Midland (Michigan) Public Schools (MPS) is struggling with how to establish fixed costs (via employee contracts) against a backdrop of decreasing state aid and increasing retirement and health care costs. An arbitrator is now trying to mediate a deal.
To allow their new contracts to cope with these variables, the MPS Board of Education proposed what the arbitrator referred to in the report as the “Grosse Pointe formula,” a direct reference to the agreements we have established locally. I’ve written about how our contracts work many times and presented on the topic at Board meetings. The MPS arbitrator described it as follows:
The “Grosse Pointe formula”…provides for teachers sharing in the increase or decrease in foundation allowance revenue, with adjustments for pension costs and step increases, and further adjustments if the fund equity falls below 10 percent or increases above 15 percent. The district proposes making this formula a permanent part of the parties’ contract.
This is a fair summary that, by the MPS’ Board’s calculations, would yield a 7% salary reduction for teachers. This is a district that has already experienced real pain. The report shares that MPS has closed five schools, teacher ranks have been reduced by 40%, but despite that the report offers a familiar refrain.
The savings [from these cost cutting efforts] has, however, been more than offset by dramatic increases in the pension contribution rate the District must pay into the Michigan Public School Employees Retirement System (MPSERS).
This is precisely why what is now being referred to as the “Grosse Pointe formula” makes so much sense. Why shouldn’t employee total compensation adjust automatically to account for increases in indirect compensation, such as retirement, that benefit those same employees?
The arbitrator does not see it that way, however. Why? She admits that “it is challenging to analyze the financial information, because so many factors have been changing simultaneously.” This is why we have built our GPPSS Budget Modeling Utility, to address this very problem, dismissing the “Grosse Pointe formula” by saying:
I am not recommending a specific formula for the parties to use in future years, although they could use the same general approach… It is not possible to predict what will happen with State funding. However, the State’s economy has begun to recover… I do not think the “Grosse Pointe formula” would be the best option for the district. It was not clear from the exhibits whether Grosse Pointe is experiencing the kind of enrollment loss which Midland is.
The very reason he does not opt for the “Grosse Pointe formula” (“not possible to predict State funding”) is the VERY reason TO adopt it. And maybe the State economy IS improving. If it improves to such an extent that Fund Equity increases, then it all works out as well. But to cite enrollment differences is downright silly when earlier in the document the MPSERS issue is properly cited as Midland’s biggest problem.
So what did the arbitrator propose as an alternate to the “Grosse Pointe formula”? What model is better in his eyes than a system that adjusts compensation to variables beyond local district controls?
- 2% salary reduction
- One unpaid furlough day in 2011-12 and two in 2012-13
- a range of 1.75% to 3% health care cost sharing
- increase class sizes
The arbitrator’s summary point regarding the MPS Board’s salary proposal was that it “did not adequately recognize the ongoing reductions in staffing can continue to achieve some of its needed reductions in expenditures.”
So in direct response to rising retirement costs, this arbitrator has determined that having fewer school days (furloughs) and increasing class sizes is what’s best for the students of Midland, Michigan – all while hoping against hope the State economy improves and Michigan’s $38 billion unfunded pension liability gets closed fast.
Really?
I’ll take the “Grosse Pointe formula” over that any day.
2 responses to “Midland report references “Grosse Pointe formula””
Dear Mr. Walsh,
Thanks for sharing the interesting decision that the Fact-Finder makes. You like our formula better than relying on MERC’s Fact-Finding, but if the GPEA had held out for Fact-Finding instead of signing onto a funding formula, we may have ended up having very different results: increased pay and/or more control over school board spending. Instead we have a politically charged and fearful environment for school employees.
Please note:
-Kathleen Opperwall, the MERC Fact-Finder is a female.
-She doesn’t get to decrease the number of school days, as legislation currently mandates that districts can’t further reduce the current number of calendar days the students attend. Likely the furlough days will be taken as unpaid snow days, or in the event that the winter is mild, unpaid “record” days, when teachers in MPS will likely be working anyway, as many of them are at home on snow (and weekend, and vacation, and so on) days, if they were lucky enough to have taken home their work the preceding evening in anticipation of such an occurrence.
-If we could trust Lansing to fully fund public education and if we could trust that all school district leaders would act in the best fiscal and educational interest of their employees and students, then formulas might make sense. In the real world, having the formulas and the current anti-public education legislation in tandem doesn’t make the GPEA members feel valued as the professionals, who provide the best public education available in our nation. Having formulas politicizes every financial decision to the point that we should all be fearful that the students’ best interests will get lost in the conversation. Our working environment is your children’s learning environment.
Respectfully,
Ranae Beyerlein, PhD
Grosse Pointe Education Association President
Thanks for the comments, Dr. Beyerlein. Of course you’re leaving out a few key details:
1. In our current agreement, you asked for, and the Board agreed to, two additional salary steps at the top of the salary grid. This was one top of the very high number of steps and lanes in our salary grid that has led to a very favorable position for your members. So the deal you negotiated did indeed deliver wage increases to a large percentage of your members.
2. That same agreement also delivered millions of dollars (out of fund equity) to fund early retirement incentives for your members.
3. The retirement investment the Board makes on your members behalf, driven by the MPSERS system referenced in the Midland fact finder’s report as a root cause of their problems, has increased by thousands of dollars per each of your members and is on a path to increase even more. Refer to my many other posts on MPSERS for more specifics.
4. Lastly, this years marks very likely the first time the Board has asked formerly for budget ideas from our employees, a clear sign of interest from the Board.
5. I see you didn’t reference the fact finder’s suggestion to raise class sizes, something even the Midland board was ready to do anyways. I’ve received quite an earful from your members, and parents, to keep class sizes lower.
It’s funny how we were such miserly spenders before this deal was agreed to overwhelmingly by all sides when the Board was accused of hoarding fund equity, but after the deal that everyone knew was formula dependent and that flowed millions to your membership, we cannot be trusted to manage money.
This is the tired narrative to which I have previously referred. And note that I call the narrative tired, not me. I have plenty of energy.
As always, thanks for the dialog.
Brendan