Study finds states face shortfall in retiree benefits

Just so you don't think Pennsylvania is the only one . . .

There was a $1 trillion gap at the end of fiscal year 2008 between the $2.35 trillion states had set aside to pay for employees' retirement benefits and the $3.35 trillion price tag of those promises, according to a new report released by the Pew Center on the States. The shortfall, which will have to be paid over the next 30 years by state and local governments, amounts to more than $8,800 for every household in the United States.

The figures detailed in Pew's report, "The Trillion Dollar Gap," include pension, health care and other non-pension benefits promised to both current and future retirees in states' and participating localities' public sector retirement systems.

Pew's numbers likely underestimate the bill coming due because the most recent available data do not account for the second half of 2008, when states' pension fund investments were particularly affected by the financial crisis. Additionally, most states' accounting methods spread the investment declines over a period of time-meaning states will be dealing with their losses for several years.
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Goal is no tax increase this year

From today's Courier Times . . .

The board hopes to close a $7.3 million deficit to avoid a tax increase in July. The district's proposed budget calls for an average $265 increase in tax bills.

Zero. Zilch. Nada. That's the amount of tax increase the Neshaminy school board is shooting for as administrators attempt to tackle a $7.3 million deficit over the next few months. The board recently voted 7-1 to approve a preliminary 2010-11 budget, which is expected to be about $162.8 million. Richard Eccles voted no and William O'Connor wasn't present, officials said. But revenues are estimated to be about $155.5 million.

The $7.3 million gap would mean a 9.6 percent tax increase. For homeowners with an average assessment of $27,626 that would be a $265 hike. The average tax bill would increase from $4,199 to $4,464, said Joseph Paradise, business administrator. The value of 1 mill in Neshaminy is $736,526. The district's current millage rate is 152, Paradise said.

Under Act 1, the district's tax increase limit is 2.9 percent, or 4.4 mills, or $3.4 million. But the district also qualifies for two exceptions: $1.6 million in special education costs and $1.3 million for increasing contributions to the state pension fund, said Superintendent Lou Muenker. So, Neshaminy's legally allowed to raise taxes by 5.37 percent, or a total of $6.2 million, Muenker said. However, after passing the first-round spending plan, the school directors then unanimously approved a motion to at least try to pass a zero tax increase and use the Act 1 limit only as a last resort.

"This will not be an easy task and may require some extremely difficult decisions from the board and administration and the community," said Ritchie Webb. "If we stand together, work together, we will get through these very difficult financial times."

You can read the complete article by clicking here.
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Keep an eye on things for me

I'm flying out of the country on business for a week so there won't likely be any updates for a little while. And if you submit comments, please be patient while awaiting them to be posted.

Talk to you next week.
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Outsourcing the truth - Facts behind the rumors

When this Board decided it would investigate the potential benefits of outsourcing some of our support functions, we knew it would be a controversial subject. Even though the cost savings opportunities make outsourcing seem like a no-brainer, we must pursue this option carefully while we're still in negotiations with NESPA. I don't think there is a Board member in the bunch that wants to see one of our employees lose their job, but ultimately we may have to weigh that consideration against cutting educational programs.

As we look deeper into the possibility of outsourcing, one thing we have learned is that some who oppose the idea will go to any lengths to make it look like a perilous journey through the gates of Hell. They have engineered made-up facts, and used fear tactics to scare and intimidate. Here is a partial collection of rumors that have been circulated throughout our district to sway the public against the notion of outsourcing - everyone one of them proven false.

Rumor - Outsourcing vendors use undocumented workers/illegal aliens to save costs.
Fact - Each vendor we considered proudly pointed out that their employees are subjected to thorough background checks and drug testing. In fact, those vendors put their employees through a more vigorous screening than Neshaminy does.

Rumor - Outsourcing companies only save costs in the initial 3-year contract, then they jack up the prices.
Fact - We contacted several districts who have outsourced for more than 3 years, and they confirmed that any cost increases beyond the initial contract were within the rate of inflation. Just to play it safe, we have asked the vendors to provide us with a 5-year bid and they continue to show us a significant savings opportunity.

Rumor - Council Rock admitted they made a mistake and is trying to bring transportation back in house.
Fact - Not true according to their superintendent, who told a Neshaminy official that they are pleased with their transportation vendor (First Student) which is the same company Neshaminy is considering.

Rumor - Council Rock is losing $1 million or more in unexpected costs of outsourced transportation.
Fact - Again, the CR superintendent has confirmed this to be completely untrue.

Rumor - Council Rock has asked Neshaminy if we would be willing to sell our buses back to them so they could bring transportation back in house.
Fact - No such request from Council Rock, or any other district, has been made.

My favorite argument against outsourcing is that those vendors are for-profit companies only out to make a buck. OMG, you mean that when their contract is up, they will put us through painful, protracted negotiations and demand compensation that this District cannot afford to pay? Really?

The best reason not to outsource is because we have many hard working, good employees who serve us and our children very well. Their work ethic or dedication isn't the problem. Financing our children's education is the challenge that is driving this issue. And if a settlement isn't reached with our Support Workers union soon, we may have little choice but to make a very difficult decision in order to offset next year's $7 million budget gap.

In case you missed Tuesday's Board meeting, here is a recap courtesy of the Courier Times.
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Thumbs up for outsourcing

The following editorial is reprinted here with permission from the Bucks County Courier Times.

Thumbs Up (Bucks County Courier Times, 1/15/2010)

To the Neshaminy School District outsourcing support-staff work. Separate proposals to turn over transportation services and custodial duties to private companies would over five years save taxpayers about $30 million, based on bids obtained by the district. The school board should do it — because the gain for taxpayers far outweighs the pain for union employees.

The transportation company would retain 90 percent of existing staff and workers would keep their current pay rate. The company would pick up 70-80 percent of workers’ health insurance costs, leaving the balance for employees to pay. True, that would be a big hit for workers to absorb, but it would put them on par with folks in the private sector. Additionally, the company would buy the district’s bus fleet and pay rent for garage and office space. Overall savings: almost $16 million.

Using similar cost-conscious tactics, the company bidding for custodial services would save taxpayers about $14 million.

Is this is a no-brainer or what?

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Negotiation, outsourcing updates

The School Board's Negotiating team and the NFT met earlier this week to further contract negotiations. Although no significant progress was made, both sides agreed to meet again in the near future.

The Board has asked for a state-appointed Fact Finder to review the negotiations with the Support Worker's union (NESPA). There are two meetings scheduled with the Fact Finder in February, and the Board anticipates the Fact Finder's assessment will be rendered in late March.

While negotiations with NESPA are ongoing, the Board continues to consider outsourcing options for some of the support functions. In response to concerns that the cost benefits of outsourcing will only last for three years, the Board has asked for and received an amended bid for Custodial services to cover five years, the savings of which is now projected to be $14.4 million. The bidding results for Transportation services have also been received, and the best bid came from First Student with a proposal to save the District $16 million over five years.

For more details on this update, go to the Board's Negotiation website. Also, here is an article in today's Courier Times regarding these developments.
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This is too funny

For all those who work in public education, this one's for you (note - this is fictional according to several websites I checked with, but don't you wish it was real?) . . .