February 2022

At San Diego Schools we believe the interests of parents and kids should have the highest priority in every action taken by a school district.

Payroll cost is the largest part of every school district’s budget. By far. Pay and benefits are typically 80 to 90% of every district’s costs.

With funding always tight, any decision affecting those costs – even by a few percent – can have significant impact on funds available for programs and services for kids.

Balancing the needs of employees with the needs of kids is difficult but important. Perhaps the most important responsibility of any board member.

Decisions with such consequential effect need to be made with all data available, to all Board members as well as the public. To help in this we’ve made a summary of key considerations that are critical to know in the course of making decisions on compensation agreement changes.

Legalities

All proposed settlements with employee groups require the district file a Collective Bargaining Disclosure (“CBD”) with the County Office of Education (“COE”), per CA Code 3547.5 (a)

If a district’s budget has certified positive, the COE’s role is simply advisory, they will review the settlement and note any issues they may feel should be considered.

Districts in “qualified” budget status have some more specific legal requirements that apply (per CA Code 3540.2) 1) CBD must be filed at least 10 days prior to presentation of that settlement to the Board for approval (3540.2 (a))

Settlements that “would endanger the fiscal well-being of the school district” require each parent organization of the district be notified within those 10 days (3540.2 (c))

Does your district do this? Has it ever?

Regardless of budget certification, the CBD requires, on page two, item C, that the district provide “the specific impacts on instructional/support programs to accommodate this settlement”

Given the Board’s responsibility to balance the interests of employee groups with the interests of kids, it would make sense to know if a settlement will result in a requirement from the COE that budget cuts (often called “budget solutions” in edu-speak) be made so that can be factored into the Board’s decision.

A sample of this document is available from the State’s Fiscal Crises Management Team (FCMAT) here.

After submission of the CBD to the COE, the COE will respond with an analysis, called the “Response Letter”. This response letter should be disclosed to the Board as well as the public in any public hearing. The COE analysis may confirm the district’s projections, or it may contain observations or highlight issues that should be considered as part of the approval process.

In San Diego County, the Office of Education maintains a repository of these documents here so you can see samples of them – scroll to bottom, “More To Explore”, “District Correspondence PDF’s”.

If you are presented an agreement for approval without the COE response letter, you do not have all the information you need to make an informed decision. We recommend you obtain a copy before any vote is taken.

Budget and Projections

Revisions to employee compensation agreements can often cost millions of dollars. In districts with financial challenges adding that cost can often trigger a need to make cuts – from other employees or our kids.

All Board members owe it to their district and their kids to make sure they fully understand the current financials of their district as well as the impact any new settlement may have prior to making a decision.

If you don’t have the key data elements below available, ask staff before making any decision.

1) What is the current fiscal status of your district?

Is your budget considered “Positive”, “Qualified”, or “Negative”? More on that is available from the California School Board training guide.

2) Is your district running a structural deficit?

If normal annual spending exceeds revenue adding extra cost will likely require cuts somewhere.

3) What does the District’s Collective Bargaining Disclosure show?

Has this document been disclosed to you prior to the meeting to allow for discussion?

4) What does the multi-year projection (MYP) show?

Districts are required to project their ability to maintain a state-mandated “Reserve for Economic Uncertainties” for the current and two following years to be certified “positive”.

5) How does the proposed agreement affect that projection?

The last MYP usually does not include the cost of the settlement being proposed – because it has not been approved. Ask your district what impact approval will have on that MYP.

6) What does the COE’s response letter indicate?

If the COE analysis indicates a need for “budget solutions” as a result of this settlement, does your district propose making cuts as a part of those solutions? If so, what will they be cutting? Given those cuts may have impact on the education of kids, don’t you want to know what you’re voting for?

Board members may want to familiarize themselves with the recent issues surrounding Sweetwater Union. Financial projections were mis-reported in part to justify higher raises for district staff. The state’s Fiscal Crises Management Team (FCMAT) audit conclusion (item 1) notes “the governing board relied upon incomplete and inaccurate financial information presented for consideration and approval of negotiated salary agreements…”

7) Have parent groups been notified of those potential impacts?

State law (CA Code 3540.2 (c)) requires all parent organizations be notified if a labor agreement will endanger the fiscal well-being of the district. Has that been done? Have your parent groups been given time to provide input? And have you listened to that?

8) Will approval of this settlement result in an automatic request for a corresponding compensation increase for all unrepresented employees?

This is called a “me too” clause and is often the case. Ask your Superintendent if approval of a settlement with a labor group will result in a proposal to apply the same increase to unrepresented employee compensation as well, when they plan to introduce that, and how much it will cost.

At San Diego Schools we feel having the administration negotiate compensation increases with full knowledge they will then personally benefit from that increase is clearly unethical and would be completely unacceptable in private industry.

Note that in 2018, the San Diego COE was forced to settle a lawsuit on a similar issue as reported by the San Diego Union Tribune.

Compensation Data

Considering an increase in compensation without knowing exactly what the current compensation plan is providing to employees – in reality, from pay records (not anecdotally or from standard schedules) is critical.

There is no management in existence in private industry that would make a decision to give someone a raise without first knowing what they are making now. Do you know those numbers, has your administration provided them to you?

9) What is the employee group’s current annual compensation increase rate, defined in its salary schedule, without this settlement?

What is the normal periodic increase rate of that schedule? Keep in mind that “contract raises” are bonus raises – given in addition to the normal annual increases specified in the salary schedules (the “step-and-column”). They are not “the only raises anyone will get” for most.

10) What is the actual increase rate of this employee group’s members over time (including all increases)?

This rate will differ from the salary schedule rate as employees work their way to the right in the step-and-column. Usually the actual rate is higher, and to make this determination you need to know what that real growth rate is.

11) What is the real growth rate of wages in the county?

Knowing the real growth rate of the employee group is important, but how that relates to “everyone else” is critical. A growth rate of 4% may not sound like much, but if the average growth rate in the area is 2%, it’s twice as much. County wage data is available through the US Bureau of Labor Statistics. How does this group’s normal increase rate compare to the average for the residents of your area?

12) What is the employee group’s actual median annual compensation rate?

No fully-informed decision on increases can be made without knowing what the current median rate is. Particularly if you are considering a raise that will result in cuts to programs for your kids, is it not incumbent on you to know what the starting point is?

For our analysis of this we use the public pay data provided by your district from it’s own pay records to Transparent California, for the latest year available. You can, of course, ask for this analysis to be done by staff. When doing that, keep in mind you are asking for data on employees who worked full-time for the entire period being examined.

Averages and medians that include part time employees or employees who did not work a full year are not valid. It’s important to consider both total pay as well as total compensation. Non-paycheck compensation is significantly higher in education than it is in private employment, and is therefore an important part of compensation.

13) What additional compensation does the Districts’ benefit plan provide?

In private industry, the normal contribution by an employer to retirement is 6.2% to social security and another 4.4% match to a 401K plan, for a total of 10.6%. In schools, in Fiscal 2020 the total contribution by the local agency and state was 27.43% This means in retirement alone a school employee is given an additional 16.83% of their salary in non-paycheck compensation.

For someone making $80,000/year, that is an additional $13,464 in compensation not given to private employees. That is a very significant amount of compensation.

In healthcare the contributions vary from district to district, but according to the California Healthcare Foundation’s 2021 report (page 17), the average contribution by private employees was $560/month.

Many districts provide full family coverage (and a plan that exceeds the highest coverages available through the Affordable Care Act for everyone else) with little or no monthly contribution from the employee. To employees under such a plan, that represents an additional $6720 in compensation they would have to pay out of their salary in private industry. Again, very significant.

For more detail on the benefits provided education industry employees in California, see How Much are California K-12 Employees Really Paid – Benefits

14) What is the average compensation rate in your area for employees with similar job responsibilities and/or education?

No responsible Board would make a decision on compensation increases that may have impact on the education of kids without knowing the standard for compensation in their area for employees with similar skills or education..

Not “what other districts pay”, because employees rarely move to other districts, but “what people in the same area commonly make for similar jobs”.

In support or administrative jobs, comparable pay data is easily available in salary surveys. Has your district provided this to you? If not, why not? Without such a survey, how can you know if your pay rates are competitive?

In certificated positions it can be difficult to compare “like jobs”, however it is easy to determine what private individuals with similar educational attainment make in your area, using the US Census Bureau’s Educational Attainment reporting.

The educational attainment mix of your own district can be obtained either directly from your staff or from the California Department of Education’s data using the “Staff Education Report – District Level”

To produce a median pay rate for comparably-educated private employees, you need to calculate a weighted number that takes into account the same mix of educational attainment as your district’s employees. Your staff can do that, or we would be happy to help. Email us if you’d like a customized analysis of your district’s compensation.

Keep in mind that in comparing both salary survey and comparably-educated numbers, you need to factor in the additional compensation education employees receive in the form of non-paycheck compensation, as outlined in the benefits discussion above.

If your employee makes $80,000/year and a comparable private employee makes $80,000/year, they are not “equal”. Your employee is making at least $13,464 more than the private employee.

Employee Attraction and Retention

We often hear that increases are necessary to “attract and retain the best people”. That is certainly a very important factor, however it is very rare that such claims are made with data that actually supports whether a district is having a problem with that.

If your district is making it’s case based on a theoretical need to increase pay to match surrounding districts, not only do you need to ask for data showing your employees are actually leaving for higher pay elsewhere, but also ask what the “seniority caps” are for surrounding districts.

Seniority caps sometimes prevent employees from moving from one district to another and starting at the same salary level they were at, if they exceed the cap. If, for instance, an employee with 10 years in District A wants to move to District B but B has a 7 year seniority cap, then making that move would result in the employee moving backwards three years in the salary schedule. Not something that encourages transfers between districts, particularly for more senior employees.

Again, as with the factors above, if you are going to make a decision removing millions of dollars from funding available for the education of your kids to solve a problem, is it not important that you ask your District to provide data validating the existence and scope of that problem?

15) What is your voluntary turnover rate?

Employees leave for many issues that are not related to pay, but properly compensating employees helps minimize turnover.

In this case, the only turnover that is important is voluntary. Retirements and terminations are not a factor given those employees are not leaving voluntarily.

What is your districts’ voluntary turnover rate? According to one of the world’s largest payroll processors, ADP, the normal turnover rate in the Education and Health industry in 2019 was 1.6% per month (page 22 ), meaning about 19% per year. How does your district’s rate compare to this?

Do you really have a turnover problem or do you just have normal (or even better than normal)l attrition rates?

16) What does your districts’ exit interview data show?

If an employee leaves your district voluntarily, why? What does your districts’ exit interview data show? Are employees leaving for reasons related to compensation or for other reasons?

If your district feels they have a problem retaining employees but does not do exit interviews or keep records on the results, what makes them think pay issues are the reason employees are leaving?

Anecdotes don’t count when it comes to spending millions.

17) How many qualified applicants does the district get for new job openings?

There are many factors affecting application rates, but compensation is certainly a key part of getting new teachers to apply. Ask your district for their statistics for the last year.

How many openings have there been in this employee group?

How many applicants were there for each opening and how many of those were deemed qualified?

How long did it take from posting the opening to filling the position?

Often this data can be found in annual Personnel Commission reporting. In one San Diego County district, an analysis of that data showed the district, who claimed to have a problem attracting candidates, received an average of 15 applicants per opening, of which 5 passed their tests to certify as “qualified”.

In private industry, having 5 fully-qualified applicants for every job opening would not be considered a problem, and likely exceeds what most hiring managers see when looking for new employees.

Whew! Is this a lot to consider? Certainly, with a decision worth millions of dollars in front of you that could have major impact on the education of our kids, worth the effort. We recommend you use the outline above as a “worksheet” to determine these details before any decision.

If done at the start of the negotiation process that provides plenty of time to ask your district to verify available data and “fill in any blanks” there may be in the data you need to make this decision with full knowledge.

Conclusion

With all this, the decision is still yours to make. We are not, in any way, suggesting the decision be made in one way or another, we are simply pointing out, again, that a decision that will have such enormous impact on the financial future of the district and funding available for the education of our kids be made with full awareness of all factors.

But keep in mind you are not making this decision for yourself, you are making this decision for the parents of your district – whom you simply represent.

As such, is it not only reasonable for those parents to expect that the Board will present this information and data to them during the course of negotiations, so they can express their opinions with full knowledge of the data behind those negotiations?

Are you truly doing your job if you do not insist that this data is made public? We strongly recommend you involve parents in that decision by giving them full access to the data above as well, inviting them to express their views on the options available.

Whether a compensation increase above the normal salary schedule is warranted, reasonable and necessary – even if it impacts funds available for the education of kids – is a decision the Board has the power to make, we trust you will make that decision with the best interests of our kids in mind.

If you would like help in doing this analysis, we’re there for you! We’ve done much of this analysis (particularly budget and pay) often.

Contact us at info@sandiegoschools.net, we would be happy to help you gather and examine the data you need to make the right decision for your employees and your parents.