Home Joe Curran. Software Guy.

Fixing the so-called School Funding Crisis

(First, some background:  Thirty years ago Joe Curran was a young aide in the Ohio Senate.  The schools were "broke" then, too)

Only in government could a slight drop in projected revenue become a crisis.   It's a rerun of the timeworn biennial drama in which well-meaning legislators struggle to come up with ways to meet the public sector's unrelenting demand for more funds. 

The problem is simple: too many people on the payroll, which accounts for about 75 percent of the average school district or state agency budget.  Help them fix this problem and the so-called "funding crisis" disappears.

Do the research and you'll discover that student enrollment has barely grown while payrolls exploded.  Look at the job descriptions and you'll discover that only about half of school employees are actually teachers.  In Columbus, Ohio our school district has 53,000 students and 8,000 full-time employees.   That's one for every seven students..  Outrageous by any standard. Particularly when you consider that a noticeable percentage of those employees would leave in a minute if they were offered a way out.

Layoffs won't work because seniority rules force the retention of the ineffective yet high-salaried people whom school boards would rather do without. 

The only way to do it quickly, painlessly, drastically and fairly is through early retirements.  That is how businesses reduce payroll to match revenue.  Why not the government?

Here's the plan

Offer TWO YEARS of retirement credit to anyone who retires now.  Tell the school districts that their budgets will remain flat BUT they can reduce their largest cost by taking advantage of the state early-retirement program.  Since many school districts have attempted early-retirement programs themselves, it stands to reason that most will gladly accept the state's deal.

Here's the math

The cost of purchasing a year's worth of retirement should be no more than 20 percent of a person's payroll cost.  So if someone costs $80,000 (salary and benefits), then it should cost about $36,000 to purchase two years of state retirement credit.  If the person retires, the state has just SAVED $44,000 this year.  PLUS, the school district can replace that person by promoting or reassigning someone with a lower salary-and-benefit cost, which would save even more.

In other words: spend 40 cents and save a dollar.  Net savings: 60 cents.

Here's how it could play out

As soon as the program is announced, about 40,000 senior state and school-district employees (with a combined payroll cost of about $2.5 billion) will immediately run the numbers in their heads.  Most within two years of their planned retirement will head for the exit. Most of the others within, say, five years of retirement will try to figure out if they can buy additional years of retirement credit.  Those who can will bolt for the door.

Within an hour there will be skid marks in school parking lots all over the state.  Problem solved.

Silencing the Naysayers

This will exacerbate the crisis in the state's pension fund.  These people will retire soon anyway.  Better to retire them now, at lower salary levels and with enhanced up-front contributions.

Agencies will simply hire new replacements.  They won't have the money!  The objective of this plan is to reduce payroll.  Permanently.

Agencies cannot operate at lower staffing levels.  When you elect an executive, you elect management.  An agency head who whines about a single-digit-percentage staff cut hasn't the skills to run a Dairy Queen, much less a multimillion-dollar state department.  Remind the governor of this.

You'll be a hero

(Who will oppose you?  The usual suspects.  To the unions it will mean fewer dues-paying members, which would stanch the flow of donations to their water-carriers in the Democrat caucus.) 

Obviously a program like this will impact the state retirement systems, so make sure the actuarial plan is sound.  Even if turns out you'll need to spend 50 cents, rather than 40, to save a dollar, you're still saving 50 cents.

Once the 800-pound payroll gorilla has been tamed, then legislatures and school boards can reverse the policies that created these bloated payrolls in the first place.

Hope this helps.