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1
Total Compensation:What Should Be Included Today?
John R. YehBurke, Williams & Sorensen, LLP
Association of California School AdministratorsNegotiators’ Planning Retreat
Palm Springs, California
June 25, 2015: 10:00 a.m. & 2:30 p.m.
2
Deconstructing Employee Compensation
• Collateral connotations of employee compensation
• Used as a barometer for …• From the inside:
• A school district’s level of “respect” for employees
• Relative desirability of school district as employer• Sign of school district’s fiscal health
• From the outside:• Sign of school district’s fiscal responsibility• A proxy for oversized, wasteful government?
3
Today’s Objectives
• Basic legal principles governing employee compensation
• Different components of employee compensation (salary, benefits, STRS/PERS)
• Methodologies for assessing economic value of different compensation components
• Bargaining strategies for deconstructing compensation in economic terms
4
COMPONENTS OF COMPENSATION
5
Components of Compensation
• “Direct wage compensation”(according to salary schedule)• Stipends for extra/adjunct duty
• STRS/PERS contribution• Health and welfare benefits (medical, dental, vision)
• What else ….. ?
6
Components of Compensation
• Government Code section 3548.2: Factfinding Criteria• Comparison of the wages, hours, and conditions of employment of
the employees involved in the factfinding proceeding with that of other employees performing similar services and with other employees generally in public school employment in comparable communities.
• The consumer price index for goods and services, commonly known as the cost of living.
• The overall compensation presently received by the employees, including direct wage compensation, vacations, holidays, and other excused time, insurance and pensions, medical and hospitalization benefits; the continuity and stability of employment; and all other benefits received.
7
SALARY:
BASIC LEGAL PRINCIPLES
8
The Salary Schedule
• Education Code section 45028:• Each certificated employee “shall be classified on the
salary schedule on the basis of uniform allowance for years of training and years of experience.”• Exception: Negotiated non-uniform schedule
• “Employees shall not be placed in different classifications on the schedule, nor paid different salaries, solely on the basis of the respective grade levels in which such employees serve.”
9
The Salary Schedule
• Education Code section 45028:• District can “grant any employee hired after a locally specified date
differential credit for prior years of experience or prior units of credit for purposes of initial placement on the salary schedule of the district.”
• Exceptions: teachers of special day and evening classes in elementary schools, teachers of special classes for elementary pupils, teachers of special day and evening high school classes and substitute teachers.
• Agreement to move all teachers in Steps 17-20 back to
Step 17, to allow more rapid advancement of all unit members
to highest step, violated uniformity requirement.• (Adair v. Stockton Unified School Dist. (2008) 162 Cal.App.4th 1436)
10
THE ECONOMICS OF WAGE
ACCRUAL
11
O “Scoresheet” VYear 1: Higher Starting Salary
Year 5: Faster Progression
Year 9: Gap Widens to approx. $5,000/Year
Year 9: Step Advancement Does Not Top Out
Year 15: Takes 15 Years for V to Reach top of O
Year 15 and Beyond: Continued increases
Source: http://www.venturausd.org/Portals/5/Certificated%20Salary%20Schedules/14-15%20SY%20Certificated%20Salary%20Schedule%20(Teacher%20Speech%20Therapist%20Nurse%20Counselor).pdf
Source: http://www.orangeusd.k12.ca.us/hr/SalarySched/CESALARYSCHEDULETchr.pdf
12
Side-by-Side Cumulative Impact
STEPCOL 1BA+30
CUMULATIVEINCREASE
CUMULATIVEINCREASE
CLASS 2BA + 30 STEP
1 $46,813 $46,813 $47,848 $47,848 12 $48,452 $95,265 $95,696 $47,848 23 $50,147 $145,412 $143,544 $47,848 34 $51,903 $197,315 $191,392 $47,848 45 $53,719 $251,034 $240,625 $49,233 56 $55,599 $306,633 $291,766 $51,141 67 $57,546 $364,179 $344,809 $53,043 78 $59,559 $423,738 $399,758 $54,949 89 $61,644 $485,382 $456,615 $56,857 9
10 $61,644 $547,026 $515,378 $58,763 1011 $61,644 $608,670 $576,045 $60,667 1112 $61,644 $670,314 $636,712 $60,667 1213 $61,644 $731,958 $697,379 $60,667 1314 $61,644 $793,602 $758,046 $60,667 1415 $61,644 $855,246 $821,765 $63,719 1519 $61,644 $1,101,822 $1,078,585 $65,663 1923 $61,644 $1,348,398 $1,343,179 $67,605 2327 $61,644 $1,594,974 $1,617,473 $71,479 27
VENTURA UNIFIED SCHOOL DISTRICT2014-2015
CERTIFICATED SALARY SCHEDULE185-DAY WORK YEAR
185 DaysORANGE UNIFIED SCHOOL DISTRICTTEACHER / NURSE SALARY MATRIX
2014 - 2015
13
WORK YEAR IS 184 DAYS
Source: http://www.sandi.net/ cms/lib/CA01001235/Centricity/ Domain/94/salaryschedules/Affected%20Jan%201%202013/Teachers.pdf
Source: http://dmusd.org/cms/lib02/CA01001898/Centricity/Domain/58/2013-14%20Salary%20Schedule%20-%20Group%203_Board%20Approv%2004-23-14_CERTIFICATED.pdf
SD “Scoresheet” DM
Year 1: Higher Starting Salary Year 5: Faster Progression Year 7: Gap Widens to approx. $9,000/yr
Year 7: Step Advancement Does Not Top Out
Year 16: Takes 15 Years for SD to Reach top of DM
Year 17 and Beyond: Salary Schedule tops out at higher salary
14
Side-by-Side Cumulative Impact
STEPS010BA
CUMULATIVEINCREASE
CUMULATIVEINCREASE
RANGE 1BA*
ANNUAL STEP01 $39,114 $39,114 $42,685 $42,685 0102 $40,583 $79,697 $87,874 $45,189 0203 $42,111 $121,808 $135,575 $47,701 0304 $43,701 $165,509 $185,779 $50,204 0405 $45,354 $210,862 $238,506 $52,727 0506 $47,072 $257,934 $293,730 $55,224 0607 $48,861 $306,795 $351,463 $57,733 0708 $50,719 $357,514 $409,196 $57,733 0809 $52,650 $410,164 $466,929 $57,733 0910 $54,661 $464,825 $524,662 $57,733 1011 $56,750 $521,575 $582,395 $57,733 1112 $56,750 $578,324 $640,128 $57,733 1213 $56,750 $635,074 $697,861 $57,733 1314 $56,750 $691,824 $755,594 $57,733 1415 $56,750 $748,574 $813,327 $57,733 1516 $58,748 $807,321 $871,060 $57,733 1617 $61,203 $868,525 $928,793 $57,733 1730+ $61,203 $1,664,168 $1,679,322 $57,733 30+31 $61,203 $1,725,371 $1,737,055 $57,733 3132 $61,203 $1,786,575 $1,794,788 $57,733 3233 $61,203 $1,847,778 $1,852,521 $57,733 3334 $61,203 $1,908,981 $1,910,254 $57,733 34
DEL MAR UNION SCHOOL DISTRICTWORK YEAR IS 184 DAYS
GROUP 3 - REGULAR CERTIFICATED
SAN DIEGO UNIFIED SCHOOL DISTRICTANNUAL SALARY RATES
SALARY PLAN R160SDEA BARGAINING UNITEffective January 1, 2013
179-DAY CONTRACT YEAR
15
Factors Impacting the Economics of Salary Schedule Progression
• Starting salary• Increases between steps• Number of years to reach maximum step• Maximum salary at highest step• Step at which salary maxes out• How long employee works at school district
16
IMPACT OF LOCAL CONTROL FUNDING FORMULA
(LCFF)
17
LCFF – The Basics
• Base Grants replace revenue limits• Base Grant adjustments replace categorical programs
(CSR, Career Technical Education, supplemental grants, concentration grants)• Supplemental and Concentration Funding based on Unduplicated
Pupil Count (Free-and-Reduced Lunch, English Language Learners and Foster Children)
• Funding allocated based on K-3, 4-6, 7-8, and 9-12 (similar to current charter school funding model)
• Annual appropriation not determined by state statute
18
LCFF – Impact on Revenue and Spending
• Grasping the basic reality of the new Local Control Funding Formula• LCAP must provide “an explanation of how expenditures of such
funding meet the LEA’s goals for its unduplicated pupils in the state priority areas.” (5 CCR section 15496(a).)
• Where does your district stand with respect to the receipt of supplemental and concentration funding?• Supplemental and Concentration Funding based on number of
students in priority areas• Difference could be as much as 40% between districts, according
to School Services• How does your district’s LCAP call for the distribution of LCFF
funding?
19
LCFF – Impact on Peer Benchmarks
• LCFF will impact the usual benchmarks for compensation:• Consumer Price Index/“COLA”• Ability to pay• Teacher attraction/retention/competitiveness
• Comparability • Do the usual indicators of comparability still apply?• Demographics, student achievement, geography
• Does LCFF funding model create new “peer” districts? “Winners” & “losers”?
• Does the district’s LCAP supplant the utility of comparables?
20
HEALTH AND WELFARE BENEFITS
21
Health and Welfare Benefits – Fundamentals
• What should the contract specify?• Eligibility
• When eligibility triggered• Pro-ration for partial FTE?
• When eligibility terminated• Suspension without pay? • Leave of Absence?• Resignation/Dismissal?
• Types of coverage offered• Medical, dental, vision• PPO/HMO/Self-Insured?
22
RETIREE HEALTH AND WELFARE BENEFITS
23
Retiree Health and Welfare Benefits
• Requirements for eligibility?• Years of service
• Types of and scope of coverage• Same coverage as current employees, or• Coverage in effect on date of retirement
• Retiree contribution• Frozen at date of retirement, or• Changes with current status quo
• At what level, cost, and type of benefits does the retiree “vest?”
24
Retiree Health and Welfare Benefits
• Recognized in Education Code section 7000 et seq. enacted in 1986, though a small number of school districts negotiated retiree benefits prior to that date
• Pension benefits have been defined through legislation• Not historically part of bargaining
• Up until recently, employer rates have been unchanged
25
RETIREMENT / PENSION BENEFITS
26
Retirement Benefits - Pension
• Future retirement benefits and related costs are part and parcel of overall compensation• See County of Sacramento (2008) PERB Dec. No. 1943-M.
• Government Code requires factfinders to consider, weigh, and be guided by overall compensation, including pensions and all other benefits received • Gov. Code, Section 3548.2
• Pension costs represent a large portion of overall compensation
27
Retirement - Employer Contributions
• Current – 8.25%• 2014/15 – 8.88%• 2015/16 – 10.73%• 2016/17 – 12.58%• 2017/18 – 14.43%• 2018/19 – 16.28%• 2019/20 – 18.13%• 2020/21 – 19.10%
• Current – 11.442%• 2014/15 – 11.771%• 2015/16 – 12.6%*• 2016/17 – 15.0%*• 2017/18 – 16.6%*• 2018/19 – 18.2%*• 2019/20 – 19.9%*• 2020/21 – 20.4%*
CalPERS CalSTRS
* Projected - CalPERS Circular 200-012-14 * Assembly Bill 1469
28
Retirement Costs
Current2014/15
2015/16 2016/17
2017/182018/19
2019/202020/21
0%
5%
10%
15%
20%
25%
11.44%
11.77%
12.60%
15.00%
16.60%
18.20%
19.90%
20.40%
8.25%8.88%
10.73%
12.58%
14.43%
16.28%
18.13%
19.10%
CalPERS CalSTRS
29
Capturing Retirement Costs
• Look at employers’ cost of providing retiree benefits• Assign value to retiree benefits as a percent of total
compensation• Determine means of assigning value to retiree benefits
• As percent of salary• Net dollar value• Cost to school district
• Include retirement costs when comparing year-over-year compensation increases
30
THE ECONOMICS OF HEALTH AND
WELFARE BENEFITS
31
Health and Welfare Benefits – Economics
• “Premium” v. “Employee Contribution”• Definition of “Premium:” “Agreed upon fees paid for coverage of
medical benefits for a defined benefit period. Premiums can be paid by employers, unions, employees, or shared by both the insured individual and the plan sponsor.”
• (Source: Bureau of Labor Statistics www.bls.gov/ncs/ebs/sp/healthterms.pdf)
• “Employee Contribution:” Traditional Forms• Co-Pays• Deductibles• Premium contributions• Caps on employer contributions
32
Health and Welfare Benefits – Economics
• Levels of Coverage• Single• Employee + 1• Family
Source: Orange Unified School Districthttp://www.orangeusd.k12.ca.us/hr/certificated/2013-2016/No4-Article%202_Compensationrev10_29_14.pdf
33
Health and Welfare Benefits – Economics
• Ways of determining value of health care coverage• Employer Contribution• Employer Premium: Average cost of coverage plus
administrative costs• Cafeteria Plan: Amount of employee’s monthly/annual
allocation• IRS Guidelines
• Actuarial Value: “The percentage of health care costs that the plan, on average, is expected to cover.”
• (http://www.irs.gov/pub/irs-drop/n-12-31.pdf)
34
TOOLS FOR TRACKING TOTAL COMPENSATION
35
Total Compensation Comparison
Revised: 1-14-2015
DistrictPension Formula
Total Employer
STRS
Rate1
Match ClassMonthly Salary
(Top Step)
Employer Retirement
Cost
Cafeteria Plan
Max Family Health ER
ContributionDental Vision
Total Caf., Med, Dental,
Vision
Total Direct Agency Costs
AUSD 2%@60 8.250% BA + 30 $5,138.00 $423.89 $0.00 $1,419.47 $54.24 $15.32 $1,489.03 $7,050.92
BUSD 2%@60 8.250% BA + 30 $5,956.00 $491.37 $0.00 $1,948.22 $95.00 $30.90 $2,074.12 $8,521.49
DUSD 2%@60 8.250% BA + 25 $4,985.00 $411.26 $0.00 $1,200.00 $154.01 $26.87 $1,380.88 $6,777.14
EUSD 2%@60 8.250% BA + 30 $5,502.00 $453.92 $0.00 $2,400.06 $188.20 $23.92 $2,612.18 $8,568.10
JUSD 2%@60 8.250% BA + 30 $5,617.00 $463.40 $0.00 $1,988.69 $176.93 $0.00 $2,165.62 $8,246.02
IUSD 2%@60 8.250% BA + 25 $5,309.00 $437.99 $1,502.00 $0.00 $0.00 $0.00 $1,502.00 $7,248.99
LUSD 2%@60 8.250% BA + 35 $5,999.00 $494.92 $1,660.00 $0.00 $0.00 $0.00 $1,660.00 $8,153.92
NUSD 2%@60 8.250% BA + 30 $6,320.50 $521.44 $0.00 $1,710.11 $191.18 $31.14 $1,932.43 $8,774.37
PUSD 2%@60 8.250% BA + 30 $5,349.00 $441.29 $0.00 $1,681.50 $125.00 $125.00 $1,931.50 $7,721.79
RUSD 2%@60 8.250% BA + 25 $5,366.00 $442.70 $0.00 $119.00 $0.00 $0.00 $119.00 $5,927.70
SUSD 2%@60 8.250% BA + 30 $4,977.00 $410.60 $0.00 $1,812.07 $131.63 $13.93 $1,957.63 $7,345.23
VUSD 2%@60 8.250% BA + 30 $4,201.00 $346.58 $0.00 $1,550.04 $143.21 $13.30 $1,706.55 $6,254.13
$5,393.29 $444.95 $263.50 $1,319.10 $104.95 $23.37 $1,710.91 $7,549.15
USD 2%@60 8.250% BA + 30 $5,765.00 $475.61 $1,022.00 $0.00 $125.00 $0.00 $1,147.00 $7,387.61
-2.1%Percentage above/below the average of comparable districts.
Alpha School DistrictTotal Compensation Comparisons for Teacher BA + 30
January 1, 2015 Salary, Pension and Health
Average:
36
Individual District SnapshotAUSDCompleted By: Jane Doe 11/13/2014District Contact: Joan Smith (123) 111-1111
Match Classification BA + 30
Monthly Amount
Amount orPercentage Page Notes
Adjusted STRS rate 8.250%Pension 423.89$ Top step 5,138.00$ Salary Schedule dated 07/30/14Next raise 51.38$ 1.00% Contract p. 65 Effective 7/1/15Cafeteria -$ Medical 1,419.47$ Bene SumDental 54.24$ Bene SumVision 15.32$ Bene SumOther -$ Term Of Contract: 7/1/14-6/30/16
Notes:
AUSD - Data Sheet
One time off-salary schedule payment of 1% of salary on January 1, 2015. (p.67)
37
Measuring Compensation Against CPI
Fiscal YearBeginning
Salary Schedule Increase
District Paid
Annual Increase/Decrease
in District PERS Rate as Percent of
Pay
Annual Increase/Decrease
in District's Contribution to
Medical as Percent
of Pay1
Total Increased Salary and District Paid Pension and Medical Benefits
CPI2 Gain/Loss
2006 4.20% 0.008% -0.935% 3.273% 3.333% -0.060%
2007 2.50% 0.182% -0.478% 2.204% 3.200% -0.996%
2008 4.00% 0.122% 0.687% 4.809% 2.683% 2.126%
2009 - 0.281% -0.199% 0.082% 0.950% -0.868%
2010 2.00% 0.998% 0.513% 3.511% 1.317% 2.194%
2011 - 0.216% 1.939% 2.155% 2.867% -0.712%
2012 - 0.494% -0.452% 0.042% 2.550% -2.508%
2013 1.50% 0.025% 0.219% 1.744% 2.267% -0.523%
Total 12.7% 2.3% 1.1% 17.8% 19.2% -1.3%
Comparison of CPI Increases to Increases in Compensation: Salary, Pension and MedicalCSEA Operational Unit
History
The data demonstrates the District’s increased contributions toward salary, pension costs and medical costs has been the equivalent of 17.8% pay increase over the ten year period, which is 1.3% less than CPI. All numbers are based on a percentage of salary.
1 Medical increase is based on the maximum employer contribution to medical premiums divided by the highest 2Listed CPI represents a six point year over year average (April through February).The calculation uses the CPI-U (All Urban Consumers) all-items index (Table 10) for San Francisco-Oakland-San Jose, CA, and is based on the average percent change for the six reported periods (based on the annual percent change reported for April of the listed year through February of the following year). For example, for 2011, the 2.867% is based on the average percent change reported for the following periods: April 2010 to April 2011, June 2010 to June 2011, August 2010 to August 2011, October 2010 to October 2011, December 2010 to December 2011, and February 2011 to February 2012. 3Medical increase is based on the maximum employer contribution to medical premiums divided by the highest annual salary.
38
OTHER COMPONENTS OF
EMPLOYEE COMPENSATION
39
Other Components
• Additional leave time (negotiated in contract)• Personal Necessity Leave• Catastrophic Leave• Sabbatical Leave
• Credit for prior service• Opportunity for adjunct duties• Professional development• Prep time• Transfer, reassignment and priority rights as to vacancies