Anatomy of an "Historic" Public-Sector Pay "Freeze"


One of the reasons why local and state governments everywhere are broke is because they spend too much (yes, it's true).

Here's a concrete example that I'm sure is typical.

The Lakota School District is the second-largest district in Southwest Ohio. It serves about 19,000 students and has just completed a deal that "stipulate[s] two consecutive years of no across-the-board raises for its teachers. It also calls for teachers to pay more for health benefits."

Some relevant facts, supplied by the Cincinnati Enquirer:

The district is facing a $10 million deficit in 2012, despite having cut about $13 million in spending over the past two years. The contract just signed expires in June 2012.

"Since 2004, Lakota has seen four of its five operating tax ballot issues rejected by voters. The last one to win approval was in 2005."

"Teachers will increase their health-care costs in the first year to a 15 percent of the expense and to 20 percent in the second year. Teachers currently pay between 10 to 12 percent of the cost for health benefits."

The contract also suspends reimbursement for tuition if teachers go back to school for an advanced degree.

"Contractual 'step increases' are not affected by the contract but union officials said that 32 percent of the union's members are not scheduled for step raises during the new contract. Step increases are based on individual teachers' experience, certification and instructional."

"The average salary among teachers in the 1,190-member Lakota Education Association is $59,000. The statewide average is $55,600."

That's somewhat slim info, but let's break it down.

The taxpayers are slow to increase their tax rates, but not completely against it (one tax increase in the past several years, despite annual attempts to jack rates). There is yet another levy on the November ballot, which would cost about $242 per $100,000 of housing value. The increase will be in place for 10 years.

The district has cut 52 teaching positions over the past couple of years, out of about 1,243 (a 4 percent reduction) to start with, and threatens a "possible reduction of "130+ additional teachers and staff" if the new tax isn't passed, along with "massive" cuts to sports programs and "eliminating some" academic programs and reducing bus-service levels to "lowest levels allowed by the state." According to this, the district currently has a total of 1,725 FTEs, so cutting 130 from that would amount to about 8 percent of total staff.

"Step increases" aren't part of the freeze and based on what's above, fully 68 percent of faculty are in line for bumps upward. So that's a pretty mild frost.

Paying 20 percent for health benefits could represent up to a 100 percent jump from where some teachers are today. For those of you in the private and nonprofit sectors, what percentage of your health benefits are you paying? My experience, perhaps not typical, is 25 percent of the premium is paid by the employee, who then kicks in 50 percent for covered dependents.

Teachers will be expected to fund their own continuing edjumication for at least the next 24 months but, based on contractual "step increases," they will then get pay raises.

The teachers there are paid well compared to their counterparts. The district has consistently ranked in the highest performance category in Ohio yet spends less per pupil than the state average.

There's no mention of pension contributions. Ohio public-school teachers do not pay into Social Security but must contribute 10 percent of their salary to a retirement fund, which is matched by the state at between 12 percent to 15 percent (I've seen various numbers reported) in a defined-benefit plan.

According to this somewhat murky chart (which even comes with alt-text telling you to call the treasurer's office if you can't figure it), it looks as if "per-pupil income," the total money the school gets per student from the state, has risen from $2,331 in FY2000 to $3,325 in FY2008, a 43 percent increase.

Which is another way of saying that, compared to the private sector, the brave folks who crafted this "historic" agreement have yet to start seriously cutting. The overall budget for the school district is over $235 million, so cutting another $10 million from that budget, assuming all the cuts were coming in a single year, amounts to, what, 4 percent? Isn't it about time (or, more accurately, well past time) that schools start cutting sports budgets?

I'd say the teachers signing on to this contract is smart politics. They've consistently delivered a quality product relative to other districts and if they look good by "freezing" two years' worth of cost-of-living increases (but not "step increases"), they can lock in 10 years' worth of new tax revenue, all without cutting any sports (yay!) or any more teachers. Or administrators or janitors or anything.

The real question is whether voters will be tough enough to inflict the same discipline on the public-sector that the recession and general innovations in business have dealt to the private sector. Over the past two years for sure but also over the past 10, 20, or so years, we're all doing more with fewer workers. That's called increased productivity and it ultimately means individual workers get paid more (because they're worth it). What it shouldn't mean is that the public sector gets more overall. As my colleague Matt Welch is fond of pointing out, we take for granted increases in productivity and service in the private sector. There's no reason not to demand it in the public sector as well.

Take it away, Riff Randle, Vince Lombardi High, Class of '79: