Budget Thoughts Part 1

It's been a while since I last posted, and to both of my regular readers (Hi mom!) I apologize.

As we approach budget season, I thought I would address some of the issues facing the district and some of the questions being asked of me by residents.

(The usual disclaimers apply.  I do not speak for the Board of Education or for the CCSD.  I speak only for myself as an individual Trustee on the Board. Shake before using.  Refrigerate after opening.  Your mileage may vary, etc.)

First, what was presented at the January 24th Board meeting is NOT the proposed budget for this year.  It was simply a preview of what the "rollover budget" would be.  A rollover budget is simply to take the exact programs we have this year and coupled with known contractual obligations project out what it would cost to keep things exactly the same.  The numbers for that were sobering.  They would far exceed the tax cap.

The budget presented tonight (February 27th)  is a first draft.  It called for an approximate 2.34% ($2.6 million) increase in the tax levy, well within our cap limit of 3.9%.  When asked by the reporter for the Examiner after the meeting if I like tonight's proposal, my response was that it is too soon to form an opinion.  Until we see the details and until we can put the dollar figures in context, it is premature to decide if it is the best budget we can submit to the voters.

Do I like the dollar amounts? I think that it is very important to come in under the tax cap number.  (More about that in a few paragraphs.) This budget does that.  Would I like to see the number be even lower? Yes, but at what cost? The need for fiscal restraint can only be considered withing the context of the proposed academic program.  Without getting into a long discussion about real estate values, taxes and the schools and how they all interrelate, I think the primary driving  factor for a majority of Chappaqua residents as to why they live here is the value proposition of the schools.  Said a little differently, the bigger picture fiscally prudent thing to do is to protect real estate values by continuing to offer the top academic program we can.

In tonight's presentation, John Chow, the Assistant Superintendent for Business pointed out that we are ranked 13th out of 46 in terms of per pupil spending in Westchester. I contend that per pupil spending is a good proxy for an efficiency measure if you consider it in context.  Arguably, we have the top school district in the county while only spending the 13th most per pupil.  It is easy to lower your per pupil spending if you are willing to cut programs and staff.  To have the broad and rich offering we do while not being even in the top 10 in spending is a testament to efficiency.

But why are taxes so high if we are only spending 13th in per pupil spending? That is a direct function of the mix between commercial and residential real estate in our tax base.  Most towns have a commercial tax base that effectively subsidize the schools.  In Chappaqua, we have one of the lowest commercial tax bases in the county.  Couple that with the fact that a good portion of our commercial tax base are condos that often have children in the schools and our commercial base can even be a drag on taxes (See the District's response to the Chappaqua Crossing DEIS for a detailed explanation) rather than a subsidy.

One thing I am happy about is that the administration, with this budget, demonstrated fiscal restraint in that they did not look at the tax cap as being a floor, but as it being a ceiling.  Over the next month and a half, we will get the details of the budget and I can form an opinion as to whether I think we are allocating our precious dollars in the most appropriate way.

A huge positive that came out of tonight's Board meeting was that in response to my question about listing any program that was being affected as a direct result of a budgetary decision (as opposed to an academic appropriateness decision) was that there really were no programs that were going to be cut.  That is a testament to the administration, the CCT and the Board all agreeing to be partners in the district and reaching a fair compromise on a two year contract for the CCT that saves the district $1.5 million over the course of the contract versus Triborough.

Parenthetically, it is important to note here that while the legislation passed last year is often referred to as the 2% tax cap, that is misleading.  It is a tax cap.  The 2% number is a baseline.  There are exceptions and there is a multiplier for growth so that the actual cap could be as high as 4% or more.  Also note that this is a cap on the tax levy, NOT the rise in taxes nor on the change in the budget.  While those two are related and intertwined, they are not the deciding factor in the tax cap.  Also understand that in a period of declining assessed real estate values, that while the tax levy cap may be 2% or may even stay the same, your individual taxes could still rise more than the amount of the change in the tax levy.  Following so far?

In my opinion, even if we think we can pass a budget that would exceed the tax cap, it is inappropriate to do so until we get to the point of being academically insolvent.  I define academically insolvent differently for Chappaqua than I do for New York State schools in general.  The term typically refers to the point when a district has cut every optional program, has used all of their reserves, and now cannot afford to even pay for required mandated state programs.  The State of NY requires certain amount of phys ed, english, social studies, math, etc to get a degree.  There are many districts in NY State that will be insolvent within two to three years.  For Chappaqua, I define it as the point we have to start dismantling programs against our wishes.

Budget and Contractual Obligations

The district starts its budget process each year with a zero based budget process.  We look at the district and assume nothing.  We look at it as if we are starting a new district each year and what would we put in our program if we were starting from scratch.

But, to be honest, while we may claim we use a zero based budget process and build it from the ground up, that is over simplifying the actual process.  Also, now that there is a tax cap, it almost flips the concept.  We now know what our ceiling for spending will be and we have to work backwards to see what fits under the cap.

It is over simplifying the process because for many reasons we cannot start with zero.  One, there are the previously mentioned state mandated programs we need to include. Two, there are contractual obligations that are in place as long as we are an operating school district such as transportation of students.

When building the budget, we know what our contractual obligations will be.  We also know historically what percentage of the budget is allocated to what items and because most of that is contractual, we can build almost all of the budget from that. The biggest contractual obligation is staff compensation.

We are currently in negotiations with all four of our bargaining units.  They are the Chappaqua Congress of Teachers (CCT), the Administrators, CSEA (Civil Service jobs) and COSA (clerical staff positions). Tonight, following yesterday's ratification by the CCT, the Board of Ed unanimously approved the terms of a Memo of Agreement (MOA) with the CCT that sets the financial arrangements of the next contract.  We are still negotiating some of the other language and work place conditions of the contract.

Later in this post I get into a discussion about the Triborough Amendment to the Taylor Law.  Now, know that the CCT has taken a major conciliatory step towards meeting the taxpayers half way between Triborough and a freeze.  There is no doubt that by their actions they are indicating their partnership with the district and its residents to work together to maintain the academic quality, the rigorous course offerings and the culture of learning in the schools.

Before I write one more word, I think it is important and appropriate to note that one of the aspects that makes the CCSD such a high ranked school district is our culture.  Part of that culture is emphasizing good relations between the district and its unions.

There is no question that I am not talking out of turn when I say that in my six years on the Board I have never seen either the Board or all four of our bargaining units waiver from a student first viewpoint.  That is true of the administration and CCT, but equally true of our clerical staff and our custodial and maintenance staff as well.  For example, as a member of the facilities committee, I see how hard our custodial and maintenance staff works and what a great job they do.  As a resident, I have seen numerous examples of the members of the CSEA stepping outside of their duties to help students both academically and personally.  I have seen members fix flats on student cars, have seen them stay late to accommodate a student theatrical production or a student meeting.

Historically, compensation has been around 75% of the budget, although that number is threatening to  creepi higher in recent years.  Let's use 77% for this year's hypothetical budget because the 38% increase in pension payments and the increase in health care costs to the district are in excess of the increase in payments our staff will pay.  Transportation, with rising gas prices will be about 7% of the budget.  Debt costs, net of savings from the energy performance contract, will run about 5% of the district's budget.

So, we already know that 90% of the budget is spoken for.  If we assume another 5% goes to operations and maintenance we are left with 5% of the budget being "discretionary".  But what is really discretionary?  We need to buy items such as text books (paper or electronic), supplies, technology, security, etc.

So how do we actually control the budget?  Through programs.  What non-required classes are we going to offer, what are the maximum and minimum sizes of those classes, what extracurricular programs are we going to offer and how is that going to be paid for (taxes or "pay to play").

Simple math tells you that if there is a cap on the increase in tax levy of say 3% adjusted, and 94% of our budget comes from the tax levy, if the sum of compensation, transportation and debt service rises by more than around 3%, we need to cut something.

That something is programs.  Also, we could try to find ways to provide the same programs in a more efficient or cost effective manner. Since compensation is almost 80% of the budget, that is where the majority of adjustments must be made to stay under the cap. Since salaries are collectively bargained and contractual, we cannot simply or unilaterally freeze salaries or even cut them.  So, the mechanism for controlling the total compensation line of the budget is a blunt tool, it is controlling the number of programs/staff.

For the teachers, because of State tenure rules, the only way to reduce staff is to eliminate a program.  In some cases, programs are eliminated because of enrollment.  For example, one year we may need one fewer 2nd grade teacher because enrollment dropped such that we can still maintain class size within district contract and policy while reducing the number of sections offered. Sometimes, even with a declining enrollment, unless we redistrict the elementary or middle schools, because the decline is spread our among the multiple schools, we are unable to take advantage of it for cost savings.  Another way would be to say we are dropping a program altogether such as the Spanish program at the high school or we are cutting kindergarten to a half day program.  (These are hypothetical and NOT actually proposed ideas.)

Another reason controlling the compensation through program adjustments is a blunt tool is that we as a district do not control which teaching staff member from a department or area of expertise is going to be cut. It is simply a LIFO (Last In, First Out) or FISH (First In, Still Here) system. Know that while I think there are valid reasons to put job security protections in place for certain staff, I would prefer that layoff decisions mimic hiring decisions in that we want to keep the best regardless of experience, salary level or any other metric other than a performance one.

To take a small digression, there are many problems with that system of layoffs beyond the fact that it does not take into account merit or effectiveness.  One, in these times of economic hardship coupled with the tax cap, we are not only not hiring less experienced teachers, we are laying off ones too.  This is creating a mid-term problem of not having a core group of teachers with between 3-8 years experience.  As teachers retire over the next 5-10 years, we will be drastically reducing our average years of experience for teachers.  Like any business there is an appropriate mix of lots of experience, middle levels of experience and newer staff.  Certainly in teaching experience does matter.  Teachers learn and grow as they become more experienced. Having experienced mentors in their school or their department is also a critical component of teacher growth. We don't want to lose an entire generation of possible mentors.

Also, less experienced teachers, those laid off first, are naturally paid less than more experienced teachers under the step plus salary increase compensation plan. So, we may be forced to lay off 3 less experienced (lower compensated) teachers for every two more experienced teachers.  The implication is that program cuts have a sort of multiplier affect on staff layoffs.

Triborough Amendment to the Taylor Law

The Taylor law is a law enacted by the state legislature that legally forbids police, fire personnel and teachers from striking.  Forbidding a union from striking takes away one of the union's most effective bargaining tools.  The legislature was persuaded to compensate or protect the unions for giving up the right to strike by passing the Triborough Amendment to the Taylor Law.

The Triborough amendment essentially says that in the event that bargaining in good faith fails and no new contract can be agreed upon at the end of an existing contract that the terms of that expiring contract will remain in place until successful conclusions to negotiations lead to a new contract.  Over time, the courts interpreted that to mean that while there will be no salary increases when Triborough is in effect, the continuation part means that step increases will continue to be implemented each year.  Also, the contribution to health plans stays frozen at whatever level was in effect at the end of the expired contract and any non cash terms such as work rules and other contractually agreed upon items remains the same as the expired contract.

What does that mean to us here in Chappaqua? Well, using the CCT as an example since they are by far the largest of our bargaining units, the average teacher, or the average step increase would be 2.68%.  To be fair and to be clear, not every teacher gets a step raise every year. The step schedule includes a few breaks in the mid teens number of years and stops altogether after a certain number (long term) service to the district. So, while the step increase is around 3% when it is relevant, since not every teacher gets one, the average is 2.68%.  I think it is also important to point out that step increases generally help the less experienced teachers more than the experienced ones.

Triborough seems to create a floor for compensation not at freeze levels, but at a RAISE of 2.68% per year.  In tough economic times like the ones in which we live, there appears to be no incentive for a union to settle for anything less than a raise of 2.7%.  To be fair, in good economic times, the district has that incentive to keep raises to a minimum and be at Triborough.

But, that is theory and while it may be how it actually works in other districts, it is not necessarily how it works here in Chappaqua.  That brings me full circle to the district establishing favorable work environment with its staff.  For example, in good times such as when we first signed our last new (not amended) contract with the teachers 5 years ago, we agreed to terms that were about double what Triborough would have been.  Not only were the step increases in place, but we also gave salary raises of about 3.4% too.  We could have come to no agreement and forced Triborough, but we did not.

Now, with the tax cap and with stagnant real estate prices and inflation being low, in order to preserve programs and even expand them, the only way to do so would be if our unions agreed to accept less than what Triborough guarantees them.  That is not to say actual salary cuts but, rather, less of an increase than they could demand legally.

I am precluded from speaking directly about current negotiations for both contractual and practical policy reasons.  As per above, the Board strongly believes that maintaining good relations with our unions comes in part from not negotiating in public.  We prefer to look at our relationship as a long term one.  We focus on our aligned interests, that of providing the best education to the students of the district.  Of course, where we differ, when we do differ, is on appropriate compensation levels.

Let me restate the good news I stated above.  The CCT and the district have agreed to financial terms of the next contract via a signed MOA. The members of the CCT agreed to accept less than State law mandated.  Both the CCT and the district have made major concessions so that we can continue to work jointly toward our goal of preserving and even growing the already rich academic program.  By accepting about a 2/5th haircut to Triborough, the CCT has allowed the district to materially reduce any staff reductions and program reductions we would have had to make in the absence of this compromise.

The CCT leadership and the administration (in conjunction with the Board of Ed) were able to sit down and have substantial discussions about the future of the district, about the financial issues facing the district and about creative ways to solve them.  By putting aside the larger rhetoric coming out of Albany and various interest groups, we were able to focus on what is important and best for Chappaqua.  I strongly believe that through this extensive discussion process the district and the CCT undertook has put us on a joint partnership path towards finding mutually acceptable solutions to our financial constraints going forward.

To use the CCT as a demonstrative example, compensation comes in four areas.  One is cash salary.  That is the amount a teacher is paid per school year.  Second, is the district's contribution to the state mandated defined benefit pension plan.  Third is the district's contribution to an employee's health insurance plan.  We also have to consider what benefits that health plan provides such as deductibles, co-pays, prescription benefits, etc.  The fourth part of compensation are other benefits.  Some of those are hard to quantify.  Some are not universal to all four unions.  For example, the CCT has a ten month work year with about 4 weeks of paid vacation during the 10 month work period.  All the unions have provisions for sick days and personal days.  Look at the contracts closely enough and you will find that one union even has a paid day off for their birthday.

To be fair to both the district and the bargaining units, locally, we really only have control over 1.5 of those 4 areas.  1.0 is salary or cash compensation and the other 0.5 is the percentage of health care contribution.  There are of course some local work condition items we can negotiate locally such as work hours or working conditions (number of students per class, custodial staffing levels on snow days, etc)

In theory, one way to rollover or keep every program we have this year next year would be with a salary freeze.  We will pay you exactly what we paid you this year, next year.  But, Triborough says that can only happen if it is collectively bargained that way.  We cannot unilaterally impose wage freezes like a private sector employer could.  So, to put it in trader parlance, in theory, the opening market for negotiations would be the district bidding freeze and the unions offering Triborough.  They could theoretically ask for more than Triborough, but the district would not be compelled in any way to pay more.

With a two sided market of freeze bid, offered at Triborough, it would appear that the bargaining units have the upper hand because in the absence of an agreement, Triborough (2.68% increase) will be imposed.  However, that assumption presumes that the only goal of the bargaining unit is pay increases.  This is where having a good working relationship with our bargaining units can show quantifiable results.

This week, the CCT demonstrated that their goals are broader and more in line with the residents than simply maximizing salary over the short term.  They recognized that program preservation and thus job preservation is in everyone's best interest.  They recognized that long-term financial sustainability is in their interests as well as the taxpayers.

I can unequivocally say that the Board of Ed and the administration respect the teachers as individual teachers.  We are proud of having the best faculty anywhere.  Our teachers are dedicated, hard working and selflessly working for the district's students.  I can also say that the CCT leadership is appreciative of the district's financial limitations, are creative in working towards solutions, and recognize that the real goal is providing the best academic experience we can for the students in the district.

Personally, I think it is a meaningful sign that the CCT views themselves as partners with the district by compromising on a contract that is somewhere between a freeze and Triborough.  Accepting less than is legally guaranteed (Triborough) is a real concession on the part of the CCT.  And, while it is not without a small part that is self serving (possibly saving jobs and programs), it is really benefiting the students.

I also have to add that were any of our bargaining units to accept terms that are less than Triborough, it is a big risk for that bargaining unit because they are under pressure from their own state union leadership to hold the ground.  Do not underestimate the pressure on local unions to hold onto a system that may not even be in their own best interest, but that guarantees certain short term benefits. Do appreciate how
deviating from the state union's leadership is a true sign that the union is partners with the district, not adversaries.

Let's face it, school budget issues are present in every school district in the state.  The district's staff all live in school districts that face the same issues we do.  They pay high school taxes in their districts too.  They understand both sides of the equation because they live on both sides.  Residents that simply complain that the unions are "not living in the real world" or are "blind to the issues" are, quite frankly, ignorant or willfully being misleading.

Other Budget Issues

So how do we keep the budget under control other than through staffing levels?  Well, there are several options.  We continue to seek ways to be more economically efficient.  Starting next year, our elementary schools will join with our middle and high schools in going to a six day schedule.  We will also be extending the class day at the elementary schools by a half an hour a day.  The six day schedule and the extra half an hour will give the students materially more instruction time, will allow us to be more flexible when pulling students out of classes for individual instruction, will allow us to expand some of the specials, and, not insignificantly, it will allow us to schedule staff development days (half days and full days) on Fridays so that the entire family benefits from an extended weekend rather than a midweek interruption.

(Next year's school days schedule was recently approved and can be found here on the district website.(pdf)  It is a material improvement over this year's although to be honest, the Board has little control over a lot of it.  There is a two week vacation over Christmas/New Year's, there is a full week off in February, another full week in April, a four day Memorial Weekend, and staff dev days will be on Fridays allowing for several 3 day weekends.)

Another option is to cut out facilities maintenance.  That is a short sighted decision that is really a non-starter. It would make future budgets even more difficult. It is the exact approach we have spent over a year fighting with BOCES about.  After putting off needed maintenance, the component districts are now faced with $18 million in repairs.

We could go to a "pay to play" model for all extracurricular activities including, sports, theater, clubs and organizations.  We may one day have to resort to that, but that is a last gasp measure.

Bottom Line

What does this all mean? I can talk in circles about the budget and the theories behind the creation of a budget, about negotiations, about partnerships, about anything at all, but the bottom line everyone asks the Board Members and the administration is, "How does this affect me?"  For about half, that means what is going to happen to my taxes next year, and for the other half it is a two parter, what happens to my taxes and what happens to my child's education.  How does it affect my child directly.

I can safely say here that the Board, the administration, the teachers, and all of our staff have as their primary goal, working together to provide the best education, the best environment for learning and the best overall program.  More directly, the district and its unions will work together to find a way to reach financial compromises that will ensure that we continue to offer the best public school education, that we continue to innovate and stay on the cutting edge of teaching and program offerings, and that we will stay below the tax cap mandate.