Wednesday, January 12, 2011

Lane Improvement a Cost Component in School Finance

I've been writing recently about the budget issues that our school board faces. The financial cost drivers that I am describing are not unique to our district, at all. But I've been using the particularized costs that we face over the next several years, in hopes that it will propagate a better understanding of the way school finance works under our current state system.

Today, our Board of Education will conduct a workshop to begin the budgeting process for budget year running from July 1, 2011 through June 30, 2012. In my first post, I explained how the governor and legislature added increased retirement costs, $250,000 per year, to the District's obligations in each of the next four years, without providing compensating revenue increases, so that unless the State legislature provides revenues to offset these increases, we will have to find a total of $1 million of offsets over the next four years. In the second post, I explained how the so-called excess cost aid pro-ration formula subtracts $350,000 in revenue from out district each year. As a result, unless and until the State corrects this problem, we will lose $350,000 in special education revenue each year, but will be prohibited from making compensating cost adjustments in special education to balance that budget.

Today, I'm going to talk about automatic lane compensation increases and how it drives up our compensation costs without regard to state funding. The average increased cost to the district resulting from lane improvement compensation is about $190,000 per year, so that it contributes to about $380,000 in increased costs for the biennium in our district.

I have several more cost and revenue items to explain in this series of posts. I want to emphasize again, that as I examine personnel costs I am not in any way disparaging the need for adequate compensation for public school employees. But we need to discuss these costs, if we are to understand them.

A lane is earned when a teacher adds, generally, 15 credits beyond a basic degree in university coursework. The cost of the automatic lane adjustments to the district depends upon the number of teachers in a given year who earn enough credits to move into a new lane. (They are called lanes because the salary grid for a school district is a chart with horizontal rows that are "steps," and vertical columns that are lanes. A teacher moves from one row to the next by increasing the number of years of service, and from one column to the next by earning sufficient lane credit.) As I have said, the total increased cost of lanes to the district would be about $190,000 in additional compensation cost a year. If reaffirmed in the new agreement, then, the total lane adjustment costs amount to total cost increases of about $380,000 for a two year collective bargaining agreement.

Teacher compensation in Minnesota has for decades been based on training and experience. Training has been recognized by lane movement. Experience has been recognized by step improvement. For many years, the State actually encouraged this system by providing equalizing revenue to provide additional compensation to districts with more highly experienced teachers and more highly trained teachers. As you can imagine, a district that is older, and has not been recently growing, has a larger percentage of its teachers with advanced degrees, and a larger percentage of teachers with longevity and earning step improvement pay. On the other hand, a district that was recently small, and is in a major growth spurt, has a very high percentage of its teachers on the lower level lanes and the lower level steps. As a result, those districts make a profit on the revenues provided in the general formula, and begin to build up reserves, whereas the districts with declining enrollment have lots of teachers bunched at the top steps and lanes, and start to run a deficit. So the training and experience revenue was designed to make up for that disparity. However, the State ultimately concluded that training and experience revenue should be discontinued, probably as an incentive to districts to change their system, or possibly as a raw cost saving measure. But all across the state, the system has persisted.

Now in many districts, including ours, lane improvement raises continue beyond the end of the collective bargaining agreement, while the new contract is being negotiated. Under Minnesota law, public employee contracts have a termination date at the end of two years. Our current contracts, for example, run from June 30, 2009 to July 1, 2011. Now under the current bargaining law, when a contract expires without a replacement contract, all permanent employees work under a so-called "continuing contract." The old collective bargaining agreement continues in force, beyond its expiration date. When that happens, all teachers and other employees work at the rate of compensation established by the old agreement.

The question of whether teachers get lane improvement compensation under the continuing contract is governed by the old collective bargaining agreement. And in most districts it is. It is a form of automatic increase that drives up compensation costs automatically before the new contract is signed. Why do we, and many other districts, agree to make these increases automatic during the continuing contract? The answer is that until recently, the legislature has generally provided us with enough funding so that we could cover that cost. In addition, the teachers who are moving up the ladder of lane improvement have put in a significant amount of work, so we have generally been able to cover the cost of lane improvements out of increased revenues from the State.

There is a significant body of research that suggests that the lane compensation system is not really all that good for school districts, nor all that good for the teaching profession. What I mean is, if you are going to spend the $190,000 more each year for teachers, there are ways to spend that money that would actually be better for everyone involved, and here I don't mean compensation based on test results. The lane credit is expensive for teachers. They have to spend a significant amount of money in tuition to earn 15 credits, and frankly, there is very little evidence that the education that they receive in the coursework they take has a significant professional benefit, let alone a benefit in the classroom. From time to time, we've suggested that it would be better to replace the lane credit system with something that was less costly to the teachers earning their lanes and of more benefit to children in the classroom. For example, teachers could earn lane credits by taking on new leadership responsibilities. But that idea has never garnered support on the other side, for some reason.

Incidentally, I would encourage you to become familiar with a new resources that allows you to view not only our agendas online, but also the attachments to those agendas that provide valuable background information on what the board of education will be discussing at its upcoming meeting. You can also review past meetings and look at the backup material in this way. You can get to the materials by going to the District 742 website and choosing the menu selection for the school board, and foll wing the links to the meetings and agenda sections. Or, you can get directly to the public board-book side by clicking this link: Click Here.

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