Budgeting for the San Dieguito raise

Budget ramifications of San Dieguito Union High School District’s new 2015-2018 teachers’ contract will impact the district’s taxpayers for years to come and deserve deeper analysis than the district is providing.

According to the district’s pay scale before the just approved contract, a first-year San Dieguito teacher (at Step 1 and Column 1) would earn $42,545 for a standard 186-day work year.

Under the new contract, that teacher will earn an extra $1,000 per year, for having a required English Learner credential. The stipend was formerly given only to teachers who earned it, but all teachers receive it now since every teacher must have the EL credential.

The EL stipend (which isn’t really a stipend any more) costs the district $500,000 annually.

In addition, because of changes in California State Teachers Retirement System (CalSTRS) regulations, about $11,000 from employees’ Flexible Spending Account health benefit program will now be transferred into salary.

CalSTRS provides retirement and other benefits for the nearly 900,000 California educators.

That brings that first-year teacher’s salary, with the $12,000 rolled into it, up to $54,545.

The contract calls for a 7-percent increase for this year (retroactive to July 1, 2015), which raises it to $58,363 for 2015-2016.

For 2016-2017, another 5.5 percent raise is part of the agreement, which brings the teacher’s salary up to $61,573.

The average salary for the district’s teachers, according to associate superintendent of human resources Torrie Norton, currently falls somewhere between $60,000 and $70,000.

That won’t be the average much longer.

The current number of certificated employees is 571, according to district documents.

Keep in mind that all district employees – hundreds more – will receive the same raises all teachers under the new contract will get. This agenda item will be voted on at the district’s Jan. 14 board meeting.

SDUHSD associate superintendent of business services Eric Dill said the combined cost for the 12.5 percent raise this year and next will be about $8.9 million.

Step-and-Column

In an article in the San Diego Union-Tribune last month, Dill said “district teachers have worked without a wage increase since 2007.”

That’s not quite accurate.

SDUHSD teachers, as with all other school districts, receive annual raises called step-and-column, which provide increases in salary every year and are given for longevity and educational credentials. These raises are in addition to any increased compensation negotiated in the master contract.

The district’s cost of step-and-column floats between $800,000 and $950,000 each year, according to Dill. He provided costs for the following years, estimating about $250,000 per year for column increases:

Year Step Column Total

2010-2011 $691,000 $250,000 $941,000

2011-2012 $678,000 $250,000 $928,000

2012-2013 $606,600 $250,000 $856,600

2013-2014 $558,700 $250,000 $808,700

2014-2015 $644,300 $250,000 $894,300

2015-2016 $603,700 $250,000 $853,700

Clearly, there have been wage increases even in the lean years.

STRS and pensions

Although moving the $11,000 Flexible Spending Account money into salary greatly inflates the pay scale, Norton said it is not pension spiking because the FSA money was already “creditable” – meaning treated as income – in the years before the transfer.

“All certificated staff have been receiving the flexible spending money since 2002, and it has always been considered creditable compensation towards retirement,” she said.

This transfer into salary had to be approved in 2015, due to changes in STRS regulations, to remain considered income, she said, “or certificated staff would face a loss in creditable compensation of the entire FLEX amount.”

Last month, SDUHSD superintendent Rick Schmitt was quoted in this newspaper about the transfer of FSA dollars to salary, saying, “It was tens of millions of dollars that we didn’t want to pass on to the taxpayers or the employees.”

In an interview two weeks ago, Schmitt tried to explain how this shift saved taxpayer money.

“The school district, therefore the taxpayers, paid many many many millions of dollars, adding up to tens of millions of dollars, into the pension fund, believing that all that would be creditable, and it legally was,” he said.

If the board hadn’t approved the contract, which included this transfer into salary, before Jan. 1, “the employees, and the taxpayers, would have lost the money that they had paid in,” Schmitt continued.

But how would that money have been “lost” if it’s been credited as income all along?

Why would not approving the FSA transfer result in “tens of millions of dollars” being passed on to taxpayers?

The quote is either a deliberate misrepresentation of the truth or an obfuscating misstatement.

Schmitt did say the transfer “inflates the salary,” but that is “because we wanted to keep it creditable.”

Shrinking reserves

The executive summary of the district’s general fund first interim report from Dec. 10 shows projected reserves for 2015-2016 ending at about $26 million, or 22.4 percent of the budget.

For the 2016-2017 year-end, projections are about $29 million, or 25.1 percent of the budget. And for the 2017-2018 year-end, projections are about $34.3 million, or 29.1 percent of the budget.

These are estimates made before the new labor agreement, and they are rosy indeed. The bloom is off the rose, however, with the new contract.

Reserve levels after factoring in the new contract are projected to be 18 percent at the end of 2016, 13 percent at the end of fiscal year 2017, and 10.4 percent at the end of fiscal 2018, Schmitt said. The required minimum by the state is 3 percent.

The district says not to worry about declining reserve levels, because increased revenue from property taxes and higher student enrollment, meaning more money from the state, is projected – projected, not a certainty.

Jason Viloria, SDUHSD’s associate superintendent of administrative services, said some teachers are close to retirement age, and as they leave, the district will save money by replacing them with new, less costly teachers.

On this point the board packet reads, “The district expects substantial savings from teacher retirements despite growing enrollment, as vacant and newer positions will be replaced with teachers in lower ranges/steps on the salary schedule within contractual teacher/student ratios.”

Growing enrollment means more per-pupil money from the state, but it’s unclear whether that state money will cover the cost of hiring more teachers for additional classes – or whether the district simply plans to cram more kids into existing classrooms.

Class size

Article 6.01 in the previous 2012-2015 teachers’ contract states that maximum class size ratios shall be: 32 students to 1 certificated teacher for high schools and 29 students to 1 certificated teacher for middle schools.

The same article 6.01 in the newly approved 2015-2018 contract states, “The maximum overall site class averages are as follows: “high schools 38.4 average, middle schools 34.6 average.”

As one parent pointed out, they are comparing maximums to averages.

For averages, if a special education class has 12 kids and a popular Advanced Placement class has 42, that averages to 27. Are they playing with numbers?

No, says the district.

“The new contract language does not increase the maximums for class size averages,” Norton said. She said ratios “do not dictate class averages.”

Using a confusing formula for determining staffing ratios, she said the new language “clarifies the process by which we staff schools” and “simply states the numbers in a much more easily understood, transparent manner.”

Clarifies and simplifies? Really?

“Class sizes have not changed,” Norton wrote. “In fact they are currently as low as they have been in a decade.”

Schmitt echoed this. “SDUHSD currently has its lowest class sizes in a decade,” he said, contradicting what parents and students report.

Highest paid in county

The most troubling clause in the contract states that the district’s teachers must be the highest paid in the county.

The contract states the district must maintain “its number one ranking” at the Masters degree benchmark through 2018.

Schmitt and Norton both said last month that the district’s teachers were ninth, 10th and 11th in compensation.

According to a chart comparing teacher salaries for all 42 school districts in the county, obtained from the San Diego County Office of Education, this claim is true for teachers with Bachelors degrees.

But the contract specifically states to use the compensation comparisons for teachers with Masters degrees.

The SDCOE chart shows that San Dieguito teachers with Masters degrees and 10 years of experience were actually the highest paid in San Diego County (those with 15 years of experience were the second highest paid).

When I asked Schmitt about his claim, he agreed that the district’s teachers with Masters degrees were the highest paid, based on the SDCOE chart. But he said there were other benchmarks showing that the SDCOE numbers were “not necessarily accurate.”

“The CTA [California Teachers Association] gets lists, we get lists, and we were pretty far down,” he said. “It was real and it’s verifiable.”

In our interview two weeks ago, Schmitt promised to produce other comparison charts that support his statement, but he now says there are no charts other than the SDCOE chart.

“The only charts I have are the same ones you already have access to,” he told me.

Here’s the backpedaling: “When discussing rank, I never mentioned the category,” he added.

Schmitt said he determined the district was lower-paid based on “news items and updates from superintendent meetings, etc.”

Hubris

The bigger issue is the hubris of demanding to be the highest paid. On this point, Schmitt said, “I’ll stand behind that clause.”

“There’s an expectation in the community that we’re number one in academics, number one in athletics, number one in the arts,” Schmitt said. “So to me it doesn’t seem odd that our employees are the highest paid in the county.”

He also said San Dieguito communities were the most expensive in the county to live in, but he provided no figures on how many teachers actually reside within district boundaries.

He briefly acknowledged that problems could arise if other school districts also place such a “number one” clause in their contracts, but then dismissed it, saying, “There’s an expectation that our community wants the best.”

So despite how much any other San Diego county district pays its teachers, taxpayers in this district are contractually bound to beat that amount – regardless of ability, performance or classroom success.

It also nullifies the claim from high school foundations that tell donors the district doesn’t have money to provide for all those “extras.”

And what about the benefits SDUHSD teachers get from serving in communities with involved parents, generous donors, new or modernized facilities, the latest technology, and, frankly, high test scores and smart students? Is high pay the only benchmark to use?

The contract states this clause is only in effect through 2018, but any sitting or former superintendent or school board member will verify that once something is in a labor union contract, just try getting it removed. Several I spoke to laughed at the idea of an expiration date on such a clause.

Spreading the wealth

To support its generous contract, the district is banking on positive forecasts for a strong revenue stream for many years to come. But that may not be wise.

According to a recent report by the nonprofit education-focused organization EdSource, Gov. Jerry Brown, at a press conference Jan. 7, called an extension of Proposition 30 “fatally flawed” and warned that another downturn in the economy was likely.

“Everything that goes up comes down,” Brown said, in the report.

The California Teachers Association and the California Federation of Teachers both back the proposed 12-year extension of Prop 30, which taxes couples making over $500,000 and individuals making more than $250,000. The bulk of that money would be earmarked for education.

“Without the additional money [from an extension of Prop 30], school revenues are expected to flatten in two years, at the same time that school districts face an additional $2 billion per year in added pension costs for teachers and administrators within the next four years,” the report reads.

Mo Muir, one of two trustees to vote against the contract, said the district “has wonderful teachers,” but she could not support the agreement because “I am not confident that the contract strikes the right balance between teachers’ compensation and taxpayers’ concerns.”

Although a raise may be in order, there are questionable components of SDUHSD’s contract. Coupled with misleading statements and the district’s spin on the agreement (the superintendent and his associates do not make it easy to separate fact from fiction), the deal is troubling.

Nevertheless, with bountiful reserves and a union demanding a master contract raise after eight years of doing without, the district decided the time was right to spread the wealth among its employees.

Whether the three trustees who approved this contract acted responsibly is a matter for voters to decide at the ballot box this November.

Marsha Sutton can be reached at suttonmarsha@gmail.com.