employee contract costing & budget implications

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%


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



% Increase 3.48% 3.48% 4.47%


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%



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%


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%


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 Costs 32,768,284$ 34,642,679$ 35,362,441$ 37,924,227$ 108,707$ 117,357$

% Increase 5.72% 7.24% 7.96%


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



% Increase 3.48% 3.48% 4.47%


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%



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%


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)


% Increase 2.20% 2.20% 3.19%


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 Costs 32,768,908$ 34,304,937$ 35,363,161$ 37,519,554$ 108,709$ 116,113$

% Increase 4.69% 6.10% 6.81%


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%


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 Costs 32,768,908$ 34,015,986$ 35,363,161$ 37,199,185$ 108,709$ 115,129$

% Increase 3.81% 5.19% 5.90%


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)


% Increase 0.07% 0.07% 1.06%


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%



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)


% Increase 0.07% 0.07% 1.06%


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


Other - - - - - -


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%


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)


% Increase -1.89% -1.89% -0.89%


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%



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%


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 -


0 0 - -


% Increase -2.96% -2.96% -0.45%


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


Other - - - - - -


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%


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


0 0 -


% Increase -3.05% -3.05% -1.16%


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


Other - - - - - -


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%


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%


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 Costs 32,768,908$ 33,504,937$ 34,530,699$ 35,574,209$ 39,650,154$


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%


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 Costs 32,768,908$ 33,523,206$ 35,576,829$ 37,796,270$ 39,631,093$


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)


% Increase 3.48% 3.48% 3.48%


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%



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%


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


- - -


% Increase 3.48% 3.48% 4.47%


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%



Other - - - - - -


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%


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)

- - -


% Increase 3.48% 3.48% 3.48%


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%



Other - - - - - -


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%


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%

employee contract costing & budget implications

Documents