Budget Advisory Committee Reviews Human Resource Adjustment Strategy 

At the Budget Advisory Committee (BAC) meeting on Tuesday, Nov. 24, members reviewed Human Resource Adjustments, the fourth and final strategy for dealing with the possibility of significant mid-year state aid cuts.

Review of Feedback from Previous Meetings

Before presenting the new material, the committee reviewed feedback from last week’s meeting. Some members were hoping for more details about the potential savings from particular program and service reductions. In response, co-chair Lakshmi Nagarajan reminded members that discussions about the four different strategies are still high level conversations focused on big picture ideas. She emphasized that drilling down to specifics within each strategy would be part of the next phase of work for the committee, if such reductions became necessary. Nagarajan took a moment to reassure members that not associating a cost to any one particular program but rather focusing on program and service reductions across the board was done intentionally to avoid any preconceived notions or prevent program comparisons at this point.

“I think it really shows something about this group’s dedication that its members want to start digging deeper into how to implement the strategies we as a group have outlined,” adds Nagarajan. “But right now we have to trust the process and follow through with our charge to look at each strategy as a whole and have high level, academic conversations about the impacts each strategy would have on the district, as a whole, in order to gain a better sense of what a $5 million reduction in revenue really looks like. ”

Nagarajan encouraged all members to review the minutes/recap of each meeting on the district’s website to get a more concrete and detailed picture of the work they’ve done thus far. She reminded the group that she and co-chair David Versocki would be presenting a condensed version of the committee’s work to the board this evening, and will also be directing the board to the detailed minutes/recaps on the website.

Superintendent Patrick McGrath stated that he also heard from some people that they too felt there was not enough details shared on specific program and services cuts. McGrath reiterated that the district had no specific programs in mind at this time.

“I can’t stress enough how important it is for people on this committee and within our community to understand that there is no master plan and that we do not have any preconceived ideas for where reductions would need to be made,” says McGrath. “It’s by design that these meetings are high level so that we can lay the groundwork and get everyone on the same page should the district need to make reductions. We don’t want anyone to be surprised by this. We are talking about sensitive topics and being open and honest in our communications and encourage everyone to read the information on our website and share it with others so we are all informed. If the Board makes the determination that reductions in programs and services need to be part of the equation for dealing with a state aid reduction, there will be a thorough community-wide discussion that informs all related decisions.”

Nagarajan pointed out that BH-BL, along with all other districts throughout the state, has no control over the amount of aid loss it could experience. The financial forecast is unclear. There could be no reductions or there could be a very significant cut. But, as of now, things look rather bleak for school districts given the projected 20 percent reduction in state aid payments in the current school year. This uncertainty is what makes the groundwork being done by the BAC so important.

“Throughout this process, the committee has learned that waiting rather than making large scale decisions involving only one strategy to save money during the current school year actually puts the district at an advantage. If the financial state of New York improves or if federal funding helps districts plug the holes left by state aid loss BH-BL may not have to make such deep reductions to this year’s budget,” explains Nagarajan. “This puts us ahead of the game by addressing cost saving and reduction possibilities for the 2021-22 school year within our usual frameworks that specifically solicit community involvement and transparency. If reductions do become a reality, the Board of Education will be prepared to draw upon multiple strategies to ensure the burden does not fall disproportionately on one part of the district or another.”

In practice, Nagarajan added, this commitment to using multiple strategies means that we may have some time before a decision such as going to full remote for budgetary reasons needs to be made. We are hopeful that this additional time gives our leaders at the state and federal level every opportunity to implement solutions that would help the district’s situation.

Human Resource Adjustment Impacts

Today’s discussion looked at human resource and contractual adjustments from a high level lens. The conversation was focused on broad concepts and numbers. The reality, says Nagarajan, is that while this strategy requires a great deal of input from many people, including employees, the administration and the board of education, any proposed changes must ultimately be approved by members of the individual bargaining units.

Human Resources Director Michael Nickson agreed with Nagarajan and stated that he wouldn’t be addressing specific positions or numbers associated with them, and that if or when it comes to that there would be meaningful and thoughtful conversations with each bargaining unit.

Instead, stated Nickson, we want to discuss standard ideas that many organizations look at when addressing human resource costs in a budget. He reminded the committee that public sector compensation packages are governed by state and federal laws, contractual relationships, pension obligations, and many other complicating factors.

When looking at BH-BL’s overall budget, Nickson points out that the human resource aspect of the budget (consisting of salaries, benefits, worker’s compensation, unemployment, and pension benefits) makes up about 75 percent of the budget, with 51 percent going to salaries, 12.25 percent for health insurance benefits, 5.5 percent for pension contributions and approximately 6.25 percent for other requirements.

One strategy often employed by organizations is to ask for a concession on salary. In aggregate, a 1 percent decrease in salaries across all BH-BL employees would yield an estimated savings of $36,000 monthly. (Any changes would need to be negotiated and approved by bargaining unit members.)

Another standard, states Nickson, is unpaid furlough days. Meaning employees’ work week would be reduced and they would not be paid for days they didn’t work. To put the value in perspective, furloughing all District employees would yield a savings of $180,000 per furlough day. The average daily impact per person for a furlough would vary depending on salaries and an individual’s daily rate of pay, adds Nickson. (Unlike layoffs, the terms of a furlough would need to be negotiated with bargaining units.)

Committee member Bonnie O’Rourke asked if a furlough decision would impact employees’ health and other benefits. Nickson stated that, depending on how a furlough is structured, it would be a method to reduce costs that would not impact an employee’s health and dental insurance coverage.

Another standard within Human Resources are savings realized through retirement and the potential of a retirement incentive. School districts are composed of many different types of employees that receive different levels of compensation. Nickson gave the example that if five instructional staff retired mid year, it might yield an estimated savings of approximately $350,000. If five non-instructional staff retired mid year, there’d be approximately $150,000 in savings. However, these savings would be realized ONLY if those positions that become vacant were not filled and there were no special incentives given for retirement. If these retirements occurred with an incentive and replacements were needed, those costs would need to be backed out of the equation.

“These are just estimates. It’s hard to give quantifiable figures when talking about these impacts in broad strokes,” explains Nickson. “But because there aren’t any details worked out or ideas in place, we need to stick to overall numbers and possibilities.”

Payroll lag is another standard HR strategy. This approach involves withholding salary (with agreement from bargaining units) from one fiscal year to be paid during another fiscal year. This standard is generally not helpful for this budget crisis as the salaries would still need to be accounted for during the 2020-2021 school year. While such a payroll lag might assist with cash flow issues, in the long run, there are no real savings to be had, but rather just a shifting of payments from one year to the next.

Besides changes to salaries, another option is to review health insurance standards, which make up 12.25 percent of BH-BL’s budget. One possibility is working with the bargaining units to increase premium contributions for all active employees (It should be noted that retiree contribution levels cannot be changed and the district is contractually obligated to adhere to the terms that were set at the time of their retirement).  For active employees, this district’s share of health and dental insurance premiums is  approximately $500,000 a month. Therefore for each 1 percent increase in employee share of the premium, the district would save about $5,000 per month. Again, this idea would need to be discussed with and approved by bargaining units, and at this stage is just presented as a standard approach.

Another idea is to revisit the health insurance plan design. Currently, BH-BL is part of a consortium, or a larger group of capital region schools, that purchase health insurance together.

“We participate in the consortium to get the most savings through traditional bargaining,” says Nickson. “And while we don’t have too much leverage in changing the plan design, we could implement a drug formulary that’s more restrictive and/or requires other options to be utilized before certain medications, such as costly experimental drugs, are approved for use.  The  elimination of  a health insurance reimbursement account that some employees have access to could also be explored as an option for savings.”

If both of these changes were implemented, the savings would be about $5,000 per month.

“We’ve never had any reason to believe our bargaining units wouldn’t work with the district to find a fit that works for their constituents and the district,” adds Nickson. “That being said, however, it’s not being recommended that the district try to handle a potential $5 million loss in state aid solely from this bucket, or any bucket.”

When looking at budgetary savings in the future, there could be a different possible buyout option for employees, such as choosing not to take health insurance during their active employment and sharing that savings with the district, as well as employees opting for a lump sum upon retirement as opposed to receiving offsets to the cost of their health insurance over time.

Assistant Superintendent Dr. Christopher Abdoo explains that some ideas can actually be  beneficial to both the district and the individual employee if there are  a significant number of employees that chose to participate. Abdoo cited the example of employees potentially obtaining their health insurance elsewhere (when possible) with the district providing a cash payout for a portion of the cost the district would otherwise have incurred to provide the employee with medical coverage. For this reason, agreements such as retirement incentives or health insurance buyouts often include a threshold number that “triggers” the various incentives.

Committee Discussion

Committee member Eric Devine asked how many employees are planning to retire mid-year or at the end of the year? Nickson said that at this point, we don’t have any numbers and wouldn’t feel comfortable taking a guess.

Committee member Therese Brigham asked if there was a time frame associated with furlough option, such as one month or one year? And would the furlough include all bargaining units, administration, support staff, and faculty? Nickson stated that the raw numbers shared above were based on a one day furlough for the entire district. But he cautions that these are specific conversations that would have to happen with each employee group, and at this point are just options within the strategy bucket. If the board wanted to go this route, HR would need to figure out if this could even be feasible.

BAC Co-chair David Versocki added that these are very difficult conversations but it’s a testament to everyone on this committee that they are willing to participate in this process in a professional capacity, especially given the sensitive topics discussed. He encouraged all members to reach out to him and Lakshmi through their shared email address to provide feedback, ask questions or share comments.

Versocki and Nagarajan will provide the board of education with a summary of the committee’s work and share with them the minutes/recap of each meeting. [WATCH VIDEO OF NOV. 24 BAC SUMMARY TO THE BOARD OF EDUCATION]

The committee will take a pause in December to digest what was learned over the past five weeks before reconvening on January 6, 2021. Hopefully by this time, there’s an update about the state’s financial situation which will give school leaders a clearer idea of the impact it will have on state aid. The committee’s next steps are to break into smaller groups and begin drilling down into the four buckets and discuss what strategies the district can implement and the time frame for doing so.

Nagarajan thanked everyone for their input and patience as the group navigated through uncomfortable situations. “No one wants any of these options,” she adds. “No one wants to see a significant tax increase. No one wants to take days off without pay or end the school year early. And we don’t want to eliminate positions. All of these options impact our students, our staff, and our community in one way or another. I’m glad that we could talk about these topics and that we were all committed to collaborating rather than being taken by surprise or jumping in to make massive changes without giving these strategies and options their due diligence. And hopefully, we won’t have to make any of the reducations this school year and we can be thankful that we are ahead of the game in planning the 2021-22 school budget.”

McGrath added that it is still too soon to know whether or not the projected cuts to state aid will be as significant as predicted. Either way, he cautions, it is likely that we will be dealing with budgetary impacts of the pandemic for several years to come. For this reason, he believes the time everyone has taken to learn the major factors affecting the budgetary process is time well spent. He expressed his thanks to the many voices from our different stakeholder groups who are involved in the process and helped shape the conversations.

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