Frank Ford finds the halls of Grosse Pointe South High School depressing these days. The students don’t respect him as much as they used to. Budget cuts frequently threaten good programs.And everyone seems to think they know more about teaching than he does.
"Gov. Engler, the Republican Party and even school boards have made teachers their whipping boy," said Ford, 57, a math teacher. "I just don’t enjoy coming to work any more and looking toward that kind of a future. It seems too many people care more about the cost than the quality of education." So Ford, after 34 years, is getting out. And he’s not alone. Hundreds of teachers in at least 16 Michigan districts are taking early-retirement buyouts. The buyouts allow districts to replace teachers at the top of the salary scale with less costly ones or to save money by not filling the vacancies at all.
Experts predict the plans will become increasingly available as districts grapple with budget constraints, costly employee contracts and a new, leaner school financial system. On average, the 1994 buyouts will pay teachers $4,000 a year for 10 years and save districts anywhere from $500,000 to several million, according to Educators Preferred Corp., a Southfield company that manages buyouts for schools and colleges.
In Grosse Pointe, 102 of 527 teachers, four administrators and five on-instructional supervisors are taking buyouts that will pay them a year’s salary over the next 10 years. For top teachers, that will mean an extra $60,000 or more on top their pensions. The district expects to save $18 million in the process. About half the teachers taking buyouts statewide are between 38 and 55; the rest are older, said Tim Bell, vice president of Educators Preferred. Buyouts work best in districts where 50 percent to 80 percent of the staff is at the top of the salary scale and there are few laid-off teachers with first rehiring rights, Bell said. "Cost containment in salaries is critical these days," he said. "If you aren’t competitive financially, you cannot be competitive educationally.
Ed Shine, superintendent of the 7,900-student Grosse Pointe Public Schools, looks on the buyouts as a way to "help re-energize the district and save a lot of money, too." Like Ford, some teachers are just worn out and plan to take it easy for a while. Others are moving on to new careers or tending to family obligations.
Already more than 5,000 job seekers have sent resumes and filled out applications for Grosse Pointe’s openings. Mickey Montagne Shield, whose son is a second-grade in the district, said she is worried that the district won’t rebound easily from the loss of experienced teachers and that the cost savings will be fleeting. "It seems like a floodgate has been opened. I have to wonder what’s wrong here, why so many are getting out," she said. "What happens in another 10 years when the new teachers are at the top of the scale? The real problem here is, "are we being as efficient as we can be with our tax dollars, or are we looking for quick fixes?" In many cases, the losses will be painful. Experienced teachers may be expensive, but their skills aren’t easily replaced. "We are losing hundreds of years of experience," said Julius Maddox, president of the 127,000-member Michigan Education Association.
Not only do experienced teachers bring wisdom and savvy to their own teaching, but they help novice teachers "avoid the pitfalls of the profession and pass on ideas young teachers wouldn’t discover on their own for five or six years," Maddox said. Bob Button, 54, widely known and highly regarded journalism teacher at years, is taking a buyout to work for the Virginia High School League Inc., which coordinates extracurricular activities. "When I came here, I replaced a legend," Button said. "Just like we were all young and energetic once, we’ll be replaced by others who are young and energetic."
More than 5,000 newly certified teachers in Michigan are eagerly awaiting the latest round of departures. "This is what I was meant to do, and I just know I’ll do a bang-up job if somebody just gives me my own classroom," said Patricia Griffin, 42, of Livonia, a recent Eastern Michigan University graduate who was runner-up for Michigan Student Teacher of the Year.
Patrick Scheetz, director of Career Development and Placement Services at Michigan State University, said the buyout surge may sound good to job seekers but it hasn’t yet translated into an increased number of job offers for graduates. "I haven’t seen any sign that this means they’re filling those positions with young graduates," Scheetz said. That could change over the summer. A dearth of teaching jobs in Michigan since the mid-1970’s has sent thousands of new teachers out of state searching for work. Slightly more than half of the newly certified teachers have gotten jobs in Michigan for about the last decade --- down from the late 1960s and early 1970s, when in-state jobs were more plentiful.
"It would be nice to see things open up a bit and our graduates be able to find something closer to home," Scheetz said.Return to News Articles
The Flint School District could save $23.3 million in teacher salaries over 10 years, under a retirement incentive to be negotiated in the teachers’ new master contract this year.
Teachers eligible to retire but still teaching would qualify for the plan, which would give them an extra one-tenth of their salary in their pension payments for 10 years.
The district would save money by replacing the high-salary retirees with lower paid teaches with less experience. "It’s a two-edged sword. One, you lose experienced people. The other edge of the sword is you gain some salaries." Said Deputy Superintendent Leonard Murtaugh.
"…In some cases you get fresh blood. It’s a matter of judging experience against perhaps—perhaps—some new enthusiasm."
About 985 of the district’s 1,450 teachers are eligible to retire and 148 likely would take the offer, predicted Educator’s Preferred Corp., a Detroit consulting firm, which developed the plan. The district would save $23.3 million if 20 of the 148 teaches were not replaced, the consultants said.
"It provides the district the opportunity to actually save some money, which makes sense to the taxpayers," said Peter J. Murphy, president of the United Teachers of Flint.
Inclusion in the teachers’ contract also could open a retirement incentive to all district employees, which could save up to $6.9 million more if the expected 245 employees opt for it, Superintendent Nathel Burtley said Wednesday.
Typically, district officials negotiate contracts and then offer non-union employees the same items, Burtley said. All of the district’s union groups, including the United teachers of Flint, will negotiate new contracts for next school year.
Teachers now may retire at 55 if they worked 30 years or at 60, with 10 years of experience.
Flint’s teacher population has been aging for years. Only 34 K-12 teachers are under 30. The oldest is 72 and the average age is 46.6. Most teachers are between 45 and 60.
Flint teachers at the top-of-the-scale salary make an average of $47,467 per year, almost double the starting salary of $24,792 for a Flint teacher with a bachelor’s degree.
Teachers retiring under the plan also would get an undetermined amount to offset tax liability for the 10 years of payments.
The plan still could change during negotiations, union and district officials cautioned.
Generally, such plans give employees a couple of months to sign up for early retirement. Then new teachers would have to be recruited.
The Detroit firm proposes that the district make it the administrator of the plan and allow it to counsel prospective taker. It would receive a commission for implementing the plan, sources said.
Now, 35 to 40 teachers usually retire from Flint each year, Murphy said.
A recent UTF survey found 70 percent of the respondents were interested in such a voluntary retirement plan, he added.
School districts cannot force employees to retire after a certain age, and many of the older teachers are well-liked by students, Murphy said.
But teachers also are under stress for long periods of time, particularly because classes are large and the district continues to cut teaches’ supply budget, Murphy said.
During summer break, many take classes or work another job. And the school district offers few opportunities and greatly-reduced pay for sabbaticals, he said.
"We are literally burning them out at a much, much faster rate," Murphy said.
Murphy expects an annual retirement seminar scheduled for Tuesday to draw 250 people, the most ever, because of talk about such a plan.Return to News Articles
Highest paid educators to get extra year's pay if they step down this year or next
PETOSKEYFarmers sometimes get paid not to farm, so why not pay teachers not to teach? Especially if paying a little bit now saves a lot in the long run.
The Petoskey School District announced an early retirement incentive Wednesday that would give the district's highest-salaried teachers an extra year's worth of pay if they retire this year or next.
"This plan will allow the district to save a considerable amount of money while permitting teachers to retire earlier and more securely than they had expected," said Superintendent John Jeffrey. "It will also bring in some new people and new ideas."
Even after paying for the extra salary, the school district stands to save $600,000 to $800,000 over the next 10 years if 10 to 13 teachers opt for the plan. The savings would come from the difference between paying salaries of about $55,000 for the most experienced teachers and the district's $28,552 starting salary.
Approximately 100 of Petoskey's 175 teachers have at least 10 years' experience in the district, thereby qualifying for the early retirement offer. Those who accept will receive $417 per month for the next 10 years, according to a school district press release issued Wednesday.
"Teachers would have to sever employment with the district this year if they have 30 or more years of experience, or next year if they have less than 30 years with the district," the district said. "This is a one-time plan which is not intended to be offered on a continuing basis."
While the incentive plan is a novel approach to saving the school district money, it is not unique.
According to Educators Preferred Corporation, a Southfield based severance plan consulting firm working for the school district; at least 50 Michigan districts have offered early-retirement buy outs to teachers. Nationwide, the company has set up similar plans for 140 schools and colleges.
The company charges $50 to $100 per teacher per year. If 10 teachers go for the early retirement, EPC makes about $7,500, said EPC vice president Tim Bell. The company sets up about 25 such plans a year.
About five years ago, 26 of 270 Mount Pleasant Public Schools teachers opted for a plan like the one Petoskey teachers have been offered, said Mount Pleasant Public Schools Business Manager Diane Block. The offer will save nearly $3.6 million.
Mount Pleasant Superintendent Robert Janson said the offer has had its pluses and minuses.
"It did what we thought it would do as far as reducing our labor cost," Janson said. "But the minuses were that we lost some darn good teachers. We feel we ended up with excellent replacements, though."
John McEwan, superintendent of Durand Public Schools near Flint, said he is pleased with the effects of the early retirement plan offered to his district's teachers last year. "I had 82 percent of my staff at the top of the pay scale, and employee costs are 80 percent of our budget," McEwan said.
McEwan said the downside of losing good teachers was not simply balanced by the financial savings to the district.
"We did lose some excellent teachers, but it was probably a good thing that some other teachers left," McEwan said.Return to News Articles
Nearly 85% of a school’s budget is salary and fringes. In many cases, 80% of the staff is at the top of the pay scale and going nowhere but up in salary. Quality, Step 1 - 3 replacements are waiting on the sidelines for an opportunity to teach, at lower salaries. Why pay a position $60,000 if a quality replacement can be recruited at $30,000?.
Many districts will be paying top of scale teachers an excess of $80,000 in salary alone by the year 2000. The obvious economic driver for salary budget reduction is replacing top of scale staff with lower salary staff, as illustrated below. This occurs normally with annual retirement turnover. However, if a significant number of staff can be transited 3 to 5 to 15 (or more) years early, the budget reduction that would have taken place years from now is brought forward, rather than paying the position a high salary for years to come. Simply put, the shorter the time a position is being paid top dollar, the less costly the position. The budget reduction is magnified when applied to many positions.
The key to the success of an incentive plan is to greatly accelerate the number of exits by 500% to 1200%. The number of exits with an incentive plan must attract true early outs, not just those who were going to exit in the next 1 to 3 years. Therefore, the incentive must be a "severance" package that is not tied to "retirement", and attractive enough such that top of scale staff exit as young as age 35. A modest lump sum "bonus" will not do it.
The first chart illustrates the difference in the cost of a position with a top of scale staff, compared to a Step 2 replacement. The second chart illustrates the gross budget reduction over time, assuming the top of scale staff person would have taught 35 years, but instead elects to leave after 28 years.Return to News Articles
You're handed an envelope at work that contains a one-time offer: early retirement. "It's a generous offer," the boss says. But how do you know? There is some confusion on this point. Dollars, of course, count for a lot when it comes to sizing up life without a regular paycheck. But some financial planners say that money might not be the proper place to start in the decision process for taking early retirement.
"First, decide if you are really ready to retire," said financial planner David Strege, senior vice president of Cornerstone Financial Advisors Ltd. in West Des Moines, Iowa. "It has to be more than just wanting to get away from cold Iowa winters." After you've consulted your mirror on the wall for self-analysis about job satisfaction, health, family and other personal life matters, finances will quickly worm their way into the exercise.
Strege said clients who are early retirement candidates face these money questions:
For a healthy couple, age 65, there is a 30% to 40% chance that one will live to age 100, he said. Nuts and bolts of early retirement deals often involve a lump sum payment, early Social Security payments with a company matching payment, and monthly payments from a company-defined benefit plan.
Defined benefit plans guarantee to pay you a specified amount when you retire, based on your salary, age and years of service. Some of these "sweeteners" may be reduced or eliminated once you reach age 62 or 65, warns Jacquie Anderson, pension and benefits specialist at Koogler Company of Iowa, a financial planning and investment firm in Pella, Iowa.
"You need to know whether having a smaller benefit over a longer period of time (now to your life expectancy) will be more valuable than a larger benefit over a shorter time," Anderson said. "Ask for these calculations." Correct dates of birth and employment are important details to check, Anderson said, because they are key numbers used by the company to calculate how much money you are going to receive. Ah, yes, the money. How do you know if your early buyout offer is even in the ballpark with other pension plans?
There are guidelines. For instance, most company-defined benefit plans are designed so the pension benefit plus Social Security benefits will replace 60% to 70% of an employee's pre-retirement income. "That's not bad, considering that you are shooting to replace 80% of that income," said Daniel Kehrer, author of Kiplinger's "12 Steps to a Worry-Free Retirement" (Kiplinger Times Business, $15). Kehrer outlined some common incentives companies offer in their early-out retirement plans:
Kehrer said key points to consider when mulling an early retirement offer include pension dollar details and how the payoff compares with what you'd get if you continued working; what your employment prospects are elsewhere; where to put an early retirement lump-sum payment; and how much of the payout will be counted ordinary income and thus be fully taxed.
Where to learn more about evaluating early retirement offers:
To inquire about Social Security benefits, call (800) 772-1213 to order Form SSA-7004, "Request for Earnings and Benefit Estimate Statement."
For facts about IRAs, call the IRS at 800-829-3676 and ask for Publication 590, Individual Retirement Arrangements.
To check IRS life expectancy tables and to calculate IRA withdrawals, call the IRS at 800-829-1040 and ask for Publication No. 590, available free.
Check out Daniel Kehrer's book, "12 Steps to a Worry-Free Retirement" (Kiplinger Times Business, $15).
Ask a financial planner to evaluate your company's offer. The International Association of Financial Planners will provide the names of up to five financial planners in your area who are members of the Registry of Financial Planners.
These planners are CFPs who have passed a series of additional tests to enter the Registry. Call 1-800-945-4237.
In a move to cut cost, the district has offered a Retirement incentive to more than 200 higher paid teachers. It has also laid off 37 with lower seniority.
Thirty-seven teachers were pink slipped April 25. At the same time, some 200 senior teachers were offered an incentive to retire. Depending on how many teachers accept the retirement offer of as much as $450 per month for 10 years, some of the laid off teachers will likely be called back as replacement by June. The districts expects 25 to 50 kindergarten-through-12th grade teachers who are at or near the top of the pay scale to take advantage of the offer this year or next.
The district’s objective is to reduce the number of staff earning the highest salaries of $56.868 or more. Teachers with one-to-three years’ experience could be hired at an average salary of about $33,000. The incentive plan could save the district more than $5 million in five years.
Ferndale School District faces a budget deficit, and staff is in the process of recommending ways to balance the budget. The Voluntary Incentive Plan is only one solution to these economic problems. The VIP was developed by administration, the Ferndale Education Association, Board of Education, and Educators Preferred Corporation (EPC), a Consulting firm specializing in such plans.EPC has implemented more than 80 such plans in Michigan districts and colleges. The firm’s costs are more than offset by the savings to the district. All administrative aspects of the plan are handled by EPC.
To contain costs and offset cuts in state aid, the Ferndale School District offers an early retirement incentive to teachers at the high end of its pay scale. At the same time, the district issues layoff notices to 37 teachers with low seniority. Administrators and teachers’ union officials hope the 37 can be recalled if enough teachers accept the Voluntary Incentive Plan, known as "VIP." The one-time proposition, which eligible teachers can accept this year or next, offers as much as $450 per month for 10 years. "In order to safeguard the school district from cutbacks from the state in the adult education area, we’re finding it necessary to cut back staff," says Personnel Director Ray Wolf. "Perhaps we can minimize cuts or not reduce the staff at all through (VIP)."
The district projects that 25 to 50 teachers of kindergarten through 12th grade will accept the offer before the end of the school year, saving the district $5 million in five years. "It’s a decision I would hope is reached only after careful planning and deliberate thought (regarding ) finances, not just someone hoping to opt out." Wolf says.
Approximately 200 Ferndale teachers are eligible for VIP; says Tim Bell of Educators Preferred Corp., an educational cost-management firm that has implemented similar plans in 80 districts and colleges throughout Michigan. "The (school) board has to be concerned with reducing the budget by ‘X’ Million dollars," Bell says. It’s a matter of choosing and reducing the staff involuntarily or making staff changes that are meaningful." The idea behind the plan is to reduce the number of teachers who have worked their way up the pay scale and replace them with personnel who can be employed at a lower cost.
Ferndale teachers salaries range from $29,022 for those with bachelor’s degrees and no prior experience to $56,868 for teachers with master’s degrees and maximum experience, according to Wolf. "We were skeptical of where the savings would occur when we first saw the plan. We had to see how it benefits our district, and we were shown that," Wolf says. "We investigated other districts where its worked." If enough teachers accept the incentive, Bell says, the district will not be "locked in" when hiring teachers down the line. "They don’t have to hire at the lowest salary step," he says. "They can hire quality replacements."
Martha Kinney, president of the Ferndale Education Association local teachers’ union, believes VIP has merit and could sway those candidates who are undecided about retiring early. "This is really a good deal for them," she says "and the cost savings enable the schools to retain programs that would not have been possible due to budget cuts." An elementary-school art teacher and 32 year veteran of the Ferndale district, Kinney is eligible to accept the plan this year but says she won’t because she "still loves teaching."
Meanwhile, 37 teachers began receiving layoff notices last week in what administrators called a "regrettable" action. Those employees lose their jobs on June 30 if a sufficient number of teachers do not accept the buyout offer. "I’ve been pink-slipped," Kinney says. "I’ve been through this, and I know it’s upsetting. But I would expect most (of those who are laid off) to be called back before the school year is out. That way, it’s good for the morale, and the district would not have to pay unemployment costs through the summer.
GWINN – A money-saving tactic by the Gwinn school district has gone above expectations.
The district had expected about 20 faculty to take advantage of a severance buyout offered earlier this year. The plan was to offer staff with 10 years or more of seniority an incentive to retire. But when the March 19 deadline arrived, 28 educators, two administrators and one support staff had signed up. With more people participating, the buyout will save the district nearly $5 million, about $3 million more than the district had expected. The district intends to fill all the vacancies except for one teaching position, Superintendent Mike Maino said.
The severance offer was one of the final actions of a three-year budget recovery plan. The plan is designed to offer one year’s salary spread out over eight years. The payments would be monthly; the total amount received over the eight-year-period is capped at $45,000. The district would save money by hiring new teachers in their first few years of teaching. Maino said the increased savings could mean some positive changes in the district in the near future. He will give an update on the savings at a special school board meeting at 6:30 p.m. Monday at the Gwinn High School library.
The buyout is being managed by Educators Preferred Corporation, a company that coordinates severance and retirement plans for schools and municipalities across the nation. EPC was in the Gwinn district the week of Feb. 1 to counsel more than 30 candidates about the offer. EPC’s role is to process the paperwork and schedule the payments of the plan to the teachers. Maino said this service comes at a cost of $225 per year for each teacher involved. Maino said this cost is minimal when considering the amount of time and effort the district would need to expend to maintain the plan.
The district is required to pay the amount for the eight-year plan to EPC over the first four years, Maino said, but the savings the first year will still be more than $450,000. These first-year savings could nearly balance the remaining budget deficit of around $500,000. The deficit once stood at $3.5 million soon after the closing of Sawyer Air Force Base in September 1995. Other major maneuvers by the district during the plan include bus route consolidation, trimming of half-time and aide positions, reductions in athletics and food services.
Jackson Public Schools may offer an early buyout plan to district support staff, including secretaries, teacher assistants, bus drivers and maintenance workers. Jackson offered a similar buyout proposal to teachers and administrators last year. The teacher buyout is expected to save the district $4.5 million over the next 10 years. The savings results from replacing staff who are at or near the top of the pay scale with new hires near the bottom.
When the issue was first brought up last year, the district had originally considered offering the deal to all of its employees. However, officials decided to wait until this year to offer the plan to support staff. Acting Superintendent William Hannon said the proposal will be up for discussion at the Dec. 7 school board meeting. A decision would likely be made at the next meeting on Dec. 14.
If it is approved, the district would likely partner with Educators Preferred Corp., a consulting organization that specializes in buyouts. EPC earns a specified amount for each employee who opts in to the program. Most buyout proposals follow a similar procedure. The teachers and administrators, for example, were offered their 1997-98 salary in monthly payments over the next 10 years. The payments could not exceed $417 a month. When the support staff was considered for the buyout last year, EPC officials estimated 57 of the roughly 380 support staff would take it. That could save the district as much as $764,000. "I’m not sure yet if we’re going to limit it to union members or if other support staff will be eligible as well," said Hannon. A small percentage of support staff do not belong to the unions, including the secretaries in central office.
Jackson Public Schools is expected to lose about 50 teachers and administrators and save up to $6.8 million through an early severance plan approved Monday. The buyout will make it possible for the district to build up a fund equity, said Georgia VanAdestine, secretary of the school board. The board has said it wants a 5 percent fund equity – roughly $3 million "in the bank" – by the year 2001. The buyout plan is available to all teachers and administrators who are at the top of the pay scale and have 10 or more years of service with Jackson Public Schools.
The buyout will be implemented by Educators Preferred Corp., an outside consulting company that specializes in buyout plans. The company gets $200 for every employee that opts for the plan. Educators who accept the buyout will get their 1997-98 salary divided into equal monthly payments over the next 10 years. The benefit is capped at $417 per month. Those who are eligible to retire could do so, and younger teachers may take the monthly bonus and change careers.
The consulting firm’s vice president, Timothy Bell, estimated 50 teachers and administrators will take the buyout; the firm bases that number on a model is has developed who takes buyouts, which is 97 per-cent accurate. Depending on different variables, the district could save as much as $6.8 million over the next 10 years. The cost savings results from replacing high-salaried veteran teachers with teachers at or near the bottom of the pay scale. The savings depends in part on how many special-education teachers bump into general-education spots. If a significant number of special-education teachers move over, the savings is reduced. The period to sign up for the buy-out is from February to April 6.
Retired Napoleon Superintendent Robert Dubois was named interim superintendent of Jackson Public Schools Monday night. The Jackson Board of Education voted unanimously to enter into contract negotiations with DuBois, who is expected to start Jan. 4. DuBois was one of two finalists for the position, and was the apparent front-runner. His competition, former Jackson Superintendent Darwin Johnson, withdrew from consideration Monday.
Vice President Stephen Osmond, who chaired the search committee, said both Johnson and DuBois emerged as candidates who fit the profile of what the district was looking for. "We were looking for someone with experience as a superintendent and who had knowledge of our district," said Osmond. The committee also wanted a good communicator.
DuBois will serve as interim superintendent for the remainder of the school year. Meanwhile, the board will begin searching for a permanent replacement for Gregg Mowen, who quit in October to take an assistant superintendent's position in Grand Rapids. DuBois, who was principal at Jackson High School from 1985 to 1990, is a lifelong resident of Jackson. In 1990, he was hired as superintendent of Napoleon Community Schools, where he retired in 1997. Since his retirement, he has served as interim superintendent in Grass Lake and Dundee.
Also on Monday, the Jackson Board of Education voted to offer an early buyout to its support staff. The buyout would be open to all full-time bus drivers, maintenance staff, secretaries, and paraprofessionals. The buyout could save the district as much as $400,000 over the next 10 years by replacing high-salaried employees with new workers at or near the bottom of the pay scale. Under the plan, employees would receive $12,000 in equal monthly payments over the next 10 years, amounting to $100 a month. Jackson Schools also kicks in a one-time payment $3,354 toward first-year tax withholdings. The district will partner with Educators Preferred Corp., which specializes in early buyouts, EPC officials will handle all informational meetings, enrollment and private counseling.
Jackson Public Schools will lose about 68 teachers and administrators during the next two years through an early-buyout program, according to preliminary figures released Monday. That’s roughly 14 percent of the district’s 500 teachers and administrators, and it is significantly higher than the 50 staff members the district expected to opt out. The early-buyout plan – approved by the board earlier this year – is expected to save the school district $5.3 million over the next 10 years by replacing high-salaried, experienced teachers with cheaper, less-experienced staff. The Jackson district no will have to gear up its recruitment efforts to replace the outgoing staff. Superintendent Gregg Mowen has said the district will recruit heavily in and outside of Michigan.
Of the 68 leaving, 53 are going at the end of this school year. The other 15 will leave at the end of the 1998-99 year. Nine of the 68 are administrators; the rest are teachers. A breakdown by building and the number of minorities who are taking the early buyout was not available Monday night. Final figures won’t be available until next Monday because employees have seven days to change their minds. Teachers and administrators with 10 years experience were eligible for the plan. The employees who take the buyout will receive the equivalent of their 1997-98 salary in monthly payment over the next 10 years. Those payments cannot exceed $417 a month.
The Lansing Board of Education and the Lansing Schools Education Association adopted EPC’s Voluntary Incentive Plan (VIP) in the 1992-93 school year. EPC designed the plan and worked closely with district administration and the education association to implement the plan. Normally the district expects 35 teachers to resign/retire. The VIP was highly successful, with 153 teachers, ages 40 to 68, electing the early out incentive. Of those opting, 48% were age 56 or younger.
Working with the district’s business and personnel offices, EPC prepared a feasibility study that projected the effects of the plan. The study was reviewed by the CPA firm of Maner, Costerisan, & Ellis, PC, Bruce Dunn, CPA and Mike Drake, CPA. Plan documents were reviewed by the law firm of Thrun, Maatsch & Nordberg, PC, Pat Berardo, Atty and Jim Maatsch, Atty.
Dr. Richard Halik, Superintendent, Lansing School District, says "EPC worked with our staff and delivered 110% of what was projected. We are quite pleased with the results, especially with the tough environment schools are faced with today."
Dr. David Smith, Comptroller, Lansing School District, Says "EPC’s incentive program was successful as we had hoped. The bottom line is the district has a rare opportunity to reduce salary costs without difficult layoffs."
Ms. Nancy Erickson, Board President, Lansing School District, says "The Board needed to take action to reduce our future salary expenses and maintain high education standards at the same time. The VIP allowed us to address our budget problems and also had a positive impact on staff morale."
Mr. Steve Cook, CPA, Director of Payroll, Lansing School District, says "Every district should look at EPC’s package. The only way a district can significantly reduce the budget is through salary cuts. An effective incentive plan such as EPC’s VIP is a true win-win for the district and the employee."
Ms. Betty Springer, President, LSEA, says "The Education Association and the Board of Education joined hands. Our membership was in favor of EPC’s incentive plan, knowing that layoffs were imminent. The benefit was meaningful and the counseling provided was very valuable to participants."
Mr. Jim Boerma, UNISERYV Director, MEA, says "We needed a successful plan and we got it. EPC’s plan is the most complete we’ve seen, and it works!"
Mr. Bruce Dunn, CPA, Auditor for Lansing School District, in his evaluation of the plan noted that "A key point to remember is not what plan is the least costly but rather what type of plan will act as an incentive to motivate employees to resign/retire early, thereby creating the greatest savings to the districts."
In summary, the plan had positive effects on budget, staffing, and the overall educational process.
The Lansing School District expects about 148 teachers, most at the top of their pay scale, to take early retirement this year. The district is offering a one time incentive to teachers and other certified employees already eligible for retirement or with at least 10 years’ experience. It expects a savings of at least $9.3 million over a 10 year period under a plan that was discussed during a series of privately held school board meetings. Some parents think it’s the right move for the district to make.
Eunice Foster, mother of an Everett High School senior, sees the early retirement plan as an opportunity, a chance to bring new blood and fresh ideas to the school district. "I would hope it would bring about the retirement of those older teachers who are more set in their ways and are less open to multiculturalism, cooperative learning and other innovative ideas," she said. Discussions between the board and the teachers union were held in private sessions in January and February. The board approved it in open session Feb. 18 following a closed-door meeting. The Lansing City Council has come under fire for developing its controversial early retirement plan in closed sessions.
The school district expects 148 teachers, some earning salaries of about $50,000 a year, take the early buyout. New, less experienced teachers would be hired in their place. New teachers make $26,282 a year, said Larry MacQueen, associate superintendent of personnel, employee relations and legal matters. "This is part of a comprehensive, long-term solution to a growing fiscal crisis," MacQueen said. Lansing schools face an $11.4 million deficit for the 1993-94 year. District staff is in the process of recommending ways to balance the budget. Program cuts are inevitable.
The offer: One-time offer to the union representing about 1,400 teachers, counselors and other professional staff.
Eligibility: Union members with at least 10 years of service, or who are eligible for benefits under the state retirement program. They must enroll by April 27, indicating they’ll retire by June 30.
The Impact: Of the 1,400 union members.
Savings: The district expects to save $9.3 million over 10 years by replacing experienced teachers. A starting teacher make $26,282; the teachers they’ll replace makes about $50,000.
Because teacher salaries make up much of a school district’s budget, Lansing educators knew layoffs were likely, said Betty Springer, president of the Lansing Schools Education Association. The 1,400 member union is composed of mostly classroom teachers. Membership, though is open to all certified employees, such as school counselors, nurses and psychologists. We decided to take a proactive step," Springer said. After studying other early retirement plans, the association suggested in December that the district look at an incentive plan developed by the Detroit consulting firm Educator’s Preferred Corp.
In 1992, five state school districts—Ypsilanti, New Haven, Highland Park, Milan and Flint—offered the consultants’ voluntary retirement plan. "We do think it’s a good idea." Springer said, "A humane idea." Under the plan eligible association members would receive one year’s salary in equal monthly payments spread over 10 years. On average employees who take the plan will receive $350 to $450 a month for 10 years, school officials said.
Because the school district could use the consultant’s plan rather than starting from scratch, it was able to move quickly in preparing a proposal for the school board and the union, MacQueen said. Informational letters were sent to the 960 eligible employees, who were asked to respond by last Friday if they were interested. About 200 asked for more information. Among those is Mary Dunn, a fourth-grade teacher at Harley Franks Elementary School. She’s weighing the plan to see if it’s the right opportunity for her. After teaching for 34 years, she is thinking about retiring—and the early buyout could give her the incentive to do so. "I will sit down with a counselor and two of my sons and look into it," she said. "Then I’ll decide what to do."
Meeting and financial counseling sessions are being set. Employees have until April 27 to accept the early retirement plan, MacQueen said. "Every teacher thinks about retiring at some point. It’s nice to have the added incentive," Dunn said. "For many teachers, it will make the difference."
Foster, who is also a member of the Parent Support Network, a group of people concerned with quality education and specifically addressing the needs of African-American youths, said she was excited about the program. "I only wish it was being extended to administrators as well." New teachers also bring new energy and ideas, which are important to a learning environment, Springer said.
Petoskey, MI April 29, 1997: The Public Schools of Petoskey projects 10-16 teachers who are near or at the top of the pay scale will accept an early retirement offer this year. As a cost containment tool, the district is offering a one-time incentive to teachers and administrators who meet defined eligibility requirements. The district expects a salary budget reduction of over $1 million in ten years. The plan, known as the "VIP" Voluntary Incentive Plan, was structured by administration, the respective bargaining units, the Board of Education, and Educators Preferred Corporation, a consulting firm specializing in such plans.
The district’s objective is to reduce the number of staff earning the highest salaries of $65, 000 or more. Teachers with one to three years of experience would be hired at an average salary of $40,000. "This is part of a comprehensive, long-term solution to a growing fiscal crisis," said Administration.
The Public Schools of Petoskey faces a budget deficit, and staff is in the process of recommending ways to balance the budget. After studying other early retirement plans, the board decided to adopt a plan specifically designed to address district objectives. The consulting firm EPC has implemented over 125 such plans in Michigan districts and colleges, such as Plymouth-Canton, Lansing, Wayne-Westland, Woodhaven, Hamtramck and East Lansing. The firm’s costs are more than off-set by the savings to the district and all administrative aspects of the plan are provided by EPC.
Sixty four teachers have decided to accept an early severance agreement offered by Plymouth-Canton Community Schools. The package is expected to save the district close to 7 million over 10 years. "A lot of experienced teachers are taking the buy-out and going on to other things." said Chuck Portelli, president of the teachers union. "They have made a very difficult decision." The number accepting the offer exceeded that anticipated by the union, given the demographics in the teaching ranks, Portelli said.
The district employs 785 teachers, 567 of whom are female and 218 male. The average salary is $52,685; the average age 41 1/2 years; and the average years of experience 23.6. The district is losing many exemplary, experienced teachers, said Errol Goldman, assistance superintendent for employee relations. Those leaving the district will receive $60,000 over 10 years in equal payments beginning in the fall.
The agreement, being handled for the district by Southfield-based Educators Preferred Corporation, is patterned after a severance package adopted in 80 Michigan school districts including Grosse Pointe, Novi, Lansing, Wayne-Westland, Oak Park and Ferndale. Eligible were teachers at the top of the scale with 11 years or service. All 64 teachers will be replaced. The district has a particular need for middle school math teachers.
Under the agreement, the district will pay up front the first year $16,000 in state and federal taxes and social security payments. "The 10-year benefit is taxed up front to the extent of two-thirds of the 10 year benefit," said Tim Bell, EPC vice president. "As the individual receives the monthly check, two-thirds excluded from taxable income and one-third, is included as taxable income in a monthly check. Two-thirds is taxed up front."Employees’ benefits will continue through the end of August.
Plymouth-Canton administrators are also being offered an early retirement package. They have until the end of this week to accept it or turn it down. Those buying into the severance agreement technically are not retiring and are eligible to seek employment anywhere in the state of Michigan, Portelli said.
PUSD saves millions in payroll dollars by giving up top-paid teachers, administrators
Prescott Unified School District’s buyout of eligible teachers and staff may have saved the districts close to $4 million. But, some say, those savings in dollars may have cost the schools in years of teaching and administrative experience. There has been much talk recently about the recent implementation of the district’s buyout plan. Just how cost-effective has it been for the district, and into whose pockets are all those extra pennies being poured?
The dollars and cents saga began more than a year ago when voters defeated the override. Up until that time, the need for a cost-saving early retirement. They suggested a plan in which they would get $3,000 a year if they gave notice of ending their employment at the end of the school year.
"The plan was beneficial to the staff, not for the district," explained Carpenter. "That $3,000 didn’t engender many early retirements. It was not so much a financial benefit to us, as a way to help us plan ahead to see who was retiring. The defeat of the override meant that there would not be enough money in the school budget to cover the salaries of all teachers and support staff employed by the district.
"We needed to come up with a new plan," Carpenter said. She detected a glimmer of one last spring when she attended a personnel conference with Kevin Kapp, director of personnel, and saw a presentation for a buyout plan. A buyout plan, very simply, offers staff members, including teachers, administrators and other support personnel, a financial incentive to exit the company or school where they are employed earlier than they might have considered. According to Carpenter in a school district such as Prescott’s, the plan encourages teachers in more experience and, hence, bigger salaries, to retire earlier. In doing so, the teachers are guaranteed an income for several years.
"The plan appeals to people over age 50 or so who are not yet ready to retire, but want to move on from teaching," said Carpenter. "The buyout give them a steady income for the next eight years. "New teachers with less experience are then hired, saving the district money, said Carpenter. While a veteran teacher might make up to $38,000, a new teacher earns the base salary of $23,000. "Of course, money is not the only consideration in hiring teachers," superintendent Jim Howard said. "We look at ability and experience. We try to hire the best candidate in spite of the budget."
Howard chose to implement a buyout plan through Educators Preferred Corporation, a firm based in Southfield Mich. The firm had a good track record, having prepared buyout plans for school districts all across the United States, including 14 in Arizona. "The buyout program was developed in the late 1980s," said Sean Kelly, managing consultant with the corporation. "The program provides employees at or near the top of the pay scale to retire or resign early." Kelly pointed out that while on occasion a younger candidate might elect to take a buyout, usually, those who are eligible for retirement participate in it.
According to Kelly, a buyout plan can be tailored to fit the needs of a particular school district. Amount of payment to participants and length of time for that payment vary from district to district. "We do a feasibility study to see if the buyout plan will help a district save money," said Kelly. "We want to keep a good reputation. If a buyout plan won’t save money, we will not advise it." Howard said that much consideration went into the adoption of the buyout plan for Pescott Unified School District. He and his staff worked closely with Prescott Education Association and Prescott Classified Employee Association.
According to Carpenter, the plan that the district finally adopted requires that participants meet one of three criteria:
According to the terms of the buyout, a participant receives an eighth of his final salary with the district, every month for eight years. He or she is required to give 10 days of service in the district per year. "We want to capitalize on those 10 days as best we can," said John Competh, president of the school board. "We’ve lost some extremely talented people to the buyout. Kelly said that although some buyout plans do not impose a cap on these payments, PUSD elected to install a cap of $6,000 per year, or $500 a month to keep the costs down.
In addition to sending out the monthly checks to participants, Educators Preferred Corporation provides counseling and guidance to them. PUSD supplies the firm with the monies for the payments, plus $200 to the firm per participant for management expenses. Kelly said that the district pays out these amounts to Educators Preferred Corporation over five-year period, although participants will receive payments for eight years.
Carpenter said the district saves money through the plan because when the higher paid teachers leave, the district no longer has to pay their salaries. "We replace them with teachers with less experience and/or years with the district, so the salaries are less," she said. In most cases, the replacement teachers are those who were fired, or let go, last year because of the override defeat. Carpenter said that the buyout enabled the district to hire back all but on of the 23 fired teachers. This can amount to some $10,000 to 15,000 a teacher. Howard put the total cost savings at up to $4 million.
"Prescott Unified School District was more successful in terms of money saved than our original feasibility study for the district forecast," said Kelly. The buyout savings are sometimes hard to grasp when one thinks about all those monthly payments being made to the exiting school personnel. "After we approved the budget, I was thinking about teachers and lower staff. I never thought it would be used for top administrators," said Barbara McCreary, a PUSD board member. For example, Raymond Polvani, who served as assistant superintendent, was with the district just five years. When his position was eliminated in 1995 due to budget cuts, he had reached the top of his salary range.
According to the terms of the buyout, Polvani was eligible for the plan and did, in fact, elect to participate in it. He wound up drawing in a monthly salary of $500 a year for eight years. McCreary said that there is not a set pay scale for administrators as there is for teachers. How was it that Polvani rose in just five years to the top of his range? "When Ray came to the district, we paid him X amount of dollars," said Howard. "The next year he got a 2 percent raise, but after that his salary was frozen. He had no higher to go." Despite his salary cap, Polvani stayed with the district three more years, until he was forced out by the elimination of his position. And because he was at the top of his pay scale, he was a legitimate buyout candidate. While Polvani’s $500 dollars a month may seem steep, both Carpenter and Howard point out that that amount is still less than what the district would have to pay for his yearly salary. "We wan the top salaried people to leave," said Carpenter. "We’ll save more money by not paying their salaries." "We needed that money to survive," he said. "Without the buyout, we would have had to cut more teachers."
Cometh agreed with Howard’s assessment. "It’s a two-edged sword," he said of the buyout. "You’re losing some good teachers, but on the other hand you’re lowering more cut backs." "If you look at any school budget, you’ll see that 80 percent goes to payroll," said Kelly . "You can turn the lights off, cut the number of buses, but that only affects some 20 percent of the budget." Kelly said that without the buyout option, budget-strapped districts would be forced to fire teachers to stay afloat. "How can you fire teachers?" he said. "We need them for our children."
Educators Preferred Corporation
Detroit, MI April 23, 1998: The Wellness Plan projects approximately 80 employees who have five or more years of service will accept an early buy-out offer this year. As a cost containment tool, the corporation is offering a one-time incentive to employees who meet defined eligibility requirements. The corporation expects a salary budget reduction between $1,000,000 in ten years. The plan, known as the "ESP" Employee Severance Plan, was structured by the Human Resources Department, Senior Management, the Board of Trustees, and Employers Preferred Corporation, a consulting firm from Southfield, MI specializing in such plans.
The corporation’s objective is to reduce the number of staff earning the highest salaries. Although not all employees will be replaced, those that are replaced will be hired at entry level wages and salaries. "This is part of a comprehensive, long-term solution to a growing fiscal crisis," said Senior Management.
The Wellness Plan faces a budget deficit, and staff is in the process of recommending ways to balance the budget. After studying other early buy-out plans, The Wellness Plan decided to adopt a plan specifically designed to address corporation objectives. The consulting firm EPC has implemented over 200 such plans throughout the country. The firm’s costs are more than off-set by the savings to the corporation and all administrative aspects of the plan are provided by EPC.
PHOENIX - More than 200 Phoenix Union High School District employees have taken advantage of an early incentive package, allowing the district to recall a majority of the employees laid-off last June. All but 72 staff members were recalled through the summer as a result of the Voluntary Incentive Plan (VIP).
As a cost containment tool, the district offered the one-time incentive to staff who met defined eligibility requirements of 10 or more years of service with the district. The buy-out attracted 129 teachers, 62 support staff and 15 administrators. Employees who elected to take the offer will leave service with the district by June 30, 1996.
Through the VIP program, terminating employees will have a 10-year monthly stream of income in addition to any other pay to which they are entitled, such as sick leave pay. The additional income cannot exceed $500 a month for administrators and teachers, and $300 for support staff. Many of the employees who took advantage of the plan - many at the top of the district’s pay scale - were able to retire three to five years earlier than expected.
The district expects a salary budget reduction over a five-year period, helping to control rising costs and avoid future lay-offs and program cuts. The plan was structured by the district and Educators Preferred Corporation, a consulting firm that specializes and has implemented more than 80 such plans nationwide.
Voluntary Incentive Plan Results
|Original VIP Projection||120||50||8|
|Actual Exits with VIP||125||60||15|
Phoenix Union’s objective was to find a method of reducing its budget with the least impact to staff and programs. This was accomplished via the VIP program, which gives employees at the top of their respective pay scales incentive to retire. Those employees were replaced with those laid-off at the end of the last school year. Savings occurred as a result of reduced salaries. For instance, the average salary of teachers taking advantage of the VIP plan was $48,000, while the salaries of the teachers who were called back are $32,300.
"This is part of a comprehensive, long-term solution to a growing fiscal crisis," said Rene X. Diaz, Ed. D., district superintendent. "No one likes to lay off employees, so when we find programs like the VIP to help reduce the budget while keeping good employees, we will take advantage of them."
Despite passage of an override in 1995, Phoenix Union still faces budget cuts as a result of current and expected cuts in state education spending. District staff is in the process of recommending ways to balance the budget over a three-year period that will minimize cuts to programs and staff.
The savings comes by hiring beginning teachers at lower salaries to replace veteran teachers.
A retirement incentive plan for veteran Evansville teachers, available to 200 teachers this school year, would provide $40 million over 10 years for other uses, school officials said Monday. The Evansville School Board was told the savings comes by hiring beginning teachers at lower salaries to replace earns about $47,400 a year and beginning teachers $26,600.
Sherry DeMuth, Evansville Teachers Association president said the teachers union would bargain to get some of the savings placed into salaries of other teachers. Superintendent Phillip Scholffstall said taxpayers will benefit from the plan, too. Alternatives like this plan are needed to "minimize" the trend of relying more on local property taxes to fund schools since little additional state funding is available, Schoffstall said.
Another benefit, Schoffstall said, will be an influx of younger teachers. Gary Staley, executive director of corporation supportive services, said employees with at least 17 years experience are eligible for the plan. or 695 of 1,400 teachers.
The incentive plan would be made available to 200 teachers, based on seniority, Staley said. If 200 teachers opt for the plan, only 180 new teachers will be hired to replace them, he said. School officials said that’s a realistic goal, noting program changes resulted in 15 fewer teacher and classroom aide jobs for the upcoming school year. Also another 20 teachers are projected to retire during a normal school year and would be replaced by beginning teachers, Staley said.
The incentive plan is expected to attract teachers who already qualify for full state retirement or are nearing retirement. State retirement benefits put $16,000 to $20,000 annually in a retiree’s pocket. ETA officials said. The Evansville plan would be in addition to that. Staley also said 129 administrators qualify under the plan and 15 to 30 of them may be allowed to participate in the incentive program.
Staley recommended Acordia School Benefits be hired to buy the annuities and manage the plan. Acordia’s cost is $1.57 million a year for five years, slightly higher than other companies’ proposals. Acordia plans to hire Educators Preferred Corp. to counsel Evansville teachers on their individual benefits under the plan, Staley said, something ETA officials said was a factor in the recommendation of Acordia. Yet to be decided is whether the incentive plan will be eight or 10 years, Staley said.
Teachers will receive in monthly installments over the plan’s life:
In addition, the corporation also will pay 65 percent of taxes on the retirement income over the life of the plan. The maximum monthly pay for retiring teachers would be $529 under the 8-year plan and $424 under the 10-year plan, Staley said. Staley said the plan would save about $814,000 the first year because the corporation will pay 10 years of taxes in a lump sum that year. The saving escalates, jumping to $1.8 million in the second year and to $6.5 million the 10th year, he said.
The Lansing School District expects to save at least $6.1 million over the next 10 years thanks to another wave of early retirement incentives, official said Friday. By September, 121 school employees - many principals and top administrators - will retire under the plan, which is the second offered employees in the last year. Retirees will receive a payout equal to their 1993-94 salary for signing on to the incentive program. It will be paid in monthly installments over the next 10 years, in addition to pension benefits, official said. "This will have nowhere near the payoff that we had when we offered the incentive to teachers, but it will help," said Lansing Schools Superintendent Richard Halik. "Every little bit helps." "Last year, about 150 teachers, most at the top of their pay scale, retired under a similar incentive," Halik said. "About 100 of those jobs were replaced, usually with teachers with less seniority. That incentive saved the district more than $10 million," Halik said.
Last year, 152 staffers with enhanced benefits. Officials said about 100 were replaced.
This year, 121 school employees, many principals and top administrators, will retire by September, including:
School officials aimed the incentive at school administrators and other non-teachers, with hopes that at least 77 employees would sign on. That number represents an estimated $6.1 million in savings to the district. Because about 44 more employees signed on than expected, officials believe the district will save even more.
The current state of funding for public education puts enormous stress on the finances of school systems nationwide. The normal response--program cuts, pay freezes and staff layoffs--are marginal and demoralizing solutions to cost containment.
Because staff salaries and fringe benefits make up the largest portion of the typical school system's operating budget, a properly structured early-buyout severance plan can be the most effective way of achieving cost savings while maintaining the quality of the education program.
Over the past decade, our firm has worked with hundreds of school system administrators who state that the cost savings and the opportunity to reallocate resources are the two main reasons for offering an early-buyout severance plan. The most effective plans encourage staff at the top of the pay scale to exit, creating opportunities to replace the departed with staff at much lower salaries.
Before your district offers any incentive plan, study it with great attention to detail. You must take into account the many elements of employee demographics and the overall impact the plan is likely to have on a school system both in the short term and in the long term.
There are hundreds of reasons why individuals decide to leave their jobs, regardless of their age and eligibility for pension benefits. To be effective from a cost-savings standpoint, the eligibility criteria should not be limited to those who are eligible to retire.
By expanding eligibility to include staff members at the top of the pay scale, regardless of pension eligibility, the success of the early-buyout severance plan will be enhanced. This approach attracts individuals who may not have been planning to leave a school system for another five, 10 or 15 years. This is where a plan's long-term cost savings is generated.
Historical data show the percentage of participants in buyout programs breaks down this way: 25 percent between ages 38 and 52; 28 percent between ages 53 and 56; 28 percent between ages 57 and 60; 15 percent between ages 60 and 62; and 4 percent 63 or older.
Greater advantages to a school system exist by using a cash benefit paid over several years rather than a lump-sum cash payment. A monthly stream of income for 7-10 years provides the participant with a greater sense of security, where as a lump-sum payment (after taxes) is easily spent within 1-2 years of departure.
Because lump-sum payments may be perceived as a bonus, employees most likely to participate are those who would have retired within the next three years, which eliminates any chance of a protracted cost savings to the district. The employer gains from the multiyear pay-out approach by being able to pay the benefit over time, thereby reducing the shock on cash flow in the first several years of the plan and by creating a participant demographic that generates a real savings.
Several tax approaches are available to pay the benefit over time and maximize savings to the school district. Each should be looked at closely to determine which is right in the case being considered.
Additionally, to maximize its effectiveness, the early-buyout plan should be offered during a one-time, 45-day window. Consider allowing the choice of more than one date that would be the participant's final date of employment or exit date. This can increase participation and give the school system greater lead time to recruit and reallocate personnel.
It would be imprudent to place any type of severance incentive plan into a collective bargaining agreement. Here a plan will quickly lose its effectiveness as an incentive for staff to exit early and instead becomes a bonus at normal retirement.
Providing comprehensive counseling to all eligible staff members will greatly increase participation. Most of the time, employees feel reluctant to discuss the plan and their options with a member of the administration. Administrators are not inclined to counsel employees in light of the liability they may place themselves and the school system under. Having a team of counselors unaffiliated with the employer available to assist employees with the process of considering the plan serves all parties well.
In most cases, school districts are replacing 100 percent of the vacated positions with lower-salaried employees, achieving the balance of significant cost savings no reduction in staff. Opponents of early buyouts argue that a district loses its best and most experienced teachers; yet recent history suggests that not all of the most seasoned and productive staff opt to leave their classrooms. Additionally, surveys of our firm's clients indicate that the combination of the remaining experienced teachers and the energy of newly hired staff creates a better working and learning environment.
Daniel Sheehy is a senior managing consultant with Educators Preferred Corp., 26877 NW Highway, suite 305, Southfield, MI 48034. E-mail: firstname.lastname@example.org
DAYTONA BEACH – Eighty-two city employees will give up their jobs over the next year under a one-time Voluntary Incentive Plan offered by the city. The 82 workers represent about 8.4 percent of the city’s full-time workforce of about 975 people. This amounts to about one-third more than the estimated 60 employees expected to accept the offer. Department or division heads opting for the plan include City Engineer Ray Lawrence, Employee Relations Administrator Fred Meincke and Development Services Director Jerry Langston. Lawrence and 25 others will end their city employment June 27; Meincke and 30 more on Jan. 30, 1999; and Langston and the remaining 24 will leave June 26, 1999.
The plan, approved by the City Commission in February, is intended to reduce the city’s general fund budget. It is administered by Michigan-based Employers Preferred Corporation, which also designed the plan. The budget reduction is based on replacing a number of higher-salary, longtime employees with new, entry-level-salary employees. That would tend to keep the workforce total at a steady level, but City Manger Carey Smith said this week he’ll "review the need for each (vacated) position before it’s filled."
The only savings estimate now available is based on a total of 41 employees accepting the plan. The savings are estimated to range over eight years, from $42,500 in the first year to $2.8 million in the eighth year. City Commissioner Tracey Remark, who strongly supported the plan offered to all city employees with 10 or more years of service, said she’s pleased it appears to have resulted in a successful effort that benefits both the city and its employees. "I’ve had many employees thank me personally for supporting the plan. A lot of them said they were glad the opportunity was made available to them," Remark said.
Those who have accepted the city offer to give up their jobs will receive a monthly income spread out over eight years with full survivor benefits. In addition to full payment for unused personal leave time, the employees will receive an amount equal to 25, 50 or 75 percent of one year’s salary during the eight-year span.
Under the plan, the 25 percent level applies to those likely to have higher salaries – employees with 30 years or more of service. Employees with 25 to 29 years of service will receive the 50 percent level and those with 10 to 24 years will receive the 75 percent level. Reflecting lower-age retirement requirements for police officers and firefighters, the 25, 50 and 75 percent levels for them are based on fewer years of service.
Two of DeLand High School’s three chemistry teachers won’t be back on campus when classes resume in August. Bonnie Coolidge and Michael Nave retired this month under an incentive plan that offered veteran school district employees bonuses, health insurance benefits and tax savings. Coolidge had planned to teach until 2000 but found the incentives too good to pass up. Nave, who planned to retire this year anyway, said the incentive plan "pushed me over the edge."
The final count is still being confirmed but about 300 of 1,800 eligible employees signed up for the incentive program by its June 5 deadline. That’s about twice the school district’s normal number of retirees in a given year. "The impact is yet to be seen," said Superintendent Bill Hall. "Certainly we are losing a number of employees who have given many years of dedicated and quality service to the school district. Replacing them is going to be a challenge for us. That’s the down side."
"On the other side, if we’ve been doing our job as leaders we have quality people waiting in the wings to move into those positions, and I think we do," Hall said. Retiring Hurst Elementary School Principal Paul Finn agreed. "For my own ego, I would like to think they’re going to miss me, but this time next year this place will be running just as efficiently," Finn said. Finn and School Board Chairman Jeff Timko noted the retirements will mean promotions for some and new jobs for others.
Local principals began looking for new teachers at a job fair Friday at Deltona’s Pine Ridge High School. About 350 applicants were expected to attend. "We’re trying to meet the needs that are there suddenly," said Al Boule, director of recruitment and equity for Volusia schools. "At least we have a good pool of applicants." Some jobs, such as the chemistry posts at DeLand High, are expected to be harder to fill than others because there are fewer qualified applicants available.
Officials of the three unions that represent school district employees have been pushing for an early retirement plan for several years. The "voluntary separation program" approved by the School Board in March was an outgrowth of those talk. Employees don’t have to be eligible for state retirement benefits to participate. "It’s kind of a double-edge sword for us. It’s something the teachers have really wanted, but when we finally got it we lost a lot of good teachers, and a lot of them are members," said Suzy Smith, president of the Volusia Teachers Organization.
Free health insurance for the next eight years and school district help with taxes on the incentives were among the most popular components, according to interviews with randomly selected employees who opted to participate.
Volusia Schools’ incentive plan at a glance
The school district expects significant cost savings from the program, primarily from replacing veteran employees at the top of the pay scale with less experienced ones who will earn less. Preliminary projections peg the savings for the budget year that will begin July 1 at between $100000 and $200,000, said Assistant Superintendent Art Cunkle. Annual savings of at least $1 million are projected for seven years after that. While some of the participating employees had planned to retire this year anyway, others decided to leave their jobs earlier than expected because of the incentives.
Teachers Carolyn and Cary Holland, both in their early 50s, re-examined their personal goals in view of the incentive package. "It made us stop and think where we were in our lives," Mrs. Holland said. Her father died a year after retiring at 65, a pattern she and her husband didn’t want to repeat. With their two sons now grown, the Hollands decided to retire this year and take time for things they’ve long wanted to do—such as making a trip to Alaska. While the School District will lose the expertise of many veteran employees, Timko said it will benefit from the enthusiasm of newly hired workers. "It’s healthy for a system to have turnover with new employees who are younger, energetic and looking forward to their careers," Timko said.
Possible $50 Million in Budget Reduction Over Ten Year Period…
The Wayne-Westland Community Schools VIP attracted 181 teachers and administrators who are at or near the top of the pay scale will accept an early retirement offer this year. As a cost containment tool, the district is offered a one time incentive to teachers and administrators who met defined eligibility requirements.
The district expects a salary budget reduction of over $20 to $23 million in five years and $50 million in ten years. The plan, known as the "VIP" - Voluntary Incentive Plan, was structured by administration, the respective bargaining units, the Board of Education, and Educators Preferred Corporation, a consulting firm specializing in such plans. Discussions between the board and the teachers union were held over the last several months. The Board unanimously approved the plan January 11, 1995.
The district’s objective is to reduce the number of staff earning the highest salaries of $55,000 or more. Teachers with 1 to 3 years of experience would be hired at an average salary range of $26,000 to $30,000. "This is part of a comprehensive, long-term solution to a growing fiscal crisis," said Mr. Dan Slee, Assistant Superintendent.
Wayne-Westland Community Schools faces a budget deficit, and staff is in the process of recommending ways to balance the budget. Program cuts are hoping to be minimized. After studying other early retirement plans, the board decided to adopt a plan specifically designed to address Wayne-Westland’s objectives. The consulting firm EPC has implemented over 80 such plans in districts and colleges, such as Plymouth-Canton, Lansing, Evansville, Woodhaven, Hamtramck, and East Lansing. The firm’s costs are more than off-set by the savings to the district and all administrative aspects of the plan are provided by EPC
The Offer: a one time offer to unions representing teachers, administrators, and other select staff who are at the top of the pay scale, and have been with the district at least 4 years. Employees not at the top of the pay scale but have ten or more years of service with the district are also eligible. Unused sick leave will be recognized in the plan offer.
5 Year Savings Projections:
181 opting/150 replaced
10 Year Savings Projections:
181 opting/150 replaced
WASHINGTON - The supply of new teachers may exceed demand, says a study out Wednesday that challenges the notion of a shortfall of 2.2 million teachers over the next decade. The Center for Education Information (CEI) says a survey of 1,354 higher-education institutions found that the USA's colleges and universities produce more than 200,000 teachers each year. Tens of thousands of other classroom vacancies are filled by former teachers returning to the profession, by teachers moving from district to district, and by those moving from private schools to public schools. "The bottom line is, the nation is overproducing teachers," CEI President C. Emily Feistritzer says. "The number completing (teacher preparation programs) exceeds vacancies by a large margin every year." U.S. Department of Education spokeswoman Melinda Kitchell Malicoho, however, says the estimated need for 2.2 million new teachers is based mainly on projected enrollment increases in the next few years and on an expected wave of teachers retiring.
C. Emily Feistritzer, President, Center for Education Information
She says that about 22% of those trained as teachers leave the profession during their first three years and that there has been an ongoing shortage of teachers for science, math, special education, bilingual education and foreign language.
Reversing the trends of the 1970s and 1980s the 1990s have seen a sharp rise in the number of people who are studying to be teachers, the study shows. In the past 15 years:
Feistritzer says the study focused mainly on the supply of teachers and did not concentrate on the quality of their training. But she says new teachers have higher grade-point averages than in previous years, take more substantive courses, and get more training in subject matter and clinical experience.
"The demand for teachers out-stripping supply is pretty much confined to large inner cities and outlying rural areas. There is evidence that people studying to be teachers don't want to teach in those two areas of the country. That is where a lot of the supply-and-demand problems lie," she says. "I think we might start being more creative about how we match up the people that are available for teaching with the jobs."
Feistritzer also says that states should consider making teaching licenses mobile and casting a wider net to recruit across state lines.
By unanimous vote of the Pennsylvania Senate, the Commonwelth legislature passed a bill permitting local governmental bodies to offer voluntary early severance plans. Final passage came on June 14.
The legislature, House Bill 1962, was promoted by EPC as a means of placing local governments on equal footing with public colleges and school districts. Those bodies have long enjoyed early severance as an option.
Dr. Miles Williams, EPC's Atlantic Region Manager, steered the legislation on EPC's behalf. Prime sponsor of the bill was Representative Lynn Herman, Majority Chair of the House Local Government Committee. Representative Terry Van Horne, Minority Chair, was the secondary sponsor. Recently retired State Senator, J. Doyle Corman, EPC's Managing Consultant for Local Government Affairs in Pennsylvania, assisted Williams in achieving passage.
Williams indicates that the Policy Office of Pennsylvania's Governor, Tom Ridge, has advised that the Governor is expected to sign the measure into law in the near future. A number of state local government bodies have expressed interest in exploring early severance pending passage of the enabling law.