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Coming to grips with less for everyone

As fiscal reality worsens with each economic forecast, boards and unions face the challenge of “living within our means.”

Here’s our reality: Rising expectations from state and federal mandates to improve achievement for all students, the growing needs of a more diverse student population, potential double-digit benefit cost increases -- and the worst budget shortfall in Oregon’s history to pay for it all.

Employees face the prospect of sharing more of their health care increases through out-of-pocket costs, plus a smaller paycheck from fewer work days this year -- and no salary increase next year. And yet boards must balance the public’s expectation of meeting their priorities with fewer dollars.

The following are some budget-cutting strategies used in the past by districts throughout Oregon.

In times like this, boards must consider the entire operation of their districts at the bargaining table now, not just salaries and benefits. For example, many boards are not just looking at salary freezes but at sharing staff with other districts, delaying maintenance or subcontracting services. Strategies include:

  • Examine the level of administrative expenditures -- the percent cited by the National School Boards Association is four to five percent of your budget.
  • Change grade combinations -- e.g., “primary grade” classrooms.
    Reduction or elimination of extra curricular programs -- districts often seek outside foundations or groups to help fund these programs.
  • Closing some schools in the district -- solid, two-way communication and parent/community engagement is especially critical in this strategy.
  • Delay of maintenance or building replacements -- commonly done in early stages of budget reduction. 
  • Subcontracting district operations -- custodial, transportation, food service are common areas to “outsource” but follow the rules set by your union contract.
  • Crafting “cost neutral” salary and benefit increases -- which may mean an actual salary and benefit freeze.

Other cost-cutting ideas include sharing staff between districts, reallocating staff among schools, and district mergers.

A clear, open decision-making process is essential. Boards can build community confidence by emphasizing the priority of putting kids first, and being explicit about how and why decisions will impact the classroom.

More about the most critical issues at the bargaining table:

Salary and benefits

Just to maintain status quo on compensation packages, districts may need to look at savings to make up the difference.

Certain costs will be increasing. The cost-of-living, or CPI -- often used as the basis for salary increases -- increased by an average of 3.9 to 4.1 percent in 2008 depending on which CPI figure you look at. Insurance premiums will increase next year and while most districts have some form of insurance cap, unions will push against out-of-pocket increases for employees.

A typical union position has been to reduce the number of staff and use these savings to fund small salary increases. But this is not a sustainable solution and fewer teachers may result in unacceptable class sizes.

Restructure the day

Many districts are examining the workday for efficiency. In a typical high school or middle school about one-quarter to one-third of staff are used to relieve other teachers for preparation time during the student contact day.

Districts may need to consider moving to schedules with a common prep time for teachers before or after the student contact day, which allows both an increased number of class offerings and lower class size.

Higher deductibles

New health reimbursement arrangements (HRAs) help districts control health care costs by offering a higher deductible health insurance program for a lower premium. Districts use the savings to help employees fund their higher out-of-pocket healthcare expenses.

Employees have the advantage of carrying the amount contributed to this “fund” over to future years.

These are some other approaches to controlling premiums:

  • More plan choices: One funded within the district’s “cap” and a higher-cost plan where employees pay the difference.
  • Consider using the Section 125 cafeteria plan to give employees more options to spend their fixed contribution.
  • Examine “opt out” provisions for those covered with group health insurance elsewhere.
  • Pool premiums for districts using the step rate (individual, two party, and family).

Funding and shortening the school year

A funding clause in the union contract allows boards to re-open the contract if there is not enough revenue to fund it. Clauses allowing the board to determine if the level of revenue is sufficient provide the most flexibility. Some clauses are more restrictive on when contracts can be reopened. [Examples of different language]

Shortening the year has become a heated but popular option. Here’s a good example of the language allowing this in a union contract:

  • If the District closes because of a lack of funds, no member of the bargaining unit shall be entitled to any salary or fringe benefits provided in this Agreement while the District is closed.
  • This Agreement does not guarantee any level of employment.

The advantage of this type of language is the number of days and their scheduling would be up to the district. An example of more specific language would be:

“In the event of a significant shortfall in projected revenues for a program, and after meeting and consulting with the Association, the District can reduce an appropriate number of work days in that program to make up the shortfall. However, no member will be reduced by more than fifteen (15) days in a normal contract year. Any greater reduction will be handled under the layoff article.”

Oregon performance pay plans