Volume 3 Issue 2

Compensation Increases Average 7.5% Over the Last Two Years

By Cindy Johnson

     Every year in early May, the Colorado legislature includes K–12 funding allocations in its finalized budget. It is then the responsibility of each local board of education to determine how that money will be spent within their school district. 
     Usually, the figures that come from the legislature are based on per-pupil funding, a figure that is multiplied by the number of students expected to attend all schools the next year, to give districts a starting point for their budgets. District budget discussions typically revolve around how the additional dollars will be allocated. In economic downturns the dollars available may decline, which means more school boards discuss cutbacks instead of expansions. 
     Over the last two years, tax revenues have risen along with the improved Colorado economy. As a result, Jeffco has received a combined $40.6 million net general fund increase from the state—$21.1 million in 2014 and $19.5 million in 2015. Of those dollars, the school board allocated a full 84 percent to be spent on compensation increases for teachers and other staff. 
     In 2014, the board raised the compensation increase from the $11.2 million recommended in the 2013 Bargaining Summit to $18.2 million. These dollars helped to increase take-home pay, as well as covered some mandated healthcare cost increases and PERA (pension) cost increases. The amount represented an average 4 percent compensation increase per employee. This year, the school board approved a budget that included $9.3 million in salary increases, $3.7 million in PERA increases, and $3 million in healthcare cost increases—an average compensation increase of 3.5 percent. 
     The rate of individual salary increases has varied widely, as the school board has corrected some persistent discrepancies in Jeffco teacher pay compared to neighboring districts. For example, the new teacher base salary has been raised from $33,000 to $38,000. In addition, all current full-time Jeffco teachers’ salaries were boosted to at least $38,000, as much as a 14 percent increase. In addition, teachers at the highest levels of the pay scale received one-time stipends of 2 percent or 4 percent, based on their professional practices evaluation. 

     For the 2015–16 hiring season, Jeffco human resources staff provided data that some positions which required master’s degrees and other hard-to-fill positions had not been appropriately addressed in the fall. Consequently, these areas didn’t have salaries that were attracting quality applicants. 
     In an effort to correct the shortcoming, the board unanimously approved a pay plan for new hires that increased salaries both for hard-to-fill positions and for relevant master’s degrees. Unfortunately, the union filed a lawsuit, believing that the increases had not been officially negotiated and left teachers already in Jeffco earning less than new hires. After agreeing to compensate current Jeffco teachers for relevant master’s degrees and an additional 2 percent increases for each of the first six years of experience serving with the district, an agreement for compensation increases was successfully negotiated and the lawsuit was dropped.
     While some of the current rhetoric says teachers “only received a one percent pay raise,” the fact is the overall increase (including healthcare and PERA) is closer to 3.5 percent. The chart above indicates several scenarios where Jeffco teachers received far greater increases. 
     An important component of compensation that must be understood is the PERA contribution. Teachers have always contributed 8 percent of their salaries to PERA for future retirement benefits (close to the 7.65 percent most workers contribute to Social Security and Medicare). Teachers receive PERA benefits instead of Social Security, but they do not pay the Social Security tax on their district wages. 
     Similar to their private sector counterparts with Social Security, school district employees in Colorado receive a matching employer contribution to their PERA retirement. The difference between private sector employees and school district employees is that taxpayer-funded districts have to match these contributions at higher rates determined by state law. 
As recently as five years ago, the match for school district employees was 13.85 percent, nearly twice what private employers must pay into Social Security. In 2010, the Colorado legislature passed a bill to help fully fund PERA by increasing contribution rates. Some of the increase was meant to be paid for with “monies otherwise available for raises.” In other words, the money that went to PERA could have gone into paychecks, but given budgetary constraints went to the retirement fund instead. 
     Employee groups have not traditionally considered their benefit costs to be compensation, nor has it been presented that way in the past. Clearly, however, it is compensation.
Without fail, Jeffco has picked up the entire increases mandated by the new law passed in 2010. For 2015 the match was 18.35 percent (nearly a one-third increase in five years). The employer/taxpayer is providing a contribution to the teachers’ retirement plan equal to 18.35 percent of their salary. That rate is scheduled to go as high as 20.15 percent in 2018.  
PERA benefits are extremely generous to people who remain district employees for their entire career. But it is unfair to career-changers or to younger teachers who may not plan to stay in the profession forever, as they lose a large part of this match. And unless they stay in the system for 30 years, they receive significantly reduced benefits.  Many teachers have expressed interest in higher take-home pay in exchange for a smaller match into their retirement system. 
     In addition to the millions spent on retirement contribution matches made by the district, additional pressure on compensation available for take-home pay increases have been the mandated increases in healthcare costs. Starting last year the district increased its allocation to cover health care benefits by a half a million dollars. This year the district added another $3 million to cover those costs. 
As the largest proportion of the school district’s $1 billion overall budget goes toward compensation, it is critical for all to understand the competing choices for how to allocate additional dollars. 
     Next year, the mandated health care cost increases are estimated to be $5 million. And over the next two years, employer PERA contributions are mandated to go up another 1.8 percentage points. As required by law, 1.5 percent of that must come from dollars otherwise available for compensation. If the district chooses to pick up both the PERA and health care cost increases, fewer dollars will be available for take-home pay increases.