February 23, 2009 was probably the worst Board of Education meeting I ever attended as a Trustee.
And that’s saying something because I attended a slew of bad ones.
That night seven years ago the Grosse Pointe Public School System Board of Education voted on a policy change to allow staff members who did not live in the district’s famously closed borders to attend GPPSS schools. (Here’s a C and G Newspaper article covering the meeting.)
It was a night I would prefer to forget, but here seven years later the current GPPSS Board of Education is set to vote on essentially the same proposal later this month (district FAQ here). This one is controversial and as tempers rise (and they are), the flood of memories came back.
The parallels and circumstances are worth exploring. Seven years ago the state economy was sputtering and school districts were under the constant threat of funding reductions or hammered with rising retirement funding costs. In 2009, that anxiety was well placed as massive cuts in state revenue to GPPSS blew multi-million dollar holes in our budget.
Under these circumstances, the Board at the time looked at one miserable and unpopular option after the other. Cafeteria services were outsourced and the same fate awaited the district’s custodians, but they took heavy concessions of their own to avoid it. The middle school bell schedule reduced from seven to six periods, which cut about a dozen teachers’ jobs. Athletic participation fees were levied, which itself triggered a recall campaign against five Board members. Taxes were raised in the form of the Sinking Fund, which allowed the district to siphon $3 million out of the General Fund. Technology spending was slashed to practically nothing.
All of these were efforts to mitigate the negative impact on teaching and learning, but we can see now that some have had long-term negative effects. Many topic for other articles, so let’s get back to non-resident staff issue.
The cavalcade of controversial issues ratcheted up the anger of the community. The prospect of increasing revenue by allowing non-resident staff to send their children to GPPSS schools was attractive to me. We implicitly trust our staff with our children. Allowing them this privilege while increasing district revenue to stave off some other unpopular cut seemed logical to me.
But reasonable people can disagree. This proposal induced some of the most intense opposition I ever saw – or rather experienced. Going into the meeting I had made it clear that I would be supporting the proposal as did then Board President Alice Kosinski. As a result, the public comments preceding the vote were directed squarely to Alice and me.
It’s the most unfortunate aspects of Board service, but in those moments when a crowd is bound together by an issue that angers them and they get a chance to get their licks in, it is simply a miserable experience to be on the receiving end. On February 23, 2009 the opponents of this proposal hammered Alice and me.
Nevertheless when the time came to vote (minutes here), Alice and I voted in favor of the policy change, but the other five trustees (Joan Dindoffer, John Steininger, Fred Minturn, Ahmed Ismail and Judy Gafa) voted it down – and it has remained down since then.
But there is a larger issue involved here that has direct parallels to the 2009 drama. Try to stay with me and I’ll try to avoid getting too wonky.
It was after that vote in 2009 that I had had enough of the annual cycle of projected budget deficits followed by five or six months of unpopular deficit mitigation efforts. It was tearing the community apart and there seemed to be no structural means of ending the horrible cycle.
This was the genesis for the contract agreements of May 2010, a topic which regular readers know I reference frequently. Please review the narrative history of the topic for more background.
The short, short version goes like this. The vast majority Michigan school districts’ financial fate is dictated by the state and to their local enrollment. 85% of the operating budget is bound to employee compensation and for the vast majority of Michigan districts’ enrollment has declined (good read on that here.) The only real way to create a perpetually and structurally balanced budget is to establish a direct relationship between state funding levels, state established retirement rates, salaries and healthcare costs.
The May 2010 contract did this, and as the district experienced tremendous budget contraction, employee compensation had to be adjusted down. The contract governed this.
The successor agreement, reached in March 2013, maintained this mechanism, but with more moderate parameters – specifically fund equity levels could be lower than the 10% target set in the May 2010 deal.
In practical terms, this clause takes form in this way. A General Fund Equity target is set in the contract for the fiscal year that ends in June. The actual ending fund equity is determined by the annual financial audit that is received by the Board in late October. The administration and Board are supposed to review the audit’s fund equity against the contract’s targeted fund equity.
If the audited result shows fund equity below the contract target, two aspects are to be evaluated. The first is the state revenue (from the per pupil Foundation Allowance.) If the state has reduced the Foundation Allowance and the fund equity target is not met, this would allow the Board to trigger the clause and reduce employee compensation. The logic is simple. If the state pays us less how can we afford to pay the same as before?
The second aspect is the state mandated retirement rate, which is a percentage of employee salaries. The March 2013 contract set a benchmark that the state retirement rate would be 24.46%, which means that for an employee earning $50,000, the district pays the state $12,230 that that employee will later benefit from in retirement. This year the district estimates total state mandated retirement costs will be $13.9 million. You can understand why this rate is a big deal. It’s 14% of our budget. Even a 1% increase in the state retirement rate will increase district costs by over $500,000.
It just so happened that this was the result of the 2015 fiscal year audit. The contract specified a fund equity target of 9.34% and the audit showed that it was actually 7.8%. Since actual year end fund equity was more than 1% below the target, the two key aspects should have been reviewed.
The Foundation Allowance was not reduced, so there was no issue there. However, the retirement rate came in at 25.52% which is above the contractually specified rate of 24.46%.
Given these conditions, the Board was supposed to have reviewed the options with the bargaining units to discuss means of bridging a roughly $530,000 gap as defined by the contracts. One aspect of that discussion might include a review of the 1.8% raise employees are due to receive next year (on top of the 1% this year). One option available to the Board would be to simply say that the employees would have to forego 1% of the aggregate 2.8% increase that otherwise would be due to the employees. Another options might be for them – officially – to do nothing and hold the employees harmless.
But an odd thing has happened – or rather did not happen.
All of these discussions about the contract, the clause, the audit never officially took place among the Board of Education either in open or closed session. It very well could be that unofficial or private discussions occurred, but none of us in the voting public have any way of knowing that. This is why we have Sunshine Laws such as Michigan’s Open Meetings Act. These laws protect the voting public against closed door decision making by elected officials.
I have never received a straight answer to this simple question that I posed to both the Board and administration: Did the Board of Education make a decision by vote whether or not to invoke the contract clause as was their right?
Let’s leave aside the question of whether the Board should or should not have invoked the clause. That’s NOT the main point. It’s clear that not only was no decision or vote held on the topic, but that the issue was not even discussed as a full Board in accordance with the contract specified timeline.
See now the relevance of the non-resident staff policy change proposal, which is a direct response by the Board to renewed budget constraints. Whether this configuration of the Board approves this policy change or strikes it down as the 2009 Board did, the issue has angered and will anger the community (see the many emails the Board is receiving on the topic). The positive potential financial impact of this policy might be $200,000 a year at best (my estimate). Meanwhile the Board did not even discuss a contract issues that would address about $530,000 of budget.
Buckle up, Board members, because this is gonna be a rough ride. And if you march down the same path that your predecessor Board’s did from 2003 to 2010, you may find yourself contemplating the same question I did the night of February 23, 2009.
“How can we end this community divisiveness we incite by proposing one unpopular decision after another to financial issues that are all essentially in the state’s control?”
After literally years of contemplation and analysis, my conclusion took the form of the May 2010 contract that acknowledged the reality that three main things dictate our financial reality – state sourced revenue, state established retirement rates, and our locally negotiated employee contracts. Bind those three together to gradually reach equilibrium, which is the path the district has been on for six years now.
But by abdicating their responsibility dictated by the contracts, the current Board thinks they have a better idea.
We’ll see on May 23rd if the voting and taxpaying public agrees with them.