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Health & Fitness

Why Sachem School District Needs To Live Within Its Constituents' Means

A discussion of the root causes of Sachem's budget woes.

Residents of Sachem School District are currently grappling with an age-old quandary: how to have their cake and eat it too.  With a reduced state aid budget and growing costs, the district faces a significant $26 million budget shortfall in the coming 2013-2014 school year. 

In response, the Board of Education has put forth three options to remedy the problem:

- Cut programs like music, art, GATE, full-day kindergarten, BOCES, intramural sports and others by $26 million

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- Raise property taxes by 16% (roughly equivalent to $26 million)

- A combination of both, raising taxes 8% and cutting programs by the remaining $13 million (or, potentially, some other combination of increases and cuts)

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Understandably, none of these options is palatable to most Sachem residents, who have come to expect a robust educational program from the district that goes beyond normal pen and pencil subjects.  While no one would deny that learning long division is more important than learning Mozart (to borrow a line from a great high school movie), Sachem shouldn’t have to choose between the two.  Programs that nurture non-traditional areas of students’ intellectual and emotional development are a crucial part of any school curriculum.  Music, sports, GATE, BOCES – all of them contribute substantially to a productive and well-adjusted citizenry. 

On the other hand, property taxes are already at near unbearable levels, with $9, $10 and even $11,000 tax bills now the norm for a majority of payers – a full 2/3 (66%) of which goes to fund local school districts in Brookhaven town; in the town of Smithtown, it is a whopping 75%. A 2012 study conducted by Stony Brook University’s Center for Survey Research details the gravity of the issue:

- When asked how serious a problem high property taxes were in their county, 81% of respondents answered either “extremely serious” (41%) or “very serious” (40%).  As the report noted: “Local taxes have been the most common local problem mentioned by Long Islanders in every poll conducted over the last ten years (since 2003).”  Source: http://www.longislandindex.org/explore/00df69b6-e54e-4c98-a690-2524391c746d

Indeed, while overall spending on local government increased significantly from the year 2000 to 2009, school spending on Long Island far outpaced other publicly funded enterprises, increasing by an astronomical 70%, while the average individual income remained essentially stagnant over the same time period, moving from $44,154 to $45,913.  In Sachem School District, the annual budget has increased $40 million since the 2005-2006 school year, ballooning from $252 million to $291 million in 2012-2013; were it to pass, the proposed $304 million budget for 2013-2014 would bring that number to over $50 million in less than 10 years. 

The question then becomes: where did the money go?  With the budget increasing each year and taxpayers giving up a substantial portion of their incomes, how can the district still be facing a $26 million shortfall?  Perhaps unsurprisingly, the answer is simple: employee costs.  For most businesses, employee costs constitute a majority of their overhead, and school districts are no exception.  Here is a breakdown of costs by occupational category compiled from the 13-14 budget (salaries, benefits and pensions plus all applicable OT, substitute costs, paid sick days etc. that have been allocated):

            - Administrators/Superintendents: $3.34 million

            - Principals and Asst. Principals: $4.3 million

            - Secretaries: $8 million

            - Custodians/Groundsmen/Mechanics: $10 million

            - Teachers (K-12, Spec. Ed, GATE, aides, coaches, etc) $98.32 million

            - Nurses/Psychologists/Social Workers/Drug Abuse Counselors: $6.7 million

            - Guidance Counselors: $3.5 million

            - Security Staff: $1.97 million

            - Librarians: $1.77 million

            - Student Services Staff: $17.3 million

            - Employee Retirement System (ERS) Contributions: $4.14 million

            - Teachers Retirement System (TRS) Contributions: $20.74 million

            - Social Security Contributions: $9.6 million

            - Medical Insurance: $32.3 million

            - Workers’ Comp/Life Insurance/Unemployment Insurance: $3.45 million

            - FICA/Medicare Contributions: 2.3 million

            - NYSHIP Opt. Out Plan (paid as taxable income to employees): $3.9 million

                                    TOTAL: $231.63 MILLION

As you can see, 76% of the total proposed budget goes towards employee costs. Everything else – school buses and drivers, utilities, textbooks, stationary, the cost of outstanding bonds, computers and software, art supplies, uniforms, musical instruments, testing services, BOCES, etc. – is paid for with the remaining 24%.  Further, these are costs that are unlikely to fluctuate wildly over any given time and can predictably be calculated. 

On the other hand, employee costs continue to rise year after year, and can be attributed to a number of factors:

Mandated contributions to retirement accounts are much greater than they were during the roaring stock market days of the late 90s and early 00s. As rates of return on investment have declined, more and more of the burden of paying for employee retirement has shifted towards the taxpayer.  Indeed, the ECR (employer contribution rate) for teachers has risen dramatically in the last 15 years, from 0.43% in 2000-01 to 7.97% in 2005-06 to 16.25% in 2013-2014.  Non-teacher rates have performed much the same, jumping from near zero levels in 2000-01 to more than 20% (20.9) in 2013-2014.  Thus, if a teacher earns $100,000 in salary for the 2013-2014 year, the district must pay an additional $16,250 in retirement contributions on that teacher’s behalf. This is in stark contrast to the average 3% rate the teacher his/her self must contribute, which, taken from the same $100,000 salary, is more than five times less than the ECR ($16,250 vs. $3,000).  To be fair, these are mandates set by Albany, since both teacher and non-teacher pensions are managed by the state and therefore, cannot be changed at the local level. 

Salaries are another variable that has ballooned significantly.  Earning $90,000-$100,000 per year in income is now the norm for teachers at the halfway point in their careers; for principals and administrators, the numbers are even higher.  As most know, salaries are determined by the number of years served as well as the level of education acquired by each teacher, while the dollar amount awarded for each bracket is agreed to by the SCTA (Sachem Central Teacher’s Association) and the Board of Education.  Invariably, these dollar amounts go up year after year, as the teacher’s union negotiates better pay for its members.  As per the current 2009-2013 contract, salaries in each pay bracket went up 1.5% the first year, 2% the second half of the second year, 1% the first half of the third year and 2% the second half of the third year, and 1% the second half of the fourth year (after the SCTA agreed in March of 2012 to defer an originally scheduled 2.5% full step increase into the future).  Thus, a teacher with a Master’s degree beginning her 7th year of teaching in 2009-2010 would earn $66,316.  By 2012-2013, her tenth year, she would earn $77,176 – a $10,860 (16.25) increase.  If the same teacher were to acquire the necessary 15 credit hours to bump her into the MA +15 (Master’s degree plus 15 additional credit hours of graduate coursework) category by the beginning of her 9th year (the third year out of four in the contract), she would end up earning $79,789 in 2012-2013, a $13,473 (20.25%) increase. 

Higher salaries increase costs in other ways as well – for example, through higher Social Security contributions.  For every $1000 that an employee earns, the district (read: the taxpayer) must pay an additional $62 (6.2%) as a contribution towards the Social Security fund, up to the $113,000 cap set by the federal government for the year 2013.  Thus, every time an employee gets a raise, the district’s total Social Security liability rises with it – as does its Medicare liability, which is federally mandated at 1.45% of every dollar earned by an employee with no cap. The same is true for pension liabilities.  Since pensions are determined largely by the average total income an employee receives in their final years of work, higher salaries mean bigger pensions – and, subsequently, a greater amount of assets that must be accrued to guarantee the solvency of the retirement fund.  This puts increasing pressure on the fund to deliver stronger and stronger rates of return in order to pay the larger pension liability.  When the fund under performs relative to its obligations (as it is currently doing), the burden of paying for pensions shifts more and more onto the taxpayer.  Case in point: the 2012-2013 budget required that $15 million be set aside for teacher retirements; in the 2013-2014 budget, the number increased to $20.7 million.  Hence the reason why most private businesses have done away with defined benefit retirement plans, because it forces them to increase their revenue streams just to pay for the same level of output. 

Then there’s healthcare.  Since 1957, New York State has provided a health insurance system for public sector workers, the New York State Health Insurance Program (NYSHIP).  State law requires employers to contribute a minimum of 50% of total premium costs for the enrollee and 35% of costs for dependents, irrespective of how many there are.  However, as with salaries, individual local unions frequently negotiate significantly better packages.  As per the current SCTA contract, teachers are required to pay only 17% of health insurance premiums for both themselves and their dependents (spouses and children).  The district pays the other 83%.  Upon retirement, the contract stipulates that individual coverage be paid in full by the district; for dependents, the district pays 80%.  We all know that health care costs across the board have been rising at an alarming rate for all Americans in the last two decades.  As the district itself notes, “The health insurance budget [for employees] represents a 7.75% premium increase for 1/1/13 and a 8.5% increase for 1/1/14” (Line 751 from “Budget Notes 2013-14 School Year”).  Yet since employees, retirees and their dependents incur only a marginal share of total health care costs, taxpayers bear the majority of the burden when those costs go up – more than four times as much as the employees. 

Let’s imagine for a moment that the Board of Education decided to implement the full 16% increase, thereby closing the $26 million budget gap.  Yes, taxpayers would give up significantly more of their hard earned money, but the students would be spared.  Their programs would be saved, and no staff members would have to be fired.  Fast forward to the 2014-2015 school year, or the year after that, or even five years down the road.  Costs will inevitably have increased – with ever larger salaries, astronomical health care costs and exploding pension obligations – and once again, the Board will say to the community: we need more money.  And if you don’t give it to us, we will once again have to consider cutting programs.  What then? Another large increase?  Just to maintain the status quo?  Usually, when people pay more for something, they get more.  Were the community to pony up the increase, would students then learn more? Would their grades be better? SAT scores? College prospects?  Earning potential? Of course not.  Now, consider the alternative.  Suppose the community rejects any tax increase this year and the Board cuts all “non essential” programs (music, GATE, etc.)  Again, fast forward to next year, the year after or five years down the road.  Costs will have gone up, and the district will ask for more money.  Only this time, they say, instead of music, art and sports being on the chopping block (since they don’t exist anymore), half the first grade teachers are on the chopping block.  Residents would be forced to make an impossibly difficult (and unfair) decision. 

To be sure, there is a very real limit (and perhaps we’ve already reached it) on how much the community can be taxed.  Time and again, school officials warn that budget cuts will hurt students.  Yet we never seem to consider the other side of the argument – that budget increases (read: tax increases) might actually be hurting students.  Higher taxes means parents have to work longer hours to make up the difference in their income, therefore spending less time at home.  It means more stress when they are home.  It means less money put away for college.  Or retirement.  It means less money flowing into the private economy, which shutters businesses and hurts students’ job prospects after graduation.  Most importantly, it means that a growing number of students will be unable to stay on Long Island in their adult years due to the high cost of living. Indeed, while the 25-34 year old demographic in the United States increased 3% overall since 2000, the same demographic on Long Island decreased by 12%.  Raising taxes will only accelerate that trend. 

Clearly, the smartest way to go forward is to neither raise taxes nor cut programs, but rather to reduce costs associated with employee overhead.  That means cutting salaries (rather than simply slowing their growth) and shifting more of the burden of insurance and retirement costs back onto the employees instead of the taxpayer.  The first two can be accomplished at the local level, while the third must be lobbied for in Albany.  This is how every private business in the world responds when revenue streams decline; in order to save the company as a whole, overhead gets reduced.  Since the economic downturn, huge numbers of Sachem residents have seen their paychecks shrink while school costs have done nothing but inflate.  This is unsustainable.  Sooner or later, the district is going to have to learn to live within their constituents’ means.  

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