502 Tuition 270,000 270,000 270,000 270,000 830 830 Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 292 292 Other - - - - - -
Total Benefits Costs 6,662,192 7,572,964 9,256,445 10,756,163 28,455 33,065
Total Costs 32,768,908$ 34,015,986$ 35,363,161$ 37,199,185$ 108,709$ 115,129$
% Increase 3.81% 5.19% 5.90%
Local Tax Impact Total Teacher Compensation Average Teacher Compensation
Example 2Step Only
2012-13 2013-14 2012-13 2013-14 2012-13 2013-14Employees (FTE) 325.3 325.3 325.3 325.3 325.3 325.3
SalariesBase Salaries 24,620,112$ 25,214,801$ 24,620,112 25,214,801$ 75,684$ 77,512$ Step Movement (Vertical) 2.14% 532,571 - - - Matrix Increase 1.00% 97,591 252,148 252,148 - 775 Education Increase (Horizontal) 0.97% 244,928 244,584 244,928 244,584 753 752 One Time Bonus $1,000 227,710 227,710 - 700 - Attrition Savings 1.00% (280,401) (252,148) -280,401 (252,148) (862)
- - - Total Salaries Costs 25,442,511 25,459,385 25,442,511 25,459,385 78,212 79,039
% Increase 0.07% 0.07% 1.06%
Supplemental Contracts 5% 664,205 697,415 664,205 697,415 2,042 2,144
BenefitsPSERS 1,558,275 2,132,224 3,179,352 4,306,682 9,774 13,239
PSERS Rate 12.36% 16.75% 12.36% 16.75% 12.36% 16.75%
FICA/Medicare 973,176 973,822 1,946,352 1,947,643 5,983 5,987 Medical/Dental 8.00% 3,765,741 4,067,000 3,765,741 4,067,000 11,576 12,502 Tuition 270,000 270,000 270,000 270,000 830 830 Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 292 292 Other - - - - - -
Total Benefits Costs 6,662,192 7,538,045 9,256,445 10,686,325 28,455 32,851
Total Costs 32,768,908$ 33,694,845$ 35,363,161$ 36,843,125$ 108,709$ 114,034$
% Increase 2.83% 4.19% 4.90%
Average Teacher CompensationLocal Tax Impact Total Teacher Compensation
Example 31% Matrix Only
2012-13 2013-14 2012-13 2013-14 2012-13 2013-14Employees (FTE) 325.3 325.3 325.3 325.3 325.3 325.3
SalariesBase Salaries 24,620,112$ 25,214,801$ 24,620,112 25,214,801$ 75,684$ 77,512$ Step Movement (Vertical) 2.14% 532,571 532,571 - 1,637 - Matrix Increase 1.00% 97,591 252,148 97,591 252,148 300 775 Education Increase (Horizontal) 0.97% 244,928 244,584 244,928 244,584 753 752 One Time Bonus $1,000 227,710 227,710 - 700 - Attrition Savings 1.00% (280,401) (252,148) -280,401 (252,148) (862)
0 - - - Total Salaries Costs 25,442,511 25,459,385 25,442,511 25,459,385 78,212 79,039
% Increase 0.07% 0.07% 1.06%
Supplemental Contracts 5% 664,205 697,415 664,205 697,415 2,042 2,144
Benefits
PSERS 1,558,275 2,132,224 3,179,352 4,306,682 9,774 13,239 PSERS Rate 12.36% 16.75% 12.36% 16.75% 12.36% 16.75%FICA/Medicare 973,176 973,822 1,946,352 1,947,643 5,983 5,987 Medical/Dental 8.00% 3,765,741 3,841,056 3,765,741 3,841,056 11,576 11,808 Tuition 270,000 270,000 270,000 270,000 830 830
Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 292 292
Other - - - - - -
Total Benefits Costs 6,662,192 7,312,101 9,256,445 10,460,381 28,455 32,156
Total Costs 32,768,908$ 33,468,901$ 35,363,161$ 36,617,181$ 108,709$ 113,339$ % Increase 2.14% 3.55% 4.26%
Local Tax Impact Total Teacher Compensation Average Teacher Compensation
Example 41% Matrix, 15% Healthcare Contribution (was 10% in 2012-13)
Status Quo
• By law, school districts that cannot reach a contract agreement with their teachers enter a “status quo” period where the District and the teachers are bound by the terms of the expired contract.
• Teachers continue to teach while receiving the same pay and benefits specified by the expired contract.
2012-13 2013-14 2012-13 2013-14 2012-13 2013-14Employees (FTE) 325.3 325.3 325.3 325.3 325.3 325.3
SalariesBase Salaries 24,620,112$ 25,214,801$ 24,620,112 25,214,801$ 75,684$ 77,512$ Step Movement (Vertical) 2.14% 532,571 532,571 - 1,637 - Matrix Increase 1.00% 97,591 97,591 - 300 - Education Increase (Horizontal) 0.97% 244,928 244,928 - 753 - One Time Bonus $1,000 227,710 227,710 - 700 - Attrition Savings 1.00% (280,401) (252,148) -280,401 (252,148) (862)
0 - - - Total Salaries Costs 25,442,511 24,962,653 25,442,511 24,962,653 78,212 77,512
% Increase -1.89% -1.89% -0.89%
Supplemental Contracts 5% 664,205 664,205 664,205 664,205 2,042 2,042
BenefitsPSERS 1,558,275 2,090,622 3,179,352 4,223,479 9,774 12,983
PSERS Rate 12.36% 16.75% 12.36% 16.75% 12.36% 16.75%
FICA/Medicare 973,176 954,822 1,946,352 1,909,643 5,983 5,870 Medical/Dental 8.00% 3,765,741 4,067,000 3,765,741 4,067,000 11,576 12,502 Tuition 270,000 270,000 270,000 270,000 830 830 Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 292 292 Other - - - - - -
Total Benefits Costs 6,662,192 7,477,444 9,256,445 10,565,122 28,455 32,478
Total Costs 32,768,908$ 33,104,302$ 35,363,161$ 36,191,980$ 108,709$ 112,032$
% Increase 1.02% 2.34% 3.06%
Local Tax Impact Total Teacher Compensation Average Teacher Compensation
Example 5Status Quo
Furloughs
• A reduction in staff by dismissing one or more teachers
• Must be for one of 3 reasons and approved by the PDE
• Usually requires the elimination of non-core courses (art, language, music)
• Least senior staff (lowest paid) go first; bumping rules (seniority) apply
2012-13 2013-14 2012-13 2013-14 2012-13 2013-14Employees (FTE) 325.3 320.3 325.3 320.3 325.3 320.3
SalariesBase Salaries 24,620,112$ 24,939,801$ 24,620,112 24,939,801 75,684$ 77,864$ Step Movement (Vertical) 2.14% 532,571 532,571 0 1,637 - Matrix Increase 1.00% 97,591 97,591 0 300 - Education Increase (Horizontal) 0.97% 244,928 244,928 0 753 - One Time Bonus $1,000 227,710 227,710 0 700 -
Attrition Savings 1.00% (280,401) (249,398) -280,401 (249,398) (862)
0 0 - -
Total Salaries Costs 25,442,511 24,690,403 25,442,511 24,690,403 78,212 77,864
% Increase -2.96% -2.96% -0.45%
Supplemental Contracts 5% 664,205 664,205 664,205 664,205 2,042 2,074
BenefitsPSERS 1,558,275 2,067,822 3,179,352 4,177,417 9,774 13,042
PSERS Rate 12.36% 16.75% 12.36% 16.75% 12.36% 16.75%
FICA/Medicare 973,176 944,408 1,946,352 1,888,816 5,983 5,897 Medical/Dental 8.00% 3,765,741 4,067,000 3,765,741 4,067,000 11,576 12,697
Tuition 270,000 270,000 270,000 270,000 830 843
Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 292 297
Other - - - - - -
Total Benefits Costs 6,662,192 7,444,230 9,256,445 10,498,233 28,455 32,776
Total Costs 32,768,908$ 32,798,838$ 35,363,161$ 35,852,841$ 108,709$ 112,714$
% Increase 0.09% 1.38% 3.68%
Local Tax Impact Total Teacher Compensation Average Teacher Compensation
Example 6Status Quo, 5 FTE Furloughs
5 furloughs @ $55K
Demotions
• A reduction in assignment and pay (e.g. 100% to 80%)
• Can be for any number of reasons (economic, decline in course enrollment, curtailment of programs)
• No approval needed from PDE• Can target senior, highly paid staff for
maximum savings while minimizing the negative educational effect to the students
2012-13 2013-14 2012-13 2013-14 2012-13 2013-14Employees (FTE) 325.3 322.3 325.3 322.3 325.3 322.3
SalariesBase Salaries 24,620,112$ 24,914,801$ 24,620,112 24,914,801 75,684$ 77,303$ Step Movement (Vertical) 2.14% 532,571 532,571 0 1,637 Matrix Increase 1.00% 97,591 97,591 0 300 Education Increase (Horizontal) 0.97% 244,928 244,928 0 753 One Time Bonus $1,000 227,710 227,710 0 700
Attrition Savings 1.00% (280,401) (249,148) -280,401 (249,148) (862)
0 0 -
Total Salaries Costs 25,442,511 24,665,653 25,442,511 24,665,653 78,212 77,303
% Increase -3.05% -3.05% -1.16%
Supplemental Contracts 5% 664,205 664,205 664,205 664,205 2,042 2,061
BenefitsPSERS 1,558,275 2,065,749 3,179,352 4,173,229 9,774 12,948
PSERS Rate 12.36% 16.75% 12.36% 16.75% 12.36% 16.75%
FICA/Medicare 973,176 943,461 1,946,352 1,886,922 5,983 5,855 Medical/Dental 8.00% 3,765,741 4,067,000 3,765,741 4,067,000 11,576 12,619
Tuition 270,000 270,000 270,000 270,000 830 838
Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 292 295
Other - - - - - -
Total Benefits Costs 6,662,192 7,441,210 9,256,445 10,492,151 28,455 32,554
Total Costs 32,768,908$ 32,771,068$ 35,363,161$ 35,822,009$ 108,709$ 111,918$
% Increase 0.01% 1.30% 2.95%
Local Tax Impact Total Teacher Compensation Average Teacher Compensation
Example 7Status Quo, 3 FTE Demotions
3 demotions @ $100K
Graphical FormatLocal Tax Impact of Various Proposals
$32,500,000
$33,000,000
$33,500,000
$34,000,000
$34,500,000
$35,000,000
2012-13 2013-14
Year
Tea
cher
Co
mp
ensa
tio
n -
Lo
cal T
ax D
olla
rs
Step + 1% Matrix + $1,000 Bonus +5%Supplementals
Step + 1% Matrix Increase
Step Only
1% Matrix Increase Only
1% Matrix Increase; healthcarecontribution from 10% to 15%
Status Quo
Status Quo, 5 FTE Furloughs
Status Quo, 3 FTE Demotions
2% Trend Line
Financial Gimmicks
1. Use the Reserve Fund
2. Offer an Early Retirement Incentive Plan (ERIP)
Both gimmicks shift the financial burden from the current year to future years – a form of intergenerational wealth transfer
Typical multi-year Analysisstep +1% matrix, 4 years
2012-13 2013-14 2013-14 2013-14 2013-14Employees (FTE) 325.0 325.0 325.0 325.0 325.0
SalariesBase Salaries 24,620,112$ 25,214,801$ 26,003,138$ 26,816,123$ 27,654,525$ Step Movement (Vertical) 2.14% 532,571 538,370 555,202 572,560 590,461 Matrix Increase 1.00% 97,591 257,532 265,583 273,887 282,450 Education Increase (Horizontal) 0.97% 244,928 244,584 252,230 260,116 268,249 One Time Bonus $1,000 227,710 - - - - Attrition Savings 1.00% (280,401) (252,148) (260,031) (268,161) (276,545)
Total Salaries Costs 25,442,511 26,003,138 26,816,123 27,654,525 28,519,140 % Increase 2.20% 3.13% 3.13% 3.13%
Supplemental Contracts 5% 664,205 697,415 732,286 768,900 807,345
BenefitsPSERS 1,558,275 2,177,763 2,849,213 3,534,249 3,744,563
PSERS Rate 12.36% 16.75% 21.25% 25.56% 26.26%
FICA/Medicare 973,176 994,620 1,025,717 1,057,786 1,090,857 Medical/Dental 4,555,346 4,555,346 4,555,346 4,555,346 Buy-back 145,393 145,393 145,393 145,393 Medical/Dental 8.00% 3,765,741 4,067,000 4,392,360 4,743,749 5,123,249
8.00% 8.00% 8.00% 8.00%
Tuition 270,000 270,000 270,000 270,000 270,000 Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 95,000 Other - - - - -
Total Benefits Costs 6,662,192 7,604,383 8,632,290 9,700,783 10,323,669
Total Costs 32,768,908$ 34,304,937$ 36,180,699$ 38,124,209$ 39,650,154$
% Increase 4.69% 5.47% 5.37% 4.00%Aggregate Increase
Local Tax Impact
21.00%
Reserve Fund
• Heard most often:– “Use the reserve fund to stabilize PSERS
increases”– “Use the reserve fund to keep tax increases
within the Act 1 cap”
2012-13 2013-14 2013-14 2013-14 2013-14Employees (FTE) 325.0 325.0 325.0 325.0 325.0
SalariesBase Salaries 24,620,112$ 25,214,801$ 26,003,138$ 26,816,123$ 27,654,525$ Step Movement (Vertical) 2.14% 532,571 538,370 555,202 572,560 590,461 Matrix Increase 1.00% 97,591 257,532 265,583 273,887 282,450 Education Increase (Horizontal) 0.97% 244,928 244,584 252,230 260,116 268,249 One Time Bonus $1,000 227,710 - - - - Attrition Savings 1.00% (280,401) (252,148) (260,031) (268,161) (276,545)
Total Salaries Costs 25,442,511 26,003,138 26,816,123 27,654,525 28,519,140 % Increase 2.20% 3.13% 3.13% 3.13%
Supplemental Contracts 5% 664,205 697,415 732,286 768,900 807,345
BenefitsPSERS before use of reserve fund 1,558,275 2,177,763 2,849,213 3,534,249 3,744,563
PSERS Rate 12.36% 16.75% 21.25% 25.56% 26.26%
Reserve Fund (800,000) (1,650,000) (2,550,000) - PSERS after use of reserve fund 1,558,275 1,377,763 1,199,213 984,249 3,744,563 FICA/Medicare 973,176 994,620 1,025,717 1,057,786 1,090,857 Medical/Dental 8.00% 3,765,741 4,067,000 4,392,360 4,743,749 5,123,249 Tuition 270,000 270,000 270,000 270,000 270,000 Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 95,000 Other - - - - -
Total Benefits Costs 6,662,192 6,804,383 6,982,290 7,150,783 10,323,669
Total Costs 32,768,908$ 33,504,937$ 34,530,699$ 35,574,209$ 39,650,154$
% Increase 2.25% 3.06% 3.02% 11.46%Aggregate Increase
Local Tax Impact
21.00%
Example 8 Reserve Fund, step +1% matrix, 4 years
Early Retirement Incentive Program (ERIP)
• Offer an incentive of $50K (or $40K or $25K) for each retiring employee
• Highly compensated employees (~$100K salary) are replace with new, less compensated (~$60K) employees
• “Pulls” retirements forward in time
Example 9 ERIP, step +1% matrix, 4 years
2012-13 2013-14 2013-14 2013-14 2013-14Employees (FTE) 325.0 325.0 325.0 325.0 325.0
SalariesBase Salaries 24,620,112$ 25,214,801$ 25,246,694$ 26,288,496$ 27,373,287$ Step Movement (Vertical) 2.14% 532,571 538,370 539,051 561,295 584,457 Matrix Increase 1.00% 97,591 257,532 257,857 268,498 279,577 Education Increase (Horizontal) 0.97% 244,928 244,584 244,893 254,998 265,521 One Time Bonus $1,000 227,710 - - - - Attrition Savings 1.00% (280,401) (1,008,592) - - - Retirement Incentive 800,000 use of Reserve Fund - (800,000) - - -
Total Salaries Costs 25,442,511 25,246,694 26,288,496 27,373,287 28,502,842 % Increase -0.77% 4.13% 4.13% 4.13%
Supplemental Contracts 5% 664,205 697,415 732,286 768,900 807,345
BenefitsPSERS 1,558,275 2,181,411 2,793,153 3,498,306 3,742,423
PSERS Rate 12.36% 16.75% 21.25% 25.56% 26.26%
FICA/Medicare 973,176 965,686 1,005,535 1,047,028 1,090,234 Medical/Dental 4,555,346 4,555,346 4,555,346 4,555,346 Buy-back 145,393 145,393 145,393 145,393 Medical/Dental 8.00% 3,765,741 4,067,000 4,392,360 4,743,749 5,123,249
8.00% 8.00% 8.00% 8.00%
Tuition 270,000 270,000 270,000 270,000 270,000 Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 95,000 Other - - - - -
Total Benefits Costs 6,662,192 7,579,097 8,556,048 9,654,083 10,320,906
Total Costs 32,768,908$ 33,523,206$ 35,576,829$ 37,796,270$ 39,631,093$
% Increase 2.30% 6.13% 6.24% 4.85%Aggregate Increase
Local Tax Impact
20.94%
Graphical FormatFinancial Gimmicks (ERIP, Reserve Fund)
Multi-Year Analysis
$32,000,000
$33,000,000
$34,000,000
$35,000,000
$36,000,000
$37,000,000
$38,000,000
$39,000,000
$40,000,000
2012-13 2013-14 2013-14 2013-14 2013-14
Year
Tea
cher
Co
mp
ensa
tio
n -
Lo
cal T
ax D
olla
rs
2% Trend Line
Step + 1% Matrix Increase
Step + 1% Matrix Increase, use ReserveFund
Step + 1% Matrix Increase, Early RetirementIncentive Program (ERIP)
Mid-Year Increases
• Is a mid-year 4% salary increase the same as a beginning-of-the-year 2% salary increase?
• Yes and no
• Yes, the dollars spent in the first year are the same
• No, the dollars spent in the second year are 2% higher for the mid-year increase
Accounting for mid-year Increases
4% matrix increase given mid-year
2% matrix increase given beginning of year
2012-13 2013-14 2013-14Employees (FTE) 325.0 325.0 325.0
SalariesBase Salaries 24,620,112$ 25,000,000$ 26,000,000$ Step Movement (Vertical) 0.00% 532,571 - - Matrix Increase 4.00% 97,591 500,000 Education Increase (Horizontal) 0.00% 244,928 - - One Time Bonus $0 - - - Attrition Savings 0.00% (280,401) - -
Total Salaries Costs 25,000,000 25,500,000 26,000,000 % Increase 2.00% 1.96%
2012-13 2013-14 2013-14Employees (FTE) 325.0 325.0 325.0
SalariesBase Salaries 24,620,112$ 25,000,000$ 25,500,000$ Step Movement (Vertical) 0.00% 532,571 - - Matrix Increase 2.00% 97,591 500,000 Education Increase (Horizontal) 0.00% 244,928 - - One Time Bonus $0 - - Attrition Savings 0.00% (280,401) - -
Total Salaries Costs 25,000,000 25,500,000 25,500,000 % Increase 2.00% 0.00%
Local Tax Impact
Local Tax Impact
Conclusions
• Expect several years of small or no salary increases due to above-inflation health care increases and PSERS increases
• Expect a move to high deductible health care plans or increased employee contributions
• Because of the unpredictable nature of revenues (state contribution, assessment appeals, transfer taxes) and expenditures (PSERS contribution rates, health care premiums), contracts should be negotiated yearly as part of the budgeting process
Appendix ATeacher Salary Matrix
• Matrix Movement
• Step Movement (vertical)
• Educational Movement (horizontal)
Teacher Salary Matrix
New Salary Matrix
Salary Movement
2012-13 2013-14 2012-13 2013-14 2012-13 2013-14Employees (FTE) 325.3 325.3 325.3 325.3 325.3 325.3
SalariesBase Salaries 24,620,112$ 25,214,801$ 24,620,112 25,214,801$ 75,684$ 77,512$ Step Movement (Vertical) 2.14% 532,571 538,370 538,370 - 1,655 Matrix Increase 1.00% 97,591 257,532 257,532 - 792 Education Increase (Horizontal) 0.97% 244,928 244,584 244,928 244,584 753 752 One Time Bonus $1,000 227,710 325,300 227,710 325,300 700 1,000 Attrition Savings 1.00% (280,401) (252,148) -280,401 (252,148) (862) (775)
- - - Total Salaries Costs 25,442,511 26,328,438 25,442,511 26,328,438 78,212 80,936
% Increase 3.48% 3.48% 3.48%
Supplemental Contracts 5% 664,205 697,415 664,205 697,415 2,042 2,144
BenefitsPSERS 1,558,275 2,177,763 3,179,352 4,452,248 9,774 13,687
PSERS Rate 12.36% 16.75% 12.36% 16.75% 12.36% 16.75%
FICA/Medicare 973,176 1,007,063 1,946,352 2,014,126 5,983 6,192 Medical/Dental 8.00% 3,765,741 4,067,000 3,765,741 4,067,000 11,576 12,502 Tuition 270,000 270,000 270,000 270,000 830 830 Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 292 292 Other - - - - - -
Total Benefits Costs 6,662,192 7,616,826 9,256,445 10,898,374 28,455 33,503
Total Costs 32,768,908$ 34,642,680$ 35,363,161$ 37,924,228$ 108,709$ 116,582$
% Increase 5.72% 7.24% 7.24%
Local Tax Impact Total Teacher Compensation Average Teacher Compensation
Appendix BAverage Salary – Method 1- Attrition Included
2012-13 2013-14 2012-13 2013-14 2012-13 2013-14Employees (FTE) 325.3 325.3 325.3 325.3 325.3 325.3
SalariesBase Salaries 24,620,112$ 25,214,801$ 24,620,112 25,214,801$ 75,684$ 77,512$ Step Movement (Vertical) 2.14% 532,571 538,370 538,370 - 1,655 Matrix Increase 1.00% 97,591 257,532 257,532 - 792 Education Increase (Horizontal) 0.97% 244,928 244,584 244,928 244,584 753 752 One Time Bonus $1,000 227,710 325,300 227,710 325,300 700 1,000
Attrition Savings 1.00% (280,401) (252,148) -280,401 (252,148) (862)
- - -
Total Salaries Costs 25,442,511 26,328,438 25,442,511 26,328,438 78,212 81,711
% Increase 3.48% 3.48% 4.47%
Supplemental Contracts 5% 664,205 697,415 664,205 697,415 2,042 2,144
BenefitsPSERS 1,558,275 2,177,763 3,179,352 4,452,248 9,774 13,687
PSERS Rate 12.36% 16.75% 12.36% 16.75% 12.36% 16.75%
FICA/Medicare 973,176 1,007,063 1,946,352 2,014,126 5,983 6,192 Medical/Dental 8.00% 3,765,741 4,067,000 3,765,741 4,067,000 11,576 12,502 Tuition 270,000 270,000 270,000 270,000 830 830
Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 292 292
Other - - - - - -
Total Benefits Costs 6,662,192 7,616,826 9,256,445 10,898,374 28,455 33,503
Total Costs 32,768,908$ 34,642,680$ 35,363,161$ 37,924,228$ 108,709$ 117,357$
% Increase 5.72% 7.24% 7.96%
Local Tax Impact Total Teacher Compensation Average Teacher Compensation
Appendix BAverage Salary – Method 2 – Attrition not Included
2012-13 2013-14 2012-13 2013-14 2012-13 2013-14Employees (FTE) 325.3 325.3 325.3 325.3 325.3 325.3
SalariesBase Salaries 24,620,112$ 25,214,801$ 24,620,112 25,214,801$ 75,684$ 77,512$ Step Movement (Vertical) 2.14% 532,571 538,370 538,370 - 1,655 Matrix Increase 1.00% 97,591 257,532 257,532 - 792 Education Increase (Horizontal) 0.97% 244,928 244,584 244,928 244,584 753 752 One Time Bonus $700, $1,000 227,710 325,300 227,710 325,300 700 1,000
Attrition Savings 1.00% (280,401) (252,148) -280,401 (252,148) (862) (775)
- - -
Total Salaries Costs 25,442,511 26,328,438 25,442,511 26,328,438 78,212 80,936
% Increase 3.48% 3.48% 3.48%
Supplemental Contracts 5% 664,205 697,415 664,205 697,415 2,042 2,144
BenefitsPSERS 1,558,275 2,177,763 3,179,352 4,452,248 9,774 13,687
PSERS Rate 12.36% 16.75% 12.36% 16.75% 12.36% 16.75%
FICA/Medicare 973,176 1,007,063 1,946,352 2,014,126 5,983 6,192 Medical/Dental 8.00% 3,765,741 4,067,000 3,765,741 4,067,000 11,576 12,502 Tuition 270,000 270,000 270,000 270,000 830 830
Worker's & Unemployment Compensation 95,000 95,000 95,000 95,000 292 292
Other - - - - - -
Total Benefits Costs 6,662,192 7,616,826 9,256,445 10,898,374 28,455 33,503
Total Costs 32,768,908$ 34,642,680$ 35,363,161$ 37,924,228$ 108,709$ 116,582$
% Increase 5.72% 7.24% 7.24%
Local Tax Impact Total Teacher Compensation Average Teacher Compensation
Appendix CEffect of a One Time Bonus
Step + 1% Matrix + $1,000 Bonus +5% Supplementals
• Approximate 4% per year compensation increases for several years caused just by PSERS:
• Who “pays” for PSERS?• What effect does PSERS have on contracts?
Appendix DThe PSERS Problem
Yearcontribution
rate delta2011-12 8.65%2012-13 12.36% 3.71%2013-14 16.75% 4.39%2014-15 21.25% 4.50%2015-16 25.56% 4.31%