The following letter was sent from Harold J. Breaux to the Harford County Board of Education, Superintendent, County Executive, and County Council. A copy was provided to The Dagger for publication:
Dear New Board of Education Members:
Congratulations on your election/selection (and thanks for your service) on the Board of Education of Harford County. As you familiarize yourself with the myriad of issues and processes in your duties I would like to solicit your attention to an issue I have engaged in at length with the past Board and Superintendent for the last two years. The issue and subject is the process by which the budgetary component for progressive pay (the increment system) is characterized in the context of required “new money” in budgeting (and thereafter request for funding to the County Executive and County Council) for the pay of the 5000 plus Harford County Public School (HCPS) employees. The wise implementation of Progressive Pay (formally known as the “single salary system”) is vital to maintaining a quality teaching/work force staff. The HCPS practice I am critiquing herein, I am convinced, is the major contributor to the annual mass departure of teachers from Harford County. This has led to shortages and/or selection of lesser qualified new applicants in especially hard to fill areas and otherwise continually having a staff with too many positions having limited teaching experience.
The annual process of pay adjustment (or not) focuses usually on Cost of Living Increases (COLAS) and the pay adjustments for the increment system. The increment system is not unique to the HCPS, it occurs elsewhere in Harford County (e.g. sheriff’s deputies and other county employees), state and federal employees and the US military. Accordingly, based on recent history, the budgetary process I describe herein needs to be addressed for other Harford County employee groups in addition to the HCPS.
The essence of the problem arises in how HCPS computes needed “new money” for increments by 1) computing difference in pay of aggregate current “individuals” in the projected next year budget compared to the pay in the reference/current year as opposed to 2) computing the aggregate difference in pay for “positions”. The difference between 1) and 2) is that 1) ignores the inherent consequence of “turnover” and its effect on needed payroll in the next year. With increments for eligible employees being nominally 3%, in past years (e.g. FY 2013), HCPS has claimed (and requested) the need for new money for increments as high as this 3% of prior year payroll. At some point (e.g. FY 2014) the HCPS seemed to allow for the fraction of individuals not eligible for steps and adjusted the new money requirements to a nominal 1.7% . As I will describe, even with this adjustment, the requested new money is grossly in error. The HCPS, however, compounds this gross error in computing the purported needed new money by then additionally claiming that “fixed costs” for items such as social security, medicare and pension fund contributions, etc., being based on percentage of payroll costs, should therefore be superimposed on this erroneous 1.7% new money cost leading to a requested sum for new money for increments being a nominal 2%.
What has happened in practice is that this estimate of new money is presented to the County Executive and the County Council and the normal political dynamic associated with official’s and the public’s distaste for tax increases (implied to be needed by this purported new money request) leads to the increment not being provided. Prior to the most recent budget year, this rejection happened in 5 of the prior six years.
The effect of this can be seen in the 2014 Compensation Study Results Report prepared by the Fox Lawson Group for the HCPS which showed Harford teachers lagging nearby counties (Baltimore City, Baltimore County and Cecil County) by 5 steps and as much as $19,000 for one category of teacher annual pay.
Over several years the “blame” generally was placed on the County Executive who wound up approving a budget level which was reduced from the HCPS requested amount with the implication that the requested “new money” for the increment was part of the Executive’s reduction leading to the approved lesser figure. Colloquially one could say that the HCPS “shot itself in the foot” by use of this budgetary process as will be described.
In a formal paper and several related analyses I have analyzed this issue and placed my writings on a web site at www.complexpolitics.wordpress.com . For a quick perspective on the I issue I urge you to read Appendix B, page 76 of my paper, titled “The Mathematics of Budgeting for Experience Increments, Longevity and Lane Changes in a Teaching System or Other Workforce [The Fallacy of Required New Money] “ at the above listed website. In that Appendix I show how a teacher, upon retiring and being replaced by a teacher entering the work force at the same position in the pay matrix (which the retiring teacher first entered the system), impacts the budget such that the difference in the two salaries equals the sum (In current dollars) formed by adding all the increments in the path the retiring teacher or employee received during his/her entire career. The consequence of this fact is that it shows that the pay system could pay all the increments in that path in the given year without the need for new money.
This “micro” example lends ultimate credence to the results of my “macro” analysis in my paper which accounts for turnover as an annual, integral component of progressive pay leading to my conclusion that the increment system leads to the need for at most ½ of one percent change in payroll and could be plus or minus based on the then present characteristics of the work force, i.e., retirements, dropouts and new hires. Additionally, my analysis shows that placing a 20% “fixed charge” added burden should be placed on this actual + or – ½ percent rather than on the erroneous 1.7% used by the HCPS.
Another way to quickly understand the issue I raise is to read the correspondence exchange I document with Mr. Brent Mckim of the Louisville, KY school district that is on my Web Site.
The criticality of understanding that little or no new money is needed to pay for the increment is etched in what I believe is a most egregious historical example of a contract provision the HCPS placed on the HCEA in the 2014-2015 Negotiated Agreement. I describe the contract terms dependence on new money (as miscalculated as described herein) to be provided by funding authorities – new money which was not provided and so the increment was not provided. I describe the actual dollars needed to fund the increment in that FY in my paper on page 43 in the section titled “The Importance of Understanding the True ILL Costs- A Critical Impact in Harford County, Maryland .”
As new members of the Board I urge you to engage with the returning board members, the superintendent and budget officers, to review this historical provision (in the agreement cited above) and ask (in light of my analysis on this topic) whether public officials should ever engage in such a financial subterfuge as occurred in the structure of that contract provision. On page 48, Section 10 of my paper I make a “Recommendation for Officials and Board of Education” on how to structure the budget components for COLAs and Increment so that the County Executive, the County Council and the Public are given the true values for any “new money “ required by category- thus putting the process on a rational basis and preventing doing further damage to the existing critical conundrum in pay disparity that has arisen from the past practice.
And finally I cite the following two corroborative items that validate my analysis:
a.) In recognition that the federal government is the largest employer in Harford County ( and its employees and military are a large component of the Harford County tax base and rely on HCPS for their children’s education) it is instructive to see how the Federal government budgets for its step or increment system. In my paper, page 40, I describe how the Office of Personnel Management publishes a yearly circular, OPM Circular A-11, which provides guidance to agency heads on “Preparation, Submission and Execution of the Budget”. In that Circular OPM advises the agency heads that no new money is to be budgeted for within grade increases because of inherent turnover and its overall impact on “no needed new money” – as described in my analysis.
b.) Dr. William T. Hartman is the Penn State University Director for Total Quality Schools, teaches Financial Management, and is author of the Book titled “School District Budgeting”. On page 41 of my paper I discuss how he describes two methods for estimating increment costs. The method I use captures all the essential features he describes as the most accurate method. Hartman describes a second or “short cut method” which he describes as overstating the increment costs. The short cut method he describes is identical to the HCPS method, and as shown in my paper, indeed does overstate increment costs. Furthermore, HCPS compounds the overstated new money costs by superimposing the 20% “fixed charges” on the overstated computation.
Harold J. Breaux, Aberdeen