School Finance

Burdened by school retiree costs, Memphis leaders explore dropping new-hire benefits

PHOTO: Laura Faith Kebede
Chief of Human Resources Trinette Small presents during a 2016 board meeting for Shelby County Schools.

Memphis leaders have been grappling for years with how to cut a $1 billion-plus liability for retiree benefits through Shelby County Schools. But even as they’ve put options on the table, they’ve never settled on a sure-fire reduction plan.

Now school board members are exploring one extreme option anew: eliminating all retiree benefits for employees hired after January of 2018.

The proposed policy change was presented Tuesday to school board members by Trinette Small, the district’s chief of human resources. (The original proposal would have applied to employees hired this year too, but was amended before the meeting.)

At issue is the $1.2 billion obligation known as OPEB, or “other post-employment benefits” such as health and life insurance. The liability is the projected cost based on employment, mortality, and healthcare trends. (OPEB does not include pensions. Retired school employees receive their pensions from the state.)

Two years ago, Superintendent Dorsey Hopson called the OPEB liability “a huge gorilla around our neck” as his administration offered up options that included cutting spouses from coverage. He backed off, though, following a series of protests from retirees.

PHOTO: Kayleigh Skinner
Retired educators attend a 2015 forum to discuss a cost-cutting plan that later was tabled.

The liability has not gone away, however. It remains a point of serious concern for the cash-strapped district and for the county commissioners who allocate funding for schools. The district now pays out retiree benefits as they occur — and sets aside millions each year to offset future costs.

Currently, about $570 out of $8,800 per-pupil costs, or about 7 percent, goes toward the obligation.

“We could be putting that money into the classroom instead,” Hopson said in 2015.

While district leaders haven’t said publicly how much the newest proposal would save, Small said the change would go a long way toward relieving longstanding tension surrounding the obligation.

“Long term, this will allow us to invest more in our teachers and not have to fund an ever-increasing OPEB debt,” Small said according to a report in The Commercial Appeal.

At the same time, some leaders have worried that cutting future benefits would make the district less competitive at a time when it’s seeking to attract and retain high-quality teachers.

Shelby County Schools has had to shoulder the responsibility for OPEB costs amid a tide of changes in the local education landscape.

While the district’s funding is based on student enrollment, the population of Memphis has declined in recent decades and more students have headed to charter schools in recent years. Exacerbating the problem, six suburban municipalities pulled out of Shelby County Schools and created their own school systems in 2014, the year after city and county schools merged. All of the changes have left the Memphis district with a smaller pool of funding to pay for the legacy costs for retirees.

School board member Miska Clay Bibbs said she requested that the administration amend its proposal with more details before the panel schedules to vote on it.

Clarification, Dec. 1, 2017: A previous version of this story stated that the school board was expected to vote on the proposal in December. A date has not been set yet, because a board member requested that the administration amend its proposal with additional details before a vote.

At what cost

Adams 14 looking for grants first, as it prepares to pay for an external manager

First grade students practice reading in Spanish in their biliteracy classroom at Dupont Elementary School in Adams 14. (Photo by Yesenia Robles, Chalkbeat)

About to embark on a search for a manager to run its district, Adams 14 officials have been looking at how to pay for that external management.

Although the state ordered that the district hand over management to a third party, following years of low performance, the order doesn’t come with money. Many community members have been wondering where the funds will come from.

Sean Milner, the district’s executive director of budget, operations and construction, said the best guess district officials have right now is that external management could cost $600,000 per year.

The cost of the contract isn’t yet clear. It’s hard to even estimate the cost since Adams 14 is the first district the state Board of Education has ordered to seek outside management.

The actual cost won’t be pinned down until after a group is selected and a contract is negotiated. The district will call for proposals requesting to know the qualifications of interested outside groups, but those will not include the cost of their work. The Colorado State Board of Education must vote to approve the selected manager before the district proceeds with a contract.

It’s possible the district will get help, at least to cover a portion of the management costs.

Adams 14 officials already applied to the state for a grant of up to $200,000 per year. There are no guarantees that Adams 14 will get that money, as they are competing with other districts that need help improving.

Colorado Department of Education officials would not comment on applications under review, but said that districts like Adams 14 that are following State Board directives receive priority for what the state calls Transformation grant dollars.

Officials are also searching for other grants to cover another $200,000. If they are successful, that could leave about $200,000 for the district to cover.

District officials said they hope that by shifting money they might be able to free up enough money from the general fund, without having to make large budget cuts. Work on the budget for 2019-20 is just beginning.

And if need be, district officials said they have informally received the school board’s verbal approval to use some of the district’s $14 million reserves.

So far, officials have looked at other districts that have gone through similar contracts in Indiana and Massachusetts. Those districts are larger than Adams 14’s 7,500-student-district. In their estimates, Adams 14 officials are also considering there may be extra costs associated if a selected partner isn’t local. The possibility also exists that Adams 14 may choose a public entity such as a school district, (Mapleton has already expressed interest), and those contracts could cost less.

Community members have asked if certain district positions, especially that of the superintendent, will duplicates the job of the external manager. Board member Bill Hyde wondered at a public board meeting earlier this year if the district would be paying twice for the same work.

Just earlier this year, the Adams 14 school board raised Superintendent Javier Abrego’s annual salary to $169,125.

The school board, which retained ultimate authority to hire or fire anyone in the district, may have to consider district positions as it finalizes the 2019-20 budget. Or the external manager, once on board, could make recommendations about staffing.

The state order requires that the district’s contract with an external manager start by July, but district officials are planning for an earlier start, potentially in March or April.

If that happens, the district would amend the current school year’s $130 million budget to use curriculum funds to pay for the outside manager for the remainder of this school year.

Officials said they’re being conservative in new spending, given that whoever comes in to run the district soon might have new ideas about programs or curriculum.

“We’re not stopping anything we have in progress,” Milner said. Some teacher training for curriculum still has to happen, for instance, he said. “But if there were new items to put in place, at this time we’re kind of holding off.”

major grants

Tennessee’s turnaround district wins big chunk of $8.25 million grant for school improvement

PHOTO: Laura Faith Kebede
A student at Libertas School of Memphis spells out words next to pictures as part of his independent learning time at the Montessori school in the Frayser community. The school is one of 10 in the state awarded a new school improvement grant.

Ten schools throughout Tennessee that are academically behind are divvying up $8.25 million in new federal grants for school improvement, the state Department of Education announced Monday.

Each school will receive $275,000 per year over three years to total $825,000. Four schools in the state’s turnaround Achievement School District netted the competitive grants, which are going to be used for bolstering strong leadership, talent management, effective instruction, and student support.

The money will be a welcome boost to the state-run district, which is tasked with improving schools in the state’s bottom 5 percent academically. The grants give schools the flexibility to add staff members or new programs to areas that will help their students improve, which is especially helpful to the schools that serve students in low-income areas and have historically been under-enrolled and under-funded.

For Memphis Scholars Raleigh Egypt, the new funding will go toward reading intervention for its middle school students, and more behavior and social work support.

“We know that one of the biggest difference makers for our kids is the ability to read and read well,” said James Dennis, interim leader of Memphis Scholars. “The grant will be a steroid shot to our efforts to meet our kids where they are. It will also go toward additional wraparound services, behavior and social work support. It will help us get to the bottom of some of the issues preventing our students from learning at high levels.”

The schools awarded are:

  • Georgian Hills Achievement Elementary School, Achievement School District
  • Memphis Scholars Raleigh Egypt, Achievement School District
  • LEAD Neely’s Bend Middle School, Achievement School District
  • Libertas at Brookmeade, Achievement School District
  • Antioch Middle School, Metro Nashville Public Schools
  • Calvin Donaldson Elementary School, Hamilton County Schools
  • Orchard Knob Middle School, Hamilton County Schools
  • McKissack Middle School, Metro Nashville Public Schools
  • McMurray Middle School, Metro Nashville Public Schools
  • The Howard School, Hamilton County Schools

These grants are provided through Title I funds from the U.S. Department of Education and must be used to support schools on the state’s lists of academically struggling schools.

“It is imperative that we provide additional support to schools that serve our students who are furthest behind and believe it is important to allow districts the autonomy to leverage what works in their local schools,” outgoing Education Commission Candice McQueen said.

It’s significant that four of the 30 schools in the Achievement School District made it through the competitive statewide application, said Sharon Griffin, leader of the district and assistant commissioner for school turnaround.

It’s “a tremendous accomplishment for our district and our operators,” Griffin said. “It’s even more impressive to know that we are the one school district in West Tennessee to have schools that were approved.”

For Georgian Hills Achievement Elementary, the announcement of the new funding fell on the first day of school after three weeks of heating problems. Bobby White, chief of external affairs for the Achievement School District, said it made the day even more of a celebration.

“This funding over three years is going to be huge for this school, as well as the other schools awarded for turnaround strategies,” White said.