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.

trumped up problems

As budget talks begin, top New York lawmaker eyes cuts from Washington

PHOTO: Photo by Jonathan Fickies for UFT
UFT President Michael Mulgrew interviews New York State Assembly Speaker Carl Heastie.

It’s Washington politics — not Albany’s — that are keeping state Assembly Speaker Carl Heastie up at night as he girds himself for New York’s coming budget season.

New York is facing its own $4.4 billion budget deficit amid ongoing power struggles in Albany. Yet it’s the tax overhaul being pushed by Congressional Republicans and President Donald Trump, along with possible federal spending cuts — both of which could take a bite out of funding for New York schools — that are worrying Heastie, a Democrat who represents the Bronx and is closely aligned with the New York City teachers union.

“Absent any other federal action that can do damage, I think we can manage that so that our schools will be fine and our healthcare can be fine,” he said Tuesday during a preview of next year’s legislative session hosted by the union. “It’s the unknown of what’s going to happen. What’s the next bad thing that Washington is looking to do.”

He was speaking at the union’s headquarters in Manhattan’s Financial District, where he was interviewed by UFT President Michael Mulgrew as part of an ongoing discussion series. (Critics were quick to pounce on the event as evidence that Heastie does the union’s bidding.)

Heastie — who will negotiate the state budget with Democratic Gov. Andrew Cuomo and the state Senate — has championed union issues in Albany. He supports the creation of “community schools,” which are filled with social services for students and their families, and has been less friendly to charter schools than his counterparts in the Senate.

During the discussion, Heastie did not say how much funding he would like to see allocated to education in the 2018-19 budget. But he noted that Cuomo typically builds a roughly billion-dollar increase to school aid into his budget — and that the Democratic-controlled Assembly usually looks to add more.

The state’s top education policymakers, the Board of Regents, released a budget proposal on Monday calling for a $1.6 billion increase in education spending. That is significantly less than their request last year, a sign they are nervous about the current budget climate.

Despite the funding uncertainty, Heastie can at least breathe a sigh of relief that he will not have to battle again this year to keep a different ally — Mayor Bill de Blasio — in charge of the city schools. For the first time, de Blasio secured a two-year extension of mayoral control last year, giving him and his backers a break from a fight that consumed the last three sessions.

Instead, charter-school policy could once again flare up. Last year, a dispute over charter funding helped push the budget well past its deadline. This year, Heastie said, he is not yet aware of any new charter-related bills heading into the new legislative session, which begins in January.

Meanwhile, he and the union are mulling changes they’d like to see to teacher evaluations.

In 2015, after fierce resistance by the unions, the state tied teacher ratings much more closely to state test scores. The move helped spark a statewide boycott of the tests, leading the Board of Regents to pass a moratorium on the use of grades 3-8 math and English tests in teacher evaluations.

However, the moratorium is set to sunset in 2019, which will likely eventually force lawmakers to change the law. Heastie did not say that he will push for a repeal this year, but did say it is time to “start the dialogue” about how to improve evaluations.

“I don’t know if we can get to a final idea,” he said. “But I think the earliest we could give schools and school districts around the state [notice] that there will be a different way to look at our student progress, I think the better.”

Dividing the dollars

Millions of extra dollars go to Indianapolis magnet schools that have fewer poor students

PHOTO: Shaina Cavazos
School 91 is one of several IPS choice programs that are getting extra money from the district.

Indianapolis Public Schools leaders recently overhauled school budgets in a bid to give more money to schools with poor students. At the same time, they quietly sent more than $6.5 million extra to 17 schools — including the district’s most affluent campuses.

That money went to special programs that often attract middle-class families in the form of about $700 extra on average per student, according to a Chalkbeat analysis. That’s substantially more than the $500 bonus the district gives to schools for each student in poverty.

Those dollars are significant in a district strapped for cash: Spread out evenly, the $6.5 million could send all schools about $250 more per student.

The bonuses also highlight a challenge district leaders often face when trying to make school funding fairer: not alienating families at schools that have long received different resources — and who might otherwise choose private schools or the suburbs.

Critics say the bonuses could work against the district’s goal of directing more resources to schools that need the most help.

“If you put more money into higher-achieving schools, your budget strategy, whether you will say it out loud or not, is to expand the achievement gap,” said Marguerite Roza, a Georgetown University professor who studies school finance.

District leaders defend the extra money as essential for special programs — which have focus areas such as Montessori, the arts, or career and technical education — because they cost more to run and would be harmed if they lost funding.

“We did not want to adversely impact the operations of those programs,” Superintendent Lewis Ferebee said.

But giving schools funding based on their programs is one thing that IPS’s new budget system was supposed to prevent. Until this year, the district awarded funds to schools based on an assortment of reasons, including the programs schools offer. In theory, the new student-based budgeting process, on the other hand, is supposed to funnel money to schools based on the needs of individual students.

Read: IPS’ new budget plan is supposed to give more money to poor schools. Here’s how it works.

The district designed some extra money to be temporary under the new budget plan so that schools wouldn’t experience a sudden drop in funding. But officials have not said whether the bonuses to special programs will lessen or disappear over time.

The 17 schools receiving extra money run the gamut. Their demographics vary, and some of the schools are low-performing. But on average, the passing rates on state tests are significantly higher than district averages, while the average poverty rate is far lower — 58 percent versus 78 percent. The amount of money they receive also varies widely.

(Click here to see Chalkbeat’s full analysis, which combined choice programs that do not receive extra money with the district’s other campuses. The projected poverty rate provided by the district does not include students in prekindergarten or self-contained special education classrooms, though those students are included in the total enrollment.)

Unlike neighborhood schools, families choose them, and the vast majority accept students by lottery.

Ferebee said he does not see spending more on choice programs as taking money away from other schools. He noted that the district also gives extra money to schools that have historically struggled. Several schools in a district-led turnaround effort called a transformation zone, for example, also get extra funding.

Plus, all families in the district have access to choice programs, he added.

“I would be more concerned if we didn’t open those programs up to all students, and didn’t provide transportation to all students,” Ferebee said. “But we do.”

The district has also worked to make sure less affluent families have access to choice programs. Last fall, the IPS board reduced the number of families who get priority because they live near a school and reserved seats for families who apply later in the year because data showed low-income families were more likely to apply late.

But for now, many of the schools that get extra money for choice programs are far more likely to educate middle-class students.

That’s likely a reflection of a key challenge for IPS and other urban districts. In states like Indiana, where schools get more money for each student they enroll, winning over parents is essential to staying financially viable. But the kind of programming — such as Montessori and International Baccalaureate schools — that can attract families who might choose private schools or move to the suburbs can be expensive because it often requires extra staff or training.

Carrie Stewart, cofounder of Afton Partners, which consults with districts on financial strategies. She said it is common for districts to give extra funding to schools with special programs.

Schools that offer the IB program, for example, must meet strict staffing and training requirements. “It’s very hard to run them at the same price tag as a typical school,” she said, which means they need more funding.

“Is that fair? I mean, I don’t know,” she added. But if the district doesn’t offer the programs at all, it could lose families to private schools, Stewart said. “Then everybody loses because the district will lose money.”