The Article

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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 Benefits
Total Teacher Compensation
2012-13
325.3
Employees (FTE)
Average Teacher Compensation
2012-13
325.3
Salaries
$
-
Total Salaries Costs
Supplemental Contracts
Benefits
PSERS
PSERS Rate
FICA/Medicare
Medical/Dental
Tuition
Worker's & Unemployment
Compensation
Other
Total Benefits Costs
Total Costs
25,442,511
78,212
664,205
2,042
3,116,549
9,581
12.36%
12.36%
8.00%
$
-
1,946,352
3,765,741
270,000
5,983
11,576
830
95,000
-
292
-
9,193,642
28,262
35,300,358
$
108,516
Funding Sources
Local Real Estate Taxes
$32.8M
State Taxes
$2.5M
Teacher Compensation
$35.3M
Local Tax Impact vs. Total Teacher Compensation
Local Tax Impact
2012-13
325.3
Employees (FTE)
Total Teacher Compensation
2012-13
325.3
Average Teacher Compensation
2012-13
325.3
Salaries
$
Total Salaries Costs
Supplemental Contracts
Benefits
PSERS
PSERS Rate
FICA/Medicare
Medical/Dental
Tuition
Worker's & Unemployment
Compensation
Other
Total Benefits Costs
Total Costs
-
-
-
-
25,442,511
25,442,511
78,212
664,205
664,205
2,042
1,558,275
3,116,549
9,581
12.36%
8.00%
-
12.36%
12.36%
973,176
3,765,741
270,000
1,946,352
3,765,741
270,000
5,983
11,576
830
95,000
-
95,000
-
292
-
6,662,192
9,193,642
28,262
$ 32,768,908
$
$2.5M
35,300,358
$
108,516
Hypothetical Contract Offer Evaluation
Step + 1% Matrix + $1,000 Bonus +5% Supplementals
Local Tax Impact
2012-13
2013-14
325.3
325.3
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
2.14%
1.00%
0.97%
$1,000
1.00%
Total Salaries Costs
$ 24,620,112 $ 25,214,801
532,571
538,370
97,591
257,532
244,928
244,584
227,710
325,300
(280,401)
(252,148)
Benefits
PSERS
PSERS Rate
Total Benefits Costs
Total Costs
% Increase
75,684 $
753
700
(862)
78,212
77,512
1,655
792
752
1,000
81,711
664,205
697,415
664,205
697,415
2,042
2,144
1,558,275
2,177,763
3,179,352
4,452,248
9,774
13,687
12.36%
8.00%
$
26,328,438
3.48%
5%
FICA/Medicare
Medical/Dental
Tuition
Worker's & Unemployment
Compensation
Other
24,620,112 $ 25,214,801
538,370
257,532
244,928
244,584
227,710
325,300
-280,401
(252,148)
25,442,511
26,328,438
Average Teacher Compensation
2012-13
2013-14
325.3
325.3
25,442,511
% Increase
Supplemental Contracts
Total Teacher Compensation
2012-13
2013-14
325.3
325.3
3.48%
16.75%
12.36%
4.47%
16.75%
12.36%
16.75%
973,176
3,765,741
270,000
1,007,063
4,067,000
270,000
1,946,352
3,765,741
270,000
2,014,126
4,067,000
270,000
5,983
11,576
830
6,192
12,502
830
95,000
-
95,000
-
95,000
-
95,000
-
292
-
292
-
6,662,192
7,616,826
9,256,445
10,898,374
28,455
33,503
$ 32,768,908
$ 34,642,680
35,363,161
$ 37,924,228
5.72%
$
$
108,709
$
117,357
7.24%
For an explanation of Step, Matrix and Educational increases see Appendix A
7.96%
Example Contract Offer Evaluation
Step + 1% Matrix + $1,000 Bonus + 5% Supplementals
Local Tax Impact
2012-13
2013-14
325.3
325.3
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
2.14%
1.00%
0.97%
$1,000
1.00%
Total Salaries Costs
$ 24,620,112 $ 25,214,801
532,571
538,370
97,591
257,532
244,928
244,584
227,710
325,300
(280,401)
(252,148)
Benefits
PSERS
PSERS Rate
Total Benefits Costs
Total Costs
% Increase
75,684 $
753
700
(862)
78,212
77,512
1,655
792
752
1,000
81,711
664,205
697,415
664,205
697,415
2,042
2,144
1,558,275
2,177,763
3,179,352
4,452,248
9,774
13,687
12.36%
8.00%
$
26,328,438
3.48%
5%
FICA/Medicare
Medical/Dental
Tuition
Worker's & Unemployment
Compensation
Other
24,620,112 $ 25,214,801
538,370
257,532
244,928
244,584
227,710
325,300
-280,401
(252,148)
25,442,511
26,328,438
Average Teacher Compensation
2012-13
2013-14
325.3
325.3
25,442,511
% Increase
Supplemental Contracts
Total Teacher Compensation
2012-13
2013-14
325.3
325.3
3.48%
16.75%
12.36%
4.47%
16.75%
12.36%
16.75%
973,176
3,765,741
270,000
1,007,063
4,067,000
270,000
1,946,352
3,765,741
270,000
2,014,126
4,067,000
270,000
5,983
11,576
830
6,192
12,502
830
95,000
-
95,000
-
95,000
-
95,000
-
292
-
292
-
6,662,192
7,616,826
9,256,445
10,898,374
28,455
33,503
$ 32,768,908
$ 34,642,680
35,363,161
$ 37,924,228
5.72%
$
7.24%
$
108,709
$
117,357
7.96%
Example Contract Offer Evaluation
Step + 1% Matrix + $1,000 Bonus + 5% Supplementals
Local Tax Impact
2012-13
2013-14
325.3
325.3
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
$ 25,250,274
2.14%
1.00%
0.97%
$1,000
1.00%
Total Salaries Costs
244,928
227,110
(280,401)
Benefits
PSERS
PSERS Rate
Other
Total Benefits Costs
Total Costs
% Increase
25,250,274 $ 25,214,801
538,370
257,532
244,928
244,584
227,110
325,300
-280,401
(252,148)
8.00%
$
77,622 $
753
698
(862)
77,512
1,655
792
752
1,000
78,211
81,711
26,328,438
697,415
664,205
697,415
2,042
2,144
2,177,763
3,179,278
4,452,248
9,773
13,687
664,205
1,558,275
12.36%
Average Teacher Compensation
2012-13
2013-14
325.3
325.3
25,441,911
26,328,438
3.48%
5%
FICA/Medicare
Medical/Dental
Tuition
Worker's & Unemployment
Compensation
$ 25,214,801
538,370
257,532
244,584
325,300
(252,148)
25,441,911
% Increase
Supplemental Contracts
Total Teacher Compensation
2012-13
2013-14
325.3
325.3
3.48%
16.75%
12.36%
16.75%
12.36%
16.75%
1,007,063
4,067,000
270,000
1,946,306
3,765,741
270,000
2,014,126
4,067,000
270,000
5,983
11,576
830
6,192
12,502
830
95,000
-
95,000
-
95,000
-
95,000
-
292
-
292
-
6,662,169
7,616,826
9,256,325
10,898,374
28,455
33,503
$ 32,768,284
$ 34,642,679
35,362,441
$ 37,924,227
$
7.24%
$
4.48%
973,153
3,765,741
270,000
5.72%
Average Teacher Compensation
2012-13
2013-14
325.3
325.3
$
108,707
$
Delta
75,684 $
753
700
(862)
77,512
1,655
792
752
1,000
78,212
81,711
2,042
2,144
102
9,774
13,687
3,913
1,655
792
(1)
300
862
3,499
4.47%
117,357
7.96%
12.36%
Salary
Increase
PSERS
Increase
16.75%
5,983
11,576
830
6,192
12,502
830
292
-
292
-
28,455
33,503
208
926
0
5,047
0
$
108,709
$
117,357
7.96%
$
8,648
Compensation
Increase
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?
Example Contract Offer Evaluation
Step + 1% Matrix + $1,000 Bonus
Local Tax Impact
2012-13
2013-14
325.3
325.3
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
2.14%
1.00%
0.97%
$1,000
1.00%
Total Salaries Costs
$ 24,620,112 $ 25,214,801
532,571
538,370
97,591
257,532
244,928
244,584
227,710
325,300
(280,401)
(252,148)
Benefits
PSERS
PSERS Rate
Total Benefits Costs
Total Costs
% Increase
Economically sustainable under
Act 1 limits?
No, the Index plus PSERS
exception is currently in the 3%
range
75,684 $
753
700
(862)
78,212
77,512
1,655
792
752
1,000
81,711
664,205
697,415
664,205
697,415
2,042
2,144
1,558,275
2,177,763
3,179,352
4,452,248
9,774
13,687
12.36%
8.00%
$
26,328,438
3.48%
5%
FICA/Medicare
Medical/Dental
Tuition
Worker's & Unemployment
Compensation
Other
24,620,112 $ 25,214,801
538,370
257,532
244,928
244,584
227,710
325,300
-280,401
(252,148)
25,442,511
26,328,438
Average Teacher Compensation
2012-13
2013-14
325.3
325.3
25,442,511
% Increase
Supplemental Contracts
Total Teacher Compensation
2012-13
2013-14
325.3
325.3
3.48%
16.75%
12.36%
4.47%
16.75%
12.36%
16.75%
973,176
3,765,741
270,000
1,007,063
4,067,000
270,000
1,946,352
3,765,741
270,000
2,014,126
4,067,000
270,000
5,983
11,576
830
6,192
12,502
830
95,000
-
95,000
-
95,000
-
95,000
-
292
-
292
-
6,662,192
7,616,826
9,256,445
10,898,374
28,455
33,503
$ 32,768,908
$ 34,642,680
35,363,161
$ 37,924,228
5.72%
$
7.24%
Compensation increases inline
with current economic
conditions?
No, local compensation is
currently in the 2% range
$
108,709
$
117,357
7.96%
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
Example 1
Step + 1% Matrix Increase
Local Tax Impact
2012-13
2013-14
325.3
325.3
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
2.14%
1.00%
0.97%
$1,000
1.00%
$ 24,620,112 $ 25,214,801
532,571
538,370
97,591
257,532
244,928
244,584
227,710
(280,401)
(252,148)
Total Benefits Costs
Total Costs
% Increase
$
75,684 $
753
700
(862)
78,212
77,512
1,655
792
752
80,711
26,003,138
5%
664,205
697,415
664,205
697,415
2,042
2,144
8.00%
1,558,275
3,765,741
2,177,763
4,067,000
3,179,352
3,765,741
4,397,760
4,067,000
9,774
11,576
13,519
12,502
95,000
-
95,000
-
95,000
-
95,000
-
292
-
292
-
6,662,192
7,604,383
9,256,445
10,819,000
28,455
33,259
$ 32,768,908
$ 34,304,937
35,363,161
$ 37,519,554
% Increase
Benefits
PSERS
Medical/Dental
Worker's & Unemployment
Compensation
Other
24,620,112 $ 25,214,801
538,370
257,532
244,928
244,584
227,710
-280,401
(252,148)
25,442,511
26,003,138
Average Teacher Compensation
2012-13
2013-14
325.3
325.3
25,442,511
Total Salaries Costs
Supplemental Contracts
Total Teacher Compensation
2012-13
2013-14
325.3
325.3
2.20%
4.69%
2.20%
$
6.10%
3.19%
$
108,709
$
116,113
6.81%
Example 2
Step Only
Local Tax Impact
2012-13
2013-14
325.3
325.3
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
2.14%
1.00%
0.97%
$1,000
1.00%
Total Salaries Costs
$ 24,620,112 $ 25,214,801
532,571
538,370
97,591
244,928
244,584
227,710
(280,401)
(252,148)
Benefits
PSERS
PSERS Rate
Total Benefits Costs
Total Costs
% Increase
75,684 $
1,637
300
753
700
(862)
78,212
77,512
1,655
752
79,919
664,205
697,415
664,205
697,415
2,042
2,144
1,558,275
2,156,195
3,179,352
4,354,624
9,774
13,386
12.36%
8.00%
$
25,745,607
1.19%
5%
FICA/Medicare
Medical/Dental
Tuition
Worker's & Unemployment
Compensation
Other
24,620,112 $ 25,214,801
532,571
538,370
97,591
244,928
244,584
227,710
-280,401
(252,148)
0
25,442,511
25,745,607
Average Teacher Compensation
2012-13
2013-14
325.3
325.3
25,442,511
% Increase
Supplemental Contracts
Total Teacher Compensation
2012-13
2013-14
325.3
325.3
1.19%
16.75%
12.36%
2.18%
16.75%
12.36%
16.75%
973,176
3,765,741
270,000
984,770
4,067,000
270,000
1,946,352
3,765,741
270,000
1,969,539
4,067,000
270,000
5,983
11,576
830
6,055
12,502
830
95,000
-
95,000
-
95,000
-
95,000
-
292
-
292
-
6,662,192
7,572,964
9,256,445
10,756,163
28,455
33,065
$ 32,768,908
$ 34,015,986
35,363,161
$ 37,199,185
3.81%
$
5.19%
$
108,709
$
115,129
5.90%
Example 3
1% Matrix Only
Local Tax Impact
2012-13
2013-14
325.3
325.3
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
2.14%
1.00%
0.97%
$1,000
1.00%
Total Salaries Costs
$ 24,620,112 $ 25,214,801
532,571
97,591
252,148
244,928
244,584
227,710
(280,401)
(252,148)
Benefits
PSERS
PSERS Rate
Total Benefits Costs
Total Costs
% Increase
75,684 $
753
700
(862)
78,212
77,512
775
752
79,039
664,205
697,415
664,205
697,415
2,042
2,144
1,558,275
2,132,224
3,179,352
4,306,682
9,774
13,239
12.36%
8.00%
$
25,459,385
0.07%
5%
FICA/Medicare
Medical/Dental
Tuition
Worker's & Unemployment
Compensation
Other
24,620,112 $ 25,214,801
252,148
244,928
244,584
227,710
-280,401
(252,148)
25,442,511
25,459,385
Average Teacher Compensation
2012-13
2013-14
325.3
325.3
25,442,511
% Increase
Supplemental Contracts
Total Teacher Compensation
2012-13
2013-14
325.3
325.3
0.07%
16.75%
12.36%
1.06%
16.75%
12.36%
16.75%
973,176
3,765,741
270,000
973,822
4,067,000
270,000
1,946,352
3,765,741
270,000
1,947,643
4,067,000
270,000
5,983
11,576
830
5,987
12,502
830
95,000
-
95,000
-
95,000
-
95,000
-
292
-
292
-
6,662,192
7,538,045
9,256,445
10,686,325
28,455
32,851
$ 32,768,908
$ 33,694,845
35,363,161
$ 36,843,125
2.83%
$
4.19%
$
108,709
$
114,034
4.90%
Example 4
1% Matrix, 15% Healthcare Contribution
Local Tax Impact
2012-13
2013-14
325.3
325.3
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
2.14%
1.00%
0.97%
$1,000
1.00%
Total Salaries Costs
$ 24,620,112 $ 25,214,801
532,571
97,591
252,148
244,928
244,584
227,710
(280,401)
(252,148)
24,620,112 $ 25,214,801
532,571
97,591
252,148
244,928
244,584
227,710
-280,401
(252,148)
0
25,442,511
25,459,385
$
75,684 $
1,637
300
753
700
(862)
78,212
77,512
775
752
79,039
25,459,385
664,205
697,415
664,205
697,415
2,042
2,144
1,558,275
12.36%
973,176
3,765,741
270,000
2,132,224
16.75%
973,822
3,841,056
270,000
3,179,352
12.36%
1,946,352
3,765,741
270,000
4,306,682
16.75%
1,947,643
3,841,056
270,000
9,774
12.36%
5,983
11,576
830
13,239
16.75%
5,987
11,808
830
95,000
95,000
95,000
95,000
-
-
-
-
0.07%
5%
Average Teacher Compensation
2012-13
2013-14
325.3
325.3
25,442,511
% Increase
Supplemental Contracts
Total Teacher Compensation
2012-13
2013-14
325.3
325.3
(was 10% in 2012-13)
0.07%
1.06%
Benefits
PSERS
PSERS Rate
FICA/Medicare
Medical/Dental
Tuition
8.00%
Worker's & Unemployment Compensation
Other
Total Benefits Costs
Total Costs
% Increase
6,662,192
7,312,101
$ 32,768,908
$ 33,468,901
2.14%
$
9,256,445
10,460,381
35,363,161
$ 36,617,181
3.55%
292
292
-
-
32,156
28,455
$
108,709
$
113,339
4.26%
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.
Example 5
Status Quo
Local Tax Impact
2012-13
2013-14
325.3
325.3
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
2.14%
1.00%
0.97%
$1,000
1.00%
Total Salaries Costs
$ 24,620,112 $ 25,214,801
532,571
97,591
244,928
227,710
(280,401)
(252,148)
Benefits
PSERS
PSERS Rate
Total Benefits Costs
Total Costs
% Increase
75,684 $
1,637
300
753
700
(862)
78,212
77,512
77,512
664,205
664,205
664,205
664,205
2,042
2,042
1,558,275
2,090,622
3,179,352
4,223,479
9,774
12,983
12.36%
8.00%
$
24,962,653
-1.89%
5%
FICA/Medicare
Medical/Dental
Tuition
Worker's & Unemployment
Compensation
Other
24,620,112 $ 25,214,801
532,571
97,591
244,928
227,710
-280,401
(252,148)
0
25,442,511
24,962,653
Average Teacher Compensation
2012-13
2013-14
325.3
325.3
25,442,511
% Increase
Supplemental Contracts
Total Teacher Compensation
2012-13
2013-14
325.3
325.3
-1.89%
16.75%
12.36%
-0.89%
16.75%
12.36%
16.75%
973,176
3,765,741
270,000
954,822
4,067,000
270,000
1,946,352
3,765,741
270,000
1,909,643
4,067,000
270,000
5,983
11,576
830
5,870
12,502
830
95,000
-
95,000
-
95,000
-
95,000
-
292
-
292
-
6,662,192
7,477,444
9,256,445
10,565,122
28,455
32,478
$ 32,768,908
$ 33,104,302
35,363,161
$ 36,191,980
1.02%
$
2.34%
$
108,709
$
112,032
3.06%
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 noncore courses (art, language, music)
• Least senior staff (lowest paid) go first;
bumping rules (seniority) apply
Example 6
Status Quo, 5 FTE Furloughs
Local Tax Impact
2012-13
2013-14
325.3
320.3
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
2.14%
1.00%
0.97%
$1,000
1.00%
Total Salaries Costs
$ 24,620,112 $ 24,939,801
532,571
97,591
244,928
5 227,710
furloughs @ $55K
(280,401)
(249,398)
Benefits
PSERS
PSERS Rate
Other
Total Benefits Costs
Total Costs
% Increase
0
25,442,511
0
24,690,403
$
75,684 $
1,637
300
753
700
(862)
77,864
-
78,212
77,864
24,690,403
664,205
664,205
664,205
664,205
2,042
2,074
1,558,275
2,067,822
3,179,352
4,177,417
9,774
13,042
12.36%
8.00%
Worker's & Unemployment
Compensation
24,939,801
0
0
0
0
(249,398)
-2.96%
5%
FICA/Medicare
Medical/Dental
Tuition
24,620,112
532,571
97,591
244,928
227,710
-280,401
Average Teacher Compensation
2012-13
2013-14
325.3
320.3
25,442,511
% Increase
Supplemental Contracts
Total Teacher Compensation
2012-13
2013-14
325.3
320.3
-2.96%
16.75%
12.36%
-0.45%
16.75%
12.36%
16.75%
973,176
3,765,741
270,000
944,408
4,067,000
270,000
1,946,352
3,765,741
270,000
1,888,816
4,067,000
270,000
5,983
11,576
830
5,897
12,697
843
95,000
-
95,000
-
95,000
-
95,000
-
292
-
297
-
6,662,192
7,444,230
9,256,445
10,498,233
28,455
32,776
$ 32,768,908
$ 32,798,838
35,363,161
$ 35,852,841
0.09%
$
1.38%
$
108,709
$
112,714
3.68%
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
Example 7
Status Quo, 3 FTE Demotions
Local Tax Impact
2012-13
2013-14
325.3
322.3
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
2.14%
1.00%
0.97%
$1,000
3
1.00%
$ 24,620,112 $ 24,914,801
532,571
97,591
244,928
227,710
demotions
(280,401) @ $100K
(249,148)
25,442,511
Total Salaries Costs
% Increase
Benefits
PSERS
PSERS Rate
FICA/Medicare
Medical/Dental
Tuition
Other
Total Benefits Costs
Total Costs
% Increase
24,914,801
0
0
0
0
(249,148)
0
25,442,511
0
24,665,653
Average Teacher Compensation
2012-13
2013-14
325.3
322.3
$
75,684 $
1,637
300
753
700
(862)
77,303
78,212
77,303
-3.05%
-1.16%
664,205
664,205
664,205
664,205
2,042
2,061
1,558,275
2,065,749
3,179,352
4,173,229
9,774
12,948
12.36%
8.00%
Worker's & Unemployment
Compensation
24,665,653
24,620,112
532,571
97,591
244,928
227,710
-280,401
-3.05%
5%
Supplemental Contracts
Total Teacher Compensation
2012-13
2013-14
325.3
322.3
16.75%
12.36%
16.75%
12.36%
16.75%
973,176
3,765,741
270,000
943,461
4,067,000
270,000
1,946,352
3,765,741
270,000
1,886,922
4,067,000
270,000
5,983
11,576
830
5,855
12,619
838
95,000
-
95,000
-
95,000
-
95,000
-
292
-
295
-
6,662,192
7,441,210
9,256,445
10,492,151
28,455
32,554
$ 32,768,908
$ 32,771,068
35,363,161
$ 35,822,009
0.01%
$
1.30%
$
108,709
$
111,918
2.95%
Graphical Format
Local Tax Impact of Various Proposals
Teacher Compensation - Local Tax Dollars
$35,000,000
Step + 1% Matrix + $1,000 Bonus +5%
Supplementals
Step + 1% Matrix Increase
$34,500,000
Step Only
$34,000,000
1% Matrix Increase Only
1% Matrix Increase; healthcare
contribution from 10% to 15%
Status Quo
$33,500,000
Status Quo, 5 FTE Furloughs
Status Quo, 3 FTE Demotions
2% Trend Line
$33,000,000
$32,500,000
2012-13
2013-14
Year
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 Analysis
step +1% matrix, 4 years
2012-13
325.0
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
2.14%
1.00%
0.97%
$1,000
1.00%
% Increase
Supplemental Contracts
26,003,138
2.20%
5%
Benefits
PSERS
PSERS Rate
Total Benefits Costs
Total Costs
% Increase
Aggregate Increase
26,816,123
27,654,525
3.13%
3.13%
28,519,140
3.13%
732,286
768,900
807,345
1,558,275
2,177,763
2,849,213
3,534,249
3,744,563
16.75%
21.25%
25.56%
3,765,741
270,000
270,000
270,000
270,000
270,000
95,000
-
95,000
-
95,000
-
95,000
-
95,000
-
6,662,192
7,604,383
8,632,290
9,700,783
10,323,669
$ 32,768,908
$ 34,304,937
$ 36,180,699
$ 38,124,209
$ 39,650,154
4.69%
1,025,717
4,555,346
145,393
4,392,360
1,057,786
4,555,346
145,393
4,743,749
26.26%
994,620
4,555,346
145,393
4,067,000
8.00%
Tuition
Worker's & Unemployment
Compensation
Other
2013-14
325.0
697,415
12.36%
8.00%
2013-14
325.0
664,205
973,176
FICA/Medicare
Medical/Dental
Buy-back
Medical/Dental
Local Tax Impact
2013-14
325.0
$ 24,620,112 $ 25,214,801 $ 26,003,138 $ 26,816,123 $ 27,654,525
532,571
538,370
555,202
572,560
590,461
97,591
257,532
265,583
273,887
282,450
244,928
244,584
252,230
260,116
268,249
227,710
(280,401)
(252,148)
(260,031)
(268,161)
(276,545)
25,442,511
Total Salaries Costs
2013-14
325.0
8.00%
8.00%
5.47%
21.00%
5.37%
1,090,857
4,555,346
145,393
5,123,249
8.00%
4.00%
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”
Example 8
Reserve Fund, step +1% matrix, 4 years
2012-13
325.0
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
2.14%
1.00%
0.97%
$1,000
1.00%
26,003,138
2.20%
% Increase
Supplemental Contracts
Local Tax Impact
2013-14
325.0
5%
2013-14
325.0
2013-14
325.0
$ 24,620,112 $ 25,214,801 $ 26,003,138 $ 26,816,123 $ 27,654,525
532,571
538,370
555,202
572,560
590,461
97,591
257,532
265,583
273,887
282,450
244,928
244,584
252,230
260,116
268,249
227,710
(280,401)
(252,148)
(260,031)
(268,161)
(276,545)
25,442,511
Total Salaries Costs
2013-14
325.0
26,816,123
27,654,525
3.13%
3.13%
28,519,140
3.13%
664,205
697,415
732,286
768,900
807,345
1,558,275
12.36%
2,177,763
16.75%
2,849,213
21.25%
3,534,249
25.56%
3,744,563
26.26%
(800,000)
1,377,763
994,620
4,067,000
270,000
(1,650,000)
1,199,213
1,025,717
4,392,360
270,000
(2,550,000)
984,249
1,057,786
4,743,749
270,000
Benefits
PSERS before use of reserve fund
PSERS Rate
Reserve Fund
PSERS after use of reserve fund
FICA/Medicare
Medical/Dental
Tuition
Worker's & Unemployment
Compensation
Other
Total Benefits Costs
Total Costs
% Increase
Aggregate Increase
8.00%
1,558,275
973,176
3,765,741
270,000
3,744,563
1,090,857
5,123,249
270,000
95,000
-
95,000
-
95,000
-
95,000
-
95,000
-
6,662,192
6,804,383
6,982,290
7,150,783
10,323,669
$ 32,768,908
$ 33,504,937
$ 34,530,699
$ 35,574,209
$ 39,650,154
2.25%
3.06%
21.00%
3.02%
11.46%
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
325.0
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
Retirement Incentive
use of Reserve Fund
2.14%
1.00%
0.97%
$1,000
1.00%
% Increase
Supplemental Contracts
25,246,694
-0.77%
5%
Benefits
PSERS
PSERS Rate
Total Benefits Costs
Total Costs
% Increase
Aggregate Increase
$ 26,288,496
561,295
268,498
254,998
-
$ 27,373,287
584,457
279,577
265,521
-
27,373,287
4.13%
4.13%
28,502,842
4.13%
732,286
768,900
807,345
1,558,275
2,181,411
2,793,153
3,498,306
3,742,423
16.75%
21.25%
25.56%
3,765,741
270,000
270,000
270,000
270,000
270,000
95,000
-
95,000
-
95,000
-
95,000
-
95,000
-
6,662,192
7,579,097
8,556,048
9,654,083
10,320,906
$ 32,768,908
$ 33,523,206
$ 35,576,829
$ 37,796,270
$ 39,631,093
2.30%
1,005,535
4,555,346
145,393
4,392,360
1,047,028
4,555,346
145,393
4,743,749
26.26%
965,686
4,555,346
145,393
4,067,000
8.00%
Tuition
Worker's & Unemployment
Compensation
Other
2013-14
325.0
697,415
12.36%
8.00%
26,288,496
2013-14
325.0
664,205
973,176
FICA/Medicare
Medical/Dental
Buy-back
Medical/Dental
Local Tax Impact
2013-14
325.0
$ 24,620,112 $ 25,214,801 $ 25,246,694
532,571
538,370
539,051
97,591
257,532
257,857
244,928
244,584
244,893
227,710
(280,401)
(1,008,592)
800,000
(800,000)
25,442,511
Total Salaries Costs
2013-14
325.0
8.00%
8.00%
6.13%
20.94%
6.24%
1,090,234
4,555,346
145,393
5,123,249
8.00%
4.85%
Graphical Format
Financial Gimmicks (ERIP, Reserve Fund)
Multi-Year Analysis
$40,000,000
Teacher Compensation - Local Tax Dollars
$39,000,000
$38,000,000
2% Trend Line
$37,000,000
Step + 1% Matrix Increase
$36,000,000
Step + 1% Matrix Increase, use Reserve
Fund
Step + 1% Matrix Increase, Early Retirement
Incentive Program (ERIP)
$35,000,000
$34,000,000
$33,000,000
$32,000,000
2012-13
2013-14
2013-14
Year
2013-14
2013-14
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
2012-13
325.0
Employees (FTE)
4% matrix
increase given
mid-year
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
0.00%
4.00%
0.00%
$0
0.00%
$ 24,620,112 $ 25,000,000
532,571
97,591
500,000
244,928
(280,401)
25,000,000
Total Salaries Costs
% Increase
2012-13
325.0
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
0.00%
2.00%
0.00%
$0
0.00%
% Increase
Local Tax Impact
2013-14
325.0
$ 24,620,112
532,571
97,591
244,928
$ 25,000,000
500,000
(280,401)
-
25,000,000
Total Salaries Costs
25,500,000
2.00%
Employees (FTE)
2% matrix
increase given
beginning of year
Local Tax Impact
2013-14
325.0
25,500,000
2.00%
2013-14
325.0
$ 26,000,000
26,000,000
1.96%
2013-14
325.0
$ 25,500,000
25,500,000
0.00%
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 A
Teacher Salary Matrix
• Matrix Movement
• Step Movement (vertical)
• Educational Movement (horizontal)
Teacher Salary Matrix
New Salary Matrix
Salary Movement
Appendix B
Average Salary – Method 1- Attrition Included
Local Tax Impact
2012-13
2013-14
325.3
325.3
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
2.14%
1.00%
0.97%
$1,000
1.00%
Total Salaries Costs
$ 24,620,112 $ 25,214,801
532,571
538,370
97,591
257,532
244,928
244,584
227,710
325,300
(280,401)
(252,148)
Benefits
PSERS
PSERS Rate
Total Benefits Costs
Total Costs
% Increase
75,684 $
753
700
(862)
78,212
77,512
1,655
792
752
1,000
(775)
80,936
664,205
697,415
664,205
697,415
2,042
2,144
1,558,275
2,177,763
3,179,352
4,452,248
9,774
13,687
12.36%
8.00%
$
26,328,438
3.48%
5%
FICA/Medicare
Medical/Dental
Tuition
Worker's & Unemployment
Compensation
Other
24,620,112 $ 25,214,801
538,370
257,532
244,928
244,584
227,710
325,300
-280,401
(252,148)
25,442,511
26,328,438
Average Teacher Compensation
2012-13
2013-14
325.3
325.3
25,442,511
% Increase
Supplemental Contracts
Total Teacher Compensation
2012-13
2013-14
325.3
325.3
3.48%
16.75%
12.36%
3.48%
16.75%
12.36%
16.75%
973,176
3,765,741
270,000
1,007,063
4,067,000
270,000
1,946,352
3,765,741
270,000
2,014,126
4,067,000
270,000
5,983
11,576
830
6,192
12,502
830
95,000
-
95,000
-
95,000
-
95,000
-
292
-
292
-
6,662,192
7,616,826
9,256,445
10,898,374
28,455
33,503
$ 32,768,908
$ 34,642,680
35,363,161
$ 37,924,228
5.72%
$
7.24%
$
108,709
$
116,582
7.24%
Appendix B
Average Salary – Method 2 – Attrition not Included
Local Tax Impact
2012-13
2013-14
325.3
325.3
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
2.14%
1.00%
0.97%
$1,000
1.00%
Total Salaries Costs
$ 24,620,112 $ 25,214,801
532,571
538,370
97,591
257,532
244,928
244,584
227,710
325,300
(280,401)
(252,148)
Benefits
PSERS
PSERS Rate
Other
Total Benefits Costs
Total Costs
% Increase
8.00%
75,684 $
753
700
(862)
77,512
1,655
792
752
1,000
78,212
81,711
697,415
664,205
697,415
2,042
2,144
2,177,763
3,179,352
4,452,248
9,774
13,687
664,205
1,558,275
12.36%
$
26,328,438
26,328,438
3.48%
5%
FICA/Medicare
Medical/Dental
Tuition
Worker's & Unemployment
Compensation
24,620,112 $ 25,214,801
538,370
257,532
244,928
244,584
227,710
325,300
-280,401
(252,148)
Average Teacher Compensation
2012-13
2013-14
325.3
325.3
25,442,511
25,442,511
% Increase
Supplemental Contracts
Total Teacher Compensation
2012-13
2013-14
325.3
325.3
3.48%
16.75%
12.36%
4.47%
16.75%
12.36%
16.75%
973,176
3,765,741
270,000
1,007,063
4,067,000
270,000
1,946,352
3,765,741
270,000
2,014,126
4,067,000
270,000
5,983
11,576
830
6,192
12,502
830
95,000
-
95,000
-
95,000
-
95,000
-
292
-
292
-
6,662,192
7,616,826
9,256,445
10,898,374
28,455
33,503
$ 32,768,908
$ 34,642,680
35,363,161
$ 37,924,228
5.72%
$
7.24%
$
108,709
$
117,357
7.96%
Appendix C
Effect of a One Time Bonus
Step + 1% Matrix + $1,000 Bonus +5% Supplementals
Local Tax Impact
2012-13
2013-14
325.3
325.3
Employees (FTE)
Salaries
Base Salaries
Step Movement (Vertical)
Matrix Increase
Education Increase (Horizontal)
One Time Bonus
Attrition Savings
Total Teacher Compensation
2012-13
2013-14
325.3
325.3
$ 24,620,112 $ 25,214,801
532,571
538,370
1.00%
97,591
257,532
0.97%
244,928
244,584
$700, $1,000
227,710
325,300
1.00%
(280,401)
(252,148)
Total Salaries Costs
Benefits
PSERS
PSERS Rate
FICA/Medicare
Medical/Dental
Tuition
Worker's & Unemployment
Compensation
Other
Total Benefits Costs
Total Costs
% Increase
8.00%
77,512
1,655
792
752
1,000
(775)
78,212
80,936
697,415
664,205
697,415
2,042
2,144
2,177,763
3,179,352
4,452,248
9,774
13,687
664,205
1,558,275
12.36%
75,684 $
753
700
(862)
26,328,438
26,328,438
3.48%
5%
$
25,442,511
25,442,511
% Increase
Supplemental Contracts
24,620,112 $ 25,214,801
538,370
257,532
244,928
244,584
227,710
325,300
-280,401
(252,148)
2.14%
Average Teacher Compensation
2012-13
2013-14
325.3
325.3
3.48%
16.75%
12.36%
3.48%
16.75%
12.36%
16.75%
973,176
3,765,741
270,000
1,007,063
4,067,000
270,000
1,946,352
3,765,741
270,000
2,014,126
4,067,000
270,000
5,983
11,576
830
6,192
12,502
830
95,000
-
95,000
-
95,000
-
95,000
-
292
-
292
-
6,662,192
7,616,826
9,256,445
10,898,374
28,455
33,503
$ 32,768,908
$ 34,642,680
35,363,161
$ 37,924,228
5.72%
$
7.24%
$
108,709
$
116,582
7.24%
Appendix D
The PSERS Problem
• Approximate 4% per year compensation
increases for several years caused just by
PSERS:
Year
2011-12
2012-13
2013-14
2014-15
2015-16
contribution
rate
8.65%
12.36%
16.75%
21.25%
25.56%
delta
3.71%
4.39%
4.50%
4.31%
• Who “pays” for PSERS?
• What effect does PSERS have on contracts?
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