December 19, 2014

Elyria
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Reinstatement of step increases for Elyria teachers could sink finances

ELYRIA — A roll of the dice by school officials in 2011 could prove costly for the district as it starts contract negotiations with the Elyria Education Association.

The teachers’ employment agreement approved then ends this month. Historically, both sides are mum about negotiations, only announcing a finalized deal. It makes speculating on how any new contract will affect the district’s bottom line difficult.

However, a memorandum of understanding signed by both sides in the spring of 2011 lays out at least one issue that will have to be addressed in contract talks — the longevity pay system known as “step increases.”

The steps were frozen, not eliminated, in 2011 and the district was hailed for the accomplishment.

“In the event that salary steps based on longevity are reinstated by Ohio law and following the expiration of this agreement between the Board of Education and the Elyria Education Association, employees would resume step increases at the next step on the salary schedule,” the signed memo said.

Superintendent Paul Rigda said the union could push to explore that caveat in an effort to get back the steps. A state law repealed in 2011 is no longer a factor preventing such an attempt.

“That could be problematic,” he said. “But that was a gamble the negotiating team decided to take. We wanted to settle, and no one wanted a disruption in school.”

Mark Smith, president of the Elyria Education Association, did not return a call for comment.

The five-year forecast

Just because school officials are not talking about contract negotiations publicly does not mean they are not thinking about how the outcome will affect the district.

Earlier this month, Ernie Strawser, a consultant with Public Finance Resources Inc., laid out the next five years of budgets for Elyria Schools. Expenses soon will outpace district income, he said.

This year, the district’s ending balance will be $8.4 million, and next year it jumps to $9.5 million, Strawser projected. But 2016 will start a slow trend of the district spending slightly more money each month than it brings in as revenue. By 2018, the cash balance will be $5.7 million, with the district spending $2.5 million over projected revenue, he projected.

“Those projections had built into them a 1.9 percent increase each year for salaries,” said Katie Henes, the district’s assistant treasurer. “There are no steps in that scenario because the steps are so great that they would cause us to go into the red before 2018.”

Rigda said the district plans to go into 2018 in the black and will do whatever is necessary to achieve that.

“I know there is the sentiment with public employees that if you have money, that means it’s for us to pay them,” Rigda said. “However, the public is the least interested in that mindset. They want to know if we’re taking care of buildings, buying supplies for students and putting in the proper programs for student growth.”

So, if the district does bring back steps, how will it cope without the revenue to cover the expense?

Rigda said the district would have to cut expenses. The budget would have a $2.7 million deficit by 2017 with the reintroduction of step increases.

“If we were held to that statement today, that would mean major staff reductions including layoffs,” Rigda said referencing the 2011 memo.

For the first time in years, Henes said the five-year forecast also includes about $1.5 million a year for building maintenance — about $7 million or 3 percent of the total years’ budgets.

“When you look at all of our buildings, that is not a lot of money, especially when you take into account the cost for some of the things we need to start doing,” she said. “A new roof can run anywhere between $300,000 and $500,000. Paving a parking lot is a six-figure cost.”

The only school with a dedicated maintenance fund is Elyria High School, and although the district can use some of that money on other buildings, it generates only about $400,000 a year.

S.B. 5 and step increases

To understand the gamble the district decided to take, it is best to look back to 2011.

Ohio Senate Bill 5 would have limited collective bargaining for public employees across the state, and as a result a well-organized opposition campaign was waged by firefighters, police officers and teachers.

“We didn’t know what was going to happen with Senate Bill 5 so we had to make the best decision for the district at that time. Our financial picture could not support the steps back then,” Rigda said.

The voter referendum known then as Issue 2 subsequently repealed that bill.

But the effects linger. Elyria was not the only district to remove or freeze salary steps in the wake of such a huge political fight.

In 2011, Cuyahoga Falls Schools reached an agreement with teachers to freeze the steps. Two years later, the steps did not come back. However, district officials and teachers did come to an agreement that included a 2 percent raise over two years.

Step increases, which escalate based on longevity, have long fallen out of favor with voters, who want school districts and other government entities to pay employees fairly in a way that is sustainable and doesn’t require more tax levies to achieve.

When the step ladder is frozen and not eliminated — as was the case with the most recent negotiated agreement for teachers in Lorain — the result can be disastrous on a district’s budget.

A 2011 memorandum of understanding signed by the Lorain Education Association and the school district halted the practice for two years. By 2013, the district had to make good on the postponed payments. The result was some teachers received a 16 percent increase given out incrementally over 16 months.

The bottom-line cost to the district was $639,000 this year, nearly $1.6 million in 2015 and $1.9 million in 2016. The district’s five-year forecast shows a deficit predicted for 2015 and each year afterward out to 2018, when it balloons to $34 million.

Contact Lisa Roberson at 329-7121 or lroberson@chroniclet.com. Follow her on Twitter @LisaRobersonCT.