Tuesday, December 22, 2009

Compensation Reform Ain't Easy: Maybe its politically smarter to just keep our heads down

Today's Times (that's St. Cloud Times) contains a story on our settlement with the administrators to transform longstanding benefits systems. I want to start by acknowledging the cooperation of the administrators in assisting with this difficult transition. When you work under one system, changing to a new system requires a lot of hard work. From the outside, its easy to say, just change the system: get it over with. But the fact is that most school districts have not been able to accomplish that objective, because it is so hard. It may sound a bit whiny, and for that I apologize, but there are times when you feel like it would be politically smarter to just leave things alone.

We've been trying to wean ourselves from a system that accrues benefits now, but pays for them in the future, a system that is very common in public entities. The city of St. Cloud and many school districts in Central Minnesota have significant accumulated post-retirement benefits, including health and leave cash out benefits, that were agreed to many years ago. Some people would say, well just get rid of those benefits. Do it tomorrow. But people have worked under these systems for decades. They have planned their future around them, and have been attracted to school districts and cities as a result of these benefits. Moreover, Minnesota law protects public employees and requires public employers to bargain about these benefits. The representatives of employer groups have an obligation under labor law to represent their members effectively; they can't just lay down and die, and of course they don't. To make a long story short, the new system that we have adopted is a substantial advance over the old. Its a transition that the Board of Education has been trying to make for a number of years, and its a transition that many cities and school boards in the area still have not made.

But that's not really what I wanted to write about today. I wanted to write about the political question whether it is politically smart for school boards to take on tough questions like this, or whether we would be better off, politically, to just let them lie unaddressed.

There are people in the world of public education who argue that its a bad idea to try to fix things that need fixing, because it just brings attention to the fact that the fixing was necessary. Dummy up, they say. The only way you get into trouble is if you try to address a difficult problem. This idea is not unique to education. I started out practicing law for the airline industry. They had an unwritten rule that you didn't talk about safety improvements. That would just make people realize that the last time they flew, the airplane wasn't as safe as it could have been. So now you have people arguing about why planes are unsafe, instead of celebrating that they are safer. Dummy up. Don't talk about safety and nobody will worry about it.

A lot of people make the same arguments in public education. Look. They say. The school districts that don't confront their intractable problems don't get in the newspaper for not doing anything. It's only if you do something that you get bad publicity. If you have major problems in your curriculum, for goodness sake, don't talk about it too much. Even if you make necessary improvements, the publicity is going to be nothing but bad. People won't remember the success that you achieved; they only remember the fight that ensued when you tried to make the reform. If there are problems in your compensation structure, you're probably better off letting sleeping dogs lie, because the public discussion isn't going to do anybody good. If you fix it, people will say, why didn't you fix it sooner. If you don't fix it enough, then people aren't going to celebrate that you made progress, they're going to trumpet the fact that you didn't fix it enough.

Now listen. When we passed the OPEB bond issue we asked our administrators for a sunset agreement. If we hadn't done that, nobody would have ever thought to discuss the issue in public. When we took an inventory of the districts who don't have a sunset, even with their teachers, let alone their administrators, it was amazing the number of school districts that hadn't even taken a run at trying to address the problem. But those districts aren't in the news. And probably, they are a whole lot smarter, politically, than we are. This year, school districts all over the state had an opportunity to make improvements in their post-retirement benefits structure. But the districts that didn't do anything stayed out of the newspaper. Now who is politically smart, and who is politically dumb. Leave well enough alone, and people will leave you alone. Evidently that's the rule.

Last week, the Board of Education adopted a memorandum of understanding with its professional school administrators, that is our principals. There are two features to that agreement. One of them has gotten a significant amount of media coverage, and was the subject of an editorial in the Daily Times. That's the issue of post-retirement health contributions to our administrative employees. The second has gotten almost no attention in the media, but it was equally important. That's the subject of changing the structure of payment for accrued leave. In both cases, we dramatically improved the structure of compensation. The improvement had nothing to do with increasing or decreasing the cost of compensation. It was about changing the structure so that it fits with modern compensation principles.

The public has a right to scrutinize whether we made a good deal for the taxpayers or a bad one. So I have no call, really to whine when that happens. We've gone down a road here in St. Cloud, to try to present our issues publicly, and to try to explain them. The price that we pay when we do that is that some people will not agree with the way that we've solved our problems. At the end of the day, I think we are better off putting these issues on the table, even thought some folks use them as the occasion to beat us up, than if we just try to stick our heads in the sand and leave well enough alone.

Some people misunderstand these compensation issues deeply. They like to use it as an opportunity to beat up on professional educators. That's shameful, because there is no call to do that. Maybe they got disciplined by an administrator when they were a student. Maybe they listened to union propaganda, or taxpayer league propaganda, trying to convince that if we would just cut administrators, the district could balance the budget. But the fact is that overwhelmingly, the educational research is telling us that school transformation begins with school administrators. This issue isn't about who is overcompensated. The issue is about putting your compensation structure on a sound basis so that when you properly reward quality people, that you aren't doing it with funny money that will have to be raised in the future.

Several decades ago, when school districts were growing, someone hit on the idea that you could attract better administrators (and teachers) for less money out of current dollars if you would offer them benefits when they retire--some thirty or more years later. What a wonderful idea theses people hit on. Hire good people now by offering benefits that could be paid three decades in the future. The boards who did that believed that school districts would keep growing and growing. There was a baby boom on, they thought that in thirty years there would be way more younger employees than older employees. They built a compensation pyramid where, they believed, there would be way more new teachers and new administrators coming into the district, than retired teachers and retired administrators going out. And if they had predicted the demographics correctly, everything would have worked out great. They didn't predict the skyrocketing medical costs. They didn't predict the falling birth rates. They didn't predict the huge increase in life expectancy that would completely change the ratio between children, adults of working age, and the retired.

Now over the years, educators came to school districts planning their future around the existing structure. They aren't the only ones who have been surprised by the new realities. Private companies have been confronted by similar problems, as their pension plans proved inadequate to meet the retirement expectations of their employees. All over the country, private and public employers are confronting this new reality, and some are confronting the problem now, and some are not. If we beat up on the public employers and their employees who are working hard to confront these issues, and give a free pass to the ones who are not, what lesson do you suppose is going to be taught?

The memorandum that we signed with our administrators last week was not designed to decrease the current compensation of anyone employed by the district, it was designed to significantly change the structure of compensation so that it would be more fair to the district over the next decades, and we accomplished that objective. We have now sunset the post-retirement health benefits for all of our bargaining units. Keep in mind that a huge block of school districts, big and small, have not implemented any sunset agreements. Some of them are right here in central Minnesota. But they have kept their heads down and so let's not talk about them.

The other thing that we have done is to change a system that was implemented many years ago with respect to compensation for unused sick leave. Once again, our primary goal in these discussions was not to lower current compensation. but to change the structure to make it more transparent, more accountable, and subject to reasonable limits. Our primary goal was to stop passing the compensation buck to future generations and future school boards. With the cooperation of our administrators, we revised the system so that caps were installed that provides more long term protection for the taxpayers of the future. The school board ten years from now is going to mark this date as a substantial improvement in how we managed our compensation system. One of the defects in the leave accrual systems in public employment is that unearned leave is paid at the hourly rate earned by the employee when he or she retires. The reason that school boards used to adopt this system is that they could provide a benefit now that would only get paid out of future revenues. Its much smarter and more fiscally sound to fund the benefit immediately at the current hourly rate and allow the employee to invest the funds. When you are forced to pay for benefits as they accrue, instead of paying for them out of a future generation's revenues, you are much more likely to take the cost seriously.

No. We didn't eliminate administrator benefits. That wasn't our purpose. And why would we want to do that anyway? Attracting and retaining quality administrators is one of the keys to educational success and transformation. We weren't trying to take away benefits earned over the last two decades, benefits offered and accepted over those decades. Our goal was to implement a smarter, more controlled system that places the benefits we do pay on a pay as you go system. What we did, compensation experts will tell you was a great step forward for the long term solvency of our school district.

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