Another Lie by the NEA: East Greenwich Teachers Would Take Pay Cuts Under School Committee Proposals
One of the other lies being spread by the NEA is that the proposals offered by the East Greenwich School Committee would result in pay cuts for teachers.
The NEA tried to pass off this lie as fact in 2004-05 and Anchor Rising showed it was a lie then.
And it is a lie in 2007, too.
An example of the propaganda being spread this year came earlier from Pam, a teacher in East Greenwich, who wrote these words in the Comments section of another Anchor Rising post:
Please ask the administrators to take the same pay cut I would take if my contribution to health care went up to 15-20% and my salary increased 1-2%.
In the early years of my career, I served as a Chief Financial Officer at several companies. Bear with me while we go granular in this post and do a CFO analysis to blow this latest lie out of the water.
As a citizen concerned about this NEA claim, the first step I took was to have a meeting with Maryanne Crawford, Director of Administration for the East Greenwich School Department. I met with her on September 6 for the purpose of getting empirical data so I could complete my own independent analysis. Therefore, please note that this analysis has not been prepared by the East Greenwich School Department.
After the meeting, I completed this Excel spreadsheet with 7 tables so my analysis would be completely transparent and subject to public scrutiny on this blog, unlike the NEA’s claims. If you want to dive into this issue, I would encourage you to open the spreadsheet and read the rest of this post while referring to the tables in the spreadsheet.
Here we go:
TABLE I: MASTER’S DEGREE PROJECTED SALARY SCHEDULE (2006-07 THROUGH 2009-10)
Maryanne informed me that 156 of the 231 East Greenwich teachers employed last year held Master’s degrees. I then chose to use that salary schedule because it represents the most likely pay scenario for teachers.
The first 2 columns present the actual 10 job step salaries for Master’s degree teachers in 2006-07, based on the most recent signed contract.
According to the East Greenwich Pendulum issue on September 6, the School Committee’s most recent offer was to increase salaries for every job step and education grade by 2.5% in 2007-08, 2% each in 2008-09 and 2009-10.
The balance of Table I then calculates the higher salaries for the 3 upcoming years based on those rates of increase.
TABLE II: MASTER’S DEGREE PROJECTED SALARY INCREASES (2007-08 THROUGH 2009-10)
For every job step below the top step 10, a teacher moves up each year to the next higher step. This is how teachers in job steps 1-9 realize 8-12%/year salary increases. I picked job step 5 as the example to review as it is the mid-point between step 1 and step 10 and would, therefore, have roughly the average increase among non-step 10 teachers.
Once at step 10, however, the salary increase each year equals just the rate of increase shown in Table I. Maryanne told me that just under 60% of last year’s East Greenwich teachers were at step 10. Therefore, if anyone is going to suffer a “pay cut” in a new contract, it will be these teachers who receive the smallest annual increase in salaries (albeit after up to 9 years of receiving 8-12%/year increases).
Table II shows that:
- Step 5 teachers receive $4,372-4,525/year salary increases over the next three years
- Step 10 teachers receive $1,431-1,745/year salary increases over the next three years.
TABLE III: HEALTH INSURANCE PREMIUM PROJECTED COSTS
Table III notes that family coverage with Blue Cross Blue Shield – Healthmate is the most common form of health insurance utilized by East Greenwich teachers, with 110 FTE’s out of 231 teachers using such coverage last school year.
Second highest is the single person coverage with Blue Cross Blue Shield – Healthmate, with 37 FTE’s using such coverage last year.
All other school department health insurance options were only used by 16 additional FTE’s as the remaining 68 FTE’s did not use any form of the East Greenwich schools-based health insurance coverage and instead took a buyback cash bonus of $5,000 in 2006-07.
Therefore, Table III focuses on the family and single person health insurance premium costs for Healthmate over the next 3 years. Actual premium costs in 2007-08 for such family coverage costs the school department $13,618 and the actual single coverage costs them $5,229.
Premium costs are assumed to go up 10%/year in the two years following 2007-08. The East Greenwich School Department’s policy is a self-insured, claims-based policy through the West Bay Collaborative.
TABLE IV: HEALTH INSURANCE CO-PAYMENT EXPENSES PROJECTED TO BE INCURRED BY TEACHERS
In 2006-07, teachers at job steps 1-4 paid a 5% co-pay while teachers at job steps 5-10 paid a 10% co-pay.
According to the East Greenwich Pendulum, the School Committee’s most recent offer proposed increasing co-pays for all job steps to 12% in 2007-08, 15% in 2008-09, and 18% in 2009-10. Table IV assumes those percentages and computes what the teachers would pay in co-payments for the next three years:
- Family coverage annual co-pays would increase from last year’s $655-1,311 to $1,634, $2,247, and $2,966.
- Single coverage annual co-pays would increase from last year’s $260-519 to $627, $863, and $1,139.
TABLE V: NET INCREASES IN PRE-TAX HEALTH INSURANCE CO-PAYMENT EXPENSES PROJECTED TO BE INCURRED BY TEACHERS
Table V simply takes the data in Table IV and calculates the annual net increases in pre-tax co-pays made by the teachers.
- The single step 5 and step 10 teachers would pay $235-368/year in higher pre-tax health insurance premium co-payments.
- The married step 5 and step 10 teachers would pay $323-719/year in higher pre-tax health insurance premium co-payments.
TABLE VI: NET INCREASES IN AFTER-TAX HEALTH INSURANCE CO-PAYMENT EXPENSES PROJECTED TO BE INCURRED BY TEACHERS
The East Greenwich School Departments offers what is called a Section 125 plan where teachers can pay their health insurance premium co-payments in pre-tax dollars, thereby lowering their taxable income and subsequent taxes.
Using a 2006 Federal Tax Rate Schedule, married couples filing jointly pay 25% income taxes on every marginal dollar earned above $61,300. So I assumed 25% plus the Rhode Island income tax rate is about 25% of the Federal rate or about 6.25%. I rounded the two percentages to 30% and Table VI calculates the true, after-tax cost to teachers of the higher health insurance co-payments.
- The single step 5 and step 10 teachers would pay $165-257/year in higher after-tax health insurance premium co-payments.
- The married step 5 and step 10 teachers would pay $226-503/year in higher after-tax health insurance premium co-payments.
Bluntly, that is not asking very much and suggests the School Committee should be more aggressive in demanding higher co-pay percentages in its next offer.
TABLE VII: NET CHANGE IN CASH COMPENSATION PROJECTED TO BE REALIZED BY TEACHERS
Table VII gives us the “bottom line” and proves the NEA has lied once again when they claimed that the offer from the School Committee would result in the teachers taking pay cuts.
- The single step 5 teacher would realize annual net cash compensation increases of $4,207-4,332/year.
- The married step 5 teacher would realize annual net cash compensation increases of $3,943-4,243/year.
- The single step 10 teacher would realize annual net cash compensation increases of $1,266-1,487/year.
- The married step 10 teacher would realize annual net cash compensation increases of $956-1,518/year.
No negative numbers anywhere to be found.
[Later Note: Enjoy Bob Walsh’s challenge of this conclusion in the Comments section – and my response debunking his claim. To provide the numbers in support of my conclusions, I have added an additional summary analysis of the net cash compensation numbers for the original School Committee offer – even adding the modified spreadsheets for public scrutiny. It can be found at the bottom of the Extended Entry section below.]
As an aside, the negotiating teams can debate whether step 10 teachers should get larger increases but my position – if I was on the team – would be that such changes are only possible if the hefty increases to steps 1-9 teachers are reduced to at least offset the additional step 10 salary increases.
CONCLUSION #1 ABOUT INTENT
Every East Greenwich teacher should bluntly ask their union leadership why the NEA is lying to them. And then every adult resident in town should ask the NEA the very same question.
The NEA likes to run around and accuse School Committees of negotiating in bad faith. But the NEA is the only party which has been shown – multiple times now – to lie to the taxpaying public and even its own members.
CONCLUSION #2 ABOUT ECONOMICS
It is not at all clear that the School Committee’s latest proposal will allow its budget increases to remain under the tax cap restrictions. (That is a separate analysis for another day. Stay tuned.)
Whether all of us want to admit it, the gravy train ride is over. Welcome to the real world of constraints, like ordinary working families and retirees live with every year.
I believe the only really effective contract that both does right by deserving teachers and lives within the tax cap will require wholesale changes to the 10-step salary schedules. That kind of change won’t happen quickly and it certainly won’t happen with a mediator trying to split the status-quo baby. The latter is a process which ensures the unsustainable economics of past contracts is only tweaked when it needs a complete overhaul.
I am concerned that the School Committee, which has shown decidely more courage than the norm so far, is still not thinking sufficiently outside the box.
Nobody expects the NEA to think outside the box. After all, their agenda here is to blow up the tax cap so uncontrolled spending can continue.
I hope the School Committee appreciates how much support there is already for them taking a firm stand to find a new way. It is too bad that the negotiating party across the table is only capable of lying instead of being constructive problem solvers.
Remember: Anchor Rising is THE place to go for information on the teachers’ strikes issues in Rhode Island. See the Extended Entry for all relevant links.
To get up to speed, here are the links – in chronological order – to other Anchor Rising posts about the East Greenwich teachers’ strike and the NEA:
Saying “No” to Legalized Extortion
Education Partnership Reports: Learning a lot more about RI teachers’ union contracts
Reflecting on Labor Unions on Labor Day
Update on the East Greenwich Teachers’ Contract & Suggested Future Actions
Breaking News on Anchor Rising: East Greenwich Teachers to Strike on Tuesday
More on the Issues in the East Greenwich Teachers’ Union Strike (This is a particularly important post on the substantive issues in dispute.)
The NEA’s Latest Disinformation Campaign in East Greenwich
Sometimes What is Old is New: Misguided Incentives Drive Public Sector Taxation
East Greenwich School Committee: Press Release & General Update
Mr. Subliminal Must Have Written the EG Teachers “Open Letter”
The Continuing NEA Disinformation Campaign in East Greenwich: Lies, More Lies & Even Some Melodrama
News Flash: Judge Orders East Greenwich Teachers Back to Work on Friday, September 7
Other relevant posts on Anchor Rising include:
Burrillville Teachers to Students: Let the Pawns Skip School
Crowley, You Charmer
Researching from Outside the Library
Children Are Their Life? No, Children Are Their Leverage.
Citizen Context for Negotiations
One Side of the Phone Conversation
My Favorite Samuel Gompers Quote
The Guidebook to Public-Abuse
Not Quite Breaking (Except of Taxpayers’ Backs)
The Other Side of the Conversation in Tiverton
The Rhode Island Right’s Bizarro Politics
A Case of Crossed Hands
Best We Can Do Is Get Involved Every Time
The Continuing Saga of the Funding Formula Distraction — A Tale of Two Cities
(These three posts immediately above in this section address the important questions of (i) what RI law and court decisions say about teachers’ strikes; (ii) the tax cap and level funding of education; and, (iii) statewide education funding formula.)
This Is the Way the System Works, the System Works, the System Works
ADDITIONAL SCENARIO ANALYSIS
In response to Bob Walsh’s challenge that failed, here are the spreadsheets analyzing the original School Committee offer of 2%, 1.75%, and 1.75% salary increases to the 10 steps over the 3 years plus 20% health insurance premium co-payments in all 3 years.
The Table VII in this modified analysis gives us the “bottom line” and proves the NEA has lied once again when they claimed that the offer from the School Committee would result in the teachers taking pay cuts.
- The single step 5 teacher would realize annual net cash compensation increases of $3,652-4,256/year.
- The married step 5 teacher would realize annual net cash compensation increases of $3,213-4,127/year.
- The single step 10 teacher would realize annual net cash compensation increases of $846-1,187/year.
- The married step 10 teacher would realize annual net cash compensation increases of $407-1,058/year.
Some lower numbers, as you would expect. But, again, no negative numbers anywhere to be found. So who is being personally dishonest and manipulative of data?
What, the teacher’s union lied to ALL of us again? NO big surprise there.
Great work, Don.
It’s striking how quiet the NEA commentors have become all of a sudden. The data analysis must have scared them away.
Don,
You accuse others of lies, but your own charts prove your personal dishonesty and manipulation of the data.
You quoted Pam as follows:
“Please ask the administrators to take the same pay cut I would take if my contribution to health care went up to 15-20% and my salary increased 1-2%.
Plug those numbers into your spreadsheet, as opposed to the proposal made by the School Committee AFTER Pam’s comments, and most of the scenarios are indeed pay cuts for most teachers, who are at the top step (as they are for two-thirds of their careers).
You owe Pam, and the readers of this blog, an apology for such a cheap stunt.
Sadly, the only conclusion your data suggests is that the East Greenwich School Committee takes negotiations seriously only prior to a court date and after a job action.
By the way, all the pay for performance advocates on this blog are curiously silent when East Greenwich is considered – since the test scores and overall student performance in East Greenwich are among the best in the country, I though there would be calls for the highest compensation package in the state, at least.
Bob, we all take a ‘pay cut’ when our insurance premiums go up. I’m curious why you and yours feel that, instead of living in the real world and sucking it up like the rest of us, you feel that we the taxpayer should take the cut in OUR pay for YOUR increased costs.
When all of us with means move out and your test scores drop to the floor (you keep telling us test scores are tied to economic opportunities) what will be your battle cry then?
>>By the way, all the pay for performance advocates on this blog are curiously silent when East Greenwich is considered – since the test scores and overall student performance in East Greenwich are among the best in the country, I though there would be calls for the highest compensation package in the state, at least.
Disingenuous.
Pay for performance proposals deal with individual teachers’ performance, not an entire district. I know the union model is collectivist, but we know have the benefit of 20th century experience, and collectivism is a discredited artifact that should be “discarded on the ash heap of history” in the public sector, just as it (mostly) has been in the private sector.
Also, EG’s performance may look good in comparison to, e.g., Providence, but:
a) How much of that performance is attributable to favorable demographics and how much (if any) to teachers adding value?
After all, the entire RI teaching force comes out of the RIC “education college” (and similar non-rigorous teachers colleges) – so there is little reason to believe that the EG teaching force is all that different from anywhere else it RI. Variations in district performance appear to correlate with community demographics, not teachers.
b) How does EG’s performance stack against world-class performance, and not just against low-performing RI and mediocre-performing U.S.?
Mr. Walsh – As a txpayer in this town and as one who currently pays for about 35% of my share of health ins. what should I do? My private employer switched to a more affordable group policy and we all got hit and guess what? In the real world we have to accept it. The economy is not great not only in RI but in the rest of country. I took a “net” pay loss as well.
Why don’t your members move to where they think they will get a better deal? If your members are so sure that they are getting screwed why didn’t they stick up for their beliefs and those of all NEA members and refuse to work today? If Ms. Hayes and the local NEA members believe is they are being coerced or worse by the SC, why work at all? Why not go to jail to make a “statement” about their civil rights being trampled?
Trust me when I say as a parent who has lived here for a while, that most parents are disgusted. We realize that working here is a hell of lot better then working in in the city or some of the larger towns. Parents volunteer to help make the lot of the pampered EG teacher even easier. If a teacher asks, parents bring in extra supplies without a whimper. We line up to chaperone field trips, etc.
Spare me the “poor teacher” act
Hey Bob,
How come the Union refused to speak with members of United Health Care when their plan offered a 500K savings over 3 years? The Town and Police Dept are on United as well as the Fire Fighters. Why didn’t you do the same and save the taxpayers some money?
You could have used that money to pay your salary demands.
Bob Walsh of the NEA writes in an earlier comment: Don, You accuse others of lies, but your own charts prove your personal dishonesty and manipulation of the data. You quoted Pam as follows: “Please ask the administrators to take the same pay cut I would take if my contribution to health care went up to 15-20% and my salary increased 1-2%. Plug those numbers into your spreadsheet, as opposed to the proposal made by the School Committee AFTER Pam’s comments, and most of the scenarios are indeed pay cuts for most teachers, who are at the top step… First of all, Bob, the NEA and its members have persisted in sending out letters and emails spreading the “pay cut” story as recently as the last 48 hours – a time period which is after the School Committee offer I analyzed was presented to the NEA negotiating team on September 5. I ran those numbers in my analysis because they aligned with the timeframe the NEA was still spreading the “pay cut” story. So who then is being personally dishonest and manipulative of the data, even with your own union membership? Second, Pam references a 1-2% annual increase when the Pendulum story notes that the lowest salary increase proposal was 2%, 1.75%, and 1.75% over the 3 years. 1.75% doesn’t round to 1% in any educated person’s mind. So who then is being dishonest and manipulative of the data? Third, I did plug the numbers from the original School Committee offer (2%, 1.75%, and 1.75% salary increases over the 3 years and 20% co-pay in all 3 years) into my spreadsheet. Guess what? There are still NO pay cuts for a step 10 teacher in any of the 3 years. So who then is being personally dishonest and manipulative of… Read more »
Hi!
I am NOT a NEA member but I think Bob Walsh at least should be credited for posting on Anchor Rising.I have met him one to a couple of times,not sure how many,and he seems like a sociable fellow.However that does not mean I would necessarily agree with him.
I would like to know how many school districts in Rhode Island have co-pays?I know the Chariho Regional School District the teacher’s do.Also when was the last time your school dept. had an outside independent management study? As a point of disclosure my second cousin Pam Hawkins is NEA Chariho President but I do not keep in contact with her.
I think school districts meed to undergo from time to time outside management studies.We often know how our school districts compare academically but usually don’t discuss at least often how it is run procedurally wise in a business/management sense like we should and how districts compare with each other in other things than academics and sports.
Regards,
Scott Bill Hirst
>>Also when was the last time your school dept. had an outside independent management study?
Fair question – but unless the management study is one with a “clean slate” – that is, what recommendations would be made without regard to what is in the teachers contract, “work rules” – I submit that it would be of limited use.
As for Mr. Walsh, and Mr. Crowley for that matter, they do deserve credit for posting.
I’ve never met Mr. Walsh, but I’ve been told multiple times, from multiple people, that he’s a nice guy in person.
Hi!
I am a avid viewer of the local PBS “A Lively Experiment” now on Thursday at 7 PM and at other times.I do not know its ratings but I do know many people watch it.
Bob Walsh is frequently a guest.I hope quite sincerely those responsible for Anchor Rising are invited to appear on the show.I have met Andrew Morse in person and saw him TWICE one a repeat recently with Jim Hummel on Channel#6,.
I do not know how many hits this discussion group gets but it has to be many.
BTW Bill Felkner,a Chariho Regional School Committee memberw ill be on September 20TH on the show and obviously repeats of the show.
Regards,
Scott
>>I do not know its ratings but I do know many people watch it.
Yeah, but how many of them are awake? 😉
In response to, “After all, the entire RI teaching force comes out of the RIC “education college” (and similar non-rigorous teachers colleges) – so there is little reason to believe that the EG teaching force is all that different from anywhere else it RI. Variations in district performance appear to correlate with community demographics, not teachers.”
Such an interesting and well-thought out notion! Why not fire all the teachers, since they are useless, undeducated, selfish beings. Each child could then be home-schooled, since you note that teachers have little to do with the academic and social development of adolescents in this community. Think of all the money that would be saved – and how brilliant all of the children would be.
You should start a movement across every suburban town in the state. Use this blog as the rallying point. It seems to have the support of such intelligent, open-minded, and thoughtful individuals. And I am sure none of the followers would have graduated from RIC.
Sign me up.
Robert S.,
No one but yourself has claimed that teachers are useless or uneducated. The data, if you care to look it, suggests that what seperates the various school districts with respect to student performance is socioeconomics, not the teachers. Don’t you recall that even RIs teacher unions have blamed socioeconomics (i.e. poverty) for poor student performance.
Ignoring your sarcasm for the moment, if you’re in the mood to start a movement why don’t you begin with trying to educate the public on seperating fact from fiction in public education. That would be very useful to parents and who knows what reforms it could lead to. You may even get your homeschoolers (just curious – why wouldn’t you want to include the urban areas?).
Robert S:
I didn’t say all teachers were useless – there are many fine, diligent and effective educators out there.
What I was responding to was Bob Walsh’s assertion that the teachers in East Greenwich are superior in performance to those elsewhere in Rhode Island – and I WAS asserting that since the teachers all come from the same pool, that his assertion doesn’t fly.
I ALSO DID assert that colleges of education are a cruel joke – I’ve stated before on this blog that they’re essentially diploma mills.
The low caliber and lack of rigor in those institutions is established fact – merely “Google” the subject and you’ll find lots of confirmation.
While you may take that as a slam against teachers, it is not. Just as teachers unions are not the same as teachers, neither are colleges of education.
Many graduates of those programs go on to become fine educators – but that is in spite of those programs, not thanks to them.
Olive, A few observations. First, three points about compensation in the private sector that seem to have escaped you and your fellow teachers: (1) performance based pay — at all levels, not just for executives — now accounts for a very substantial portion of most professional and managerial workers’ total potential compensation; (2) as multiple people have noted on this blog, workers in the private sector pay a much higher percentage of their health care costs than teachers; and (3) most workers in the private sector don’t have defined benefit pensions like you do (they have 401ks, to which they contribute a higher percentage of pay than teachers do), much less the post-retirement health care benefits that teachers get. Second, with respect to performance based pay, the relevant question is EG teachers’ value added above and beyond the outcomes one would expect (statistically) to observe based on the demographics of the inputs (i.e., students) you are working with. While one can criticize its methodology, the Infoworks reports attempt to measure this value added. And in fact, EG generally looks quite good — at Hanaford Elementary, Cole Jr HS and EGHS, scores are above what one would expect to see based on demographic inputs; this represents evidence of real value added by the EG teachers in these schools (Eldredge Elementary does not display value added in reading or writing, only in math). Given this, I can’t help but wonder why, apart from fear or retribution in the teachers room from your local union reps (whom, as we all know, tend to be the weakest teachers) EG teachers don’t offer up the following deal to EG taxpayers: we’ll pony up for a higher share of our health care expenses (and give up the buybacks), if you will pony up for performance based… Read more »
It seems to me that this entire predicament could be resolved if all the bloggers on this site left their jobs to become public educators. Imagine the dramatic pay and pension increases that each blogger would receive…not to mention the exceptional health insurance package! And, each blogger could leave the drudgery and challenge of his/her prior job behind and enter the opulent life of a public school teacher…think of how much your life would change. No more stress, no more financial concerns.. just constant praise, respect, and appreciation..and so much free time. Imagine how the children would benefit from each blogger’s superior knowledge base in pedagogy and content areas. Problem solved.
BTW, every public school teacher that I have ever met decided to get into education because he/she knew it would be a “cushy job” with great pay, benefits, and require minimal effort/knowledge/training. Intelligence, a passion for education, a desire to create a positive change in the life of a child/adolscent, certainly had nothing to do with their decisions to become teachers.
Bloggers of this site – Unite! Become public educators in the state of Rhode Island. ( Just make sure that you have a Bachelor’s degree from a nationally accredited institution, have passed the mandated tests, are working on or have completed your Master’s, have certification in the required content areas, continually take professional development courses, have an approved I-Plan, and are able to prove your intelligence, management skills, and superb teaching style in yearly observations.) Piece of cake!
Robert S.:
When you can’t attack an argument’s logic or the facts upon which it is based, go ad hominem. Pretty revealing strategy there, my friend…
Robert S,
Any explanation offered on how such highly educated ‘public educators’ are not able to identify illiterate children in their midst and pass those illiterate children on to their equally highly educated ‘public educator’ colleagues who then pass these illiterate children on to a high school graduation ceremony?
Robert S any explanation on why union leadership supports the cause of illegal aliens when those same illegals not only make life very difficult for their own public educators working in the urban core but whose presence drains taxpayers dollars from potential public educator salaries and benes? Any explanation on why rank and file tolerate union leadership that works against their own best interest? Robert S the bloggers are not who you need to worry about.
Back in the day those who became teachers did so to make a difference in the world. All too often in today’s world those entering the ‘public educators’ sphere do so for the perks and not due to some greater calling.
Sad but true!
Scott,
Bob Walsh as with Ducky Crowley is a paid liar aka propagandist for the NEA. Tell us again why Walsh deserves credit for posting here? If anything Walsh coming here and responding is a compliment to the truthful and fact based heat and light Donald and the Anchor Risisng team is producing on this and other subjects.
Thank you Robert S!
What I don’t understand is how these bloggers find the time to write these long diatribes if they are so busy working and lack all this free time they claim teachers have.
In response to John’s statement of, “When you can’t attack an argument’s logic or the facts upon which it is based, go ad hominem. Pretty revealing strategy there, my friend…”
Actually it is… I have included a definition of “satire” from American Heritage Dictionary (note that I actually cite my sources as opposed to stating a diatribe of non-referenced information)
satire (n.)
Irony, sarcasm, or caustic wit used to attack or expose folly, vice, or stupidity.
Need I say more…
To the extent that I deserve “credit” for posting here, it is because I have learned to mostly ignore folks like Tim and actually take the time to listen to, learn from, and discuss issues with a group of people who disagree with me on quite a few issues, and with whom I share common ground on many others. If I had lived in the saem college dorm with many of the people here, I suspect we would have annoyed many people by arguing issues like these late into the night.
There is no doubt that my worldview is generally liberal, or progressive, or whatever the next one-word summary they come up with will be, and that I am pro-labor as well (I have been around long enough to recognize that progressive is not always pro-labor, and vice-versa, so I make the distinction that I am both). That said, my views are more nuanced and my background more extensive than a one-word summary can ever provide.
I sometimes find it amusing to see how my views are characterized by others here – but, that, too is important to know, as we are all aware of the relationship between perception and reality. For example, no one actually asked me what I personally thought about how the public sector negotiating process actually works. (Not very well is answer – for example, there is entirely too much “tradition” among both labor and management in too many communities that if you don’t wait until the last minute, you are not getting the best deal – and the timelines for requesting mediation, etc. are clearly no longer effective.)
Sorry I’m late to the party. Don, you are correct; but only to a point. Time was, people who took public sector jobs did so for the benefits & the job security, knowing that they would make less money than they would in the private sector. Now, they got the security, the benefits, AND they’re making a darn good salary. Surprised I’m agreeing? What you fail–or refuse–to realize is that the problem is that public sector wages have become unsupportable only because private sector wages have stagnated. I just wrote this on another thread; I’ve written it pretty much every time I’ve commented here. A man in his 30s today makes less than a man in his 30s did in the 1970s. (And please, please don’t make me explain the difference between real and nominal wages again.) So, you are correct. Teachers’ salaries are out of hand. And teachers are insulated from the real world. But, so, it seems, are you. You harp on teachers, without ever acknowledging the context that makes this true. What has changed since the 70s? The prevalence of supply-side econ theory, and tax cuts for the ultra-wealthy. Those are what have driven teachers’ salaries to the point they’re at. Raise taxes back to Reagan-era levels, re-distribute that money to states & municipalities, distribute some of those record corporate profits in the form of salary increases, and then a 4% teacher’s raise won’t seem like highway robbery. And, it would be different if I felt that the people railing against the teachers were concerned about education. They’re not. For them, it’s the money. What does neo-classical econ theory say will happen when you drive the price of labor down? You get fewer applicants, and of lower quality. Do you disagree with that? Is that what you… Read more »
>>It seems to me that this entire predicament could be resolved if all the bloggers on this site left their jobs to become public educators.
Robert S-
Yes, there is much to be said for “walking a mile in the other person’s shoes.”
So how about a little “job sharing” – I’ll switch places with you, and vice versa.
I propose that I perform your job next June, July and August, and you mine.
If it works out, we can repeat the process every year.
How’s about it?
Don, To quote an earlier post of yours “They need to start living like the rest of us, the people who pay their salaries and benefits.” In response to that, I recently found this out from an EG teacher. They (EG Teachers) do not receive FICA taxes as part of their employment at EG (verified through examination of pay stub). According to this EG teacher, EG is one of three school districts in Rhode Island that still does not get FICA taxes (unverified, if you can disprove please disprove). If we are going to say that “They need to start living like the rest of us, the people who pay their salaries and benefits.” Shouldn’t we also say that they should get FICA taxes like we do? I hope we are both in agreement with that statement. Now to that end we should take away their pension (a now rare form of EE retirement plan) and put them into a 403(b) with a defined contribution of 3% of their annual salary, which many school systems seem to have adopted across the country. 3% only seems fair since in the real world most of us get some kind of employer match or profit sharing that should work out to around 3%-5% of compensation. As for the teachers pay I think we can all agree the 2.5% raise offered by the school committee is acceptable since it exceeds the current inflation rate of approximately 2.3%. So now we have the teachers in the “real world.” The current pension rate that EG pays into the pension system is 8.72% per the Employees’ Retirement System of Rhode Island per the latest annual report (for FY05, the EG Teachers are the only workers from EG part of this statewide pension plan) located at their website… Read more »
FICA is:
“An acronym for Federal Insurance Contributions Act. FICA taxes are deducted from the pay of most American workers to support Social Security programs.”
Teachers, of course, do not receive social security and, therefore, are not obliged to contribute to it. This is all the more reason they should be concerned that their pensions are being endangered by the General Assembly’s misguided spending priorities – more specifically, very generous social programs.
You bring up an important point, EG Observer. Because while you did not know what FICA is and did not understand the implication that teachers do not contribute to it, the unions which represent the teachers certainly do. And the studious lack of concern about this critical matter by the well informed union leadership which supposedly has its members’ best interest at heart and is well paid to act on behalf of those interests is, to say no more, puzzling and irresponsible.
http://www.answers.com/topic/fica?cat=biz-fin
Susan D,
I do know what FICA is, and I have verified that Warwick teachers receive it.
Obvoiuosly, you do not know that your employer by law matches the 7.62% in FICA taxes that are deducted from your paycheck.
Ask someone who is self employed and files a Schedule C, they pay a SECA (Self-Employment Contributions Act) rate of 15.3%, double what you pay since their is no employer to match their contribution.
Also Susan please note if you scrolled down on your own link you would have came across this definition:
The noun FICA has one meaning:
Meaning #1: a tax on employees and EMPLOYERS that is used to fund the Social Security system
“EG is one of three school districts in Rhode Island that still does not get FICA taxes”
“I do know what FICA is, and I have verified that Warwick teachers receive it.”
It’s probably dangerous to continue this discussion because my possession of only basic information about FICA is matched by your citation of unverified facts. But let’s try.
The one thing we agree on is that FICA is a tax, or contribution, paid by the employee and matched by another tax/contribution by the employer. And that this tax, or contribution, goes towards social security.
Now, when you say Warwick teachers “receive” a FICA tax (if they do, which is not established), you must mean that Warwick is making the employer matching FICA contribution on their behalf. Does this mean that Warwick teachers are also paying a FICA tax/contribution?
And are you further saying that EG teachers are paying the FICA tax/contribution (you saw the pay stub) but the town is not making the employer matching contribution?
My understanding – I stand ready to be corrected on anything that follows by someone who knows for sure and can cite sources of data – is that approximately one-half of the school districts in RI are in the Social Security system; I’m not sure what percentage of RI teachers are in (it would depend upon the mix of large districts in SS). NEARI often cites the non-availability of Social Security as justification for the pension (i.e., “it’s the only retirement teachers have”). NEARI also cites the roughly 10% that teachers “contribute” toward the pension. I’d gladly trade with those teachers, thank you very much: 1) A vested pension benefit cannot be reduced, whereas the U.S. Supreme Court has held that Congress can reduce or eliminate Social Security benefits at any time, without regard to the “contributions” that the workers has made over the decades (the case is “Fleming v. Nestor” for anyone who doesn’t believe me and wants to look it up). BTW, that case goes back to the Kennedy administration – and note how in the succeeding decades the Democrat “protectors of seniors” have done nothing to change the Social Security law to provide “vesting” for workers. The demographic numbers – plus the mythical “Social Security Trust Fund” which is just a myth, thanks to Congress’ of both parties emptying and spending the money – make reductions in Social Security benefits inevitable (watch for the euphemism “means testing”). Any “baby boomer” (and those behind them) who isn’t prepared for their Social Security “benefits” to be greatly reduced, if not forfeited, is situating themselves like an Ostrich with its head buried deep into one of Rhode Island’s potholes – they won’t see it coming, but the painful collision is only a matter of time. 2) The teacher pension contribution… Read more »
Wow – lots of misinformation on the retirement issues. First, Social Security and pensions are entirely different systems created for entirely different purposes. There was never an expectation that social security become the American pension system – in fact, the benefits are weighted fairly heavily in favor of low income workers (and accidentally favor high income, short duration workers). About half the teachers in the state, comprising a majority of the school districts, are not in social security, a condition that also exists community by community in two other states and entirely in about 15 others. The employee contribution to social security is 6.2% of the first $97,000 or so of salary, indexed upward every year, and the employer contributes the same amount. Medicare, not available to teachers in those districts employed before 1987 (and madatory for everyone since then), requires a 1.45% contribution from both sides, with no income cap. Tom W. is partailly incorrect about “loading” on pensions – sick days, etc. are not counted in the teacher retirement system towards final average salary, only actual work. A simple mathematical analysis (break out the spreadsheets, Don, and test this out, becaseu no one will beleive me!) of a starting teacher in the new pension system, where benefits maximize at 75% of highest three years of salary at age 59 after 38 years of service, will show that the teachers own contributions of 9.5% of salary, invested at the pension system’s average rate of return, cover the costs of that teacher’s pension. While our country would be a lot better off if every employee had a similar arrangement, I don’t represent everybody (yet!). And yes, Tow W., there was a lot of messing around with the pension system before my time at NEARI – in fact, when I ran… Read more »
>>First, Social Security and pensions are entirely different systems created for entirely different purposes. There was never an expectation that social security become the American pension system – in fact, the benefits are weighted fairly heavily in favor of low income workers (and accidentally favor high income, short duration workers). Well Bob, I’m glad that as a “progressive” you’re at least tacitly admitting that Social Security is really a welfare program – I wish that the Democratic Party was as honest, as for decades now it has been promoting the misconception that it is a retirement program, and allowing millions of seniors to operate under the misapprehension that their “benefits” are merely the return of the “contributions” they made during their working years. >>About half the teachers in the state, comprising a majority of the school districts, are not in social security, a condition that also exists community by community in two other states and entirely in about 15 others. The employee contribution to social security is 6.2% of the first $97,000 or so of salary, indexed upward every year, and the employer contributes the same amount. Medicare, not available to teachers in those districts employed before 1987 (and madatory for everyone since then), requires a 1.45% contribution from both sides, with no income cap. Oh, those lucky teachers in the districts which had the foresight to opt-out (I believe that they were given an opportunity in the 1970’s to either opt-in or opt-out of Social Security). >>Tom W. is partailly incorrect about “loading” on pensions – sick days, etc. are not counted in the teacher retirement system towards final average salary, only actual work. A simple mathematical analysis (break out the spreadsheets, Don, and test this out, becaseu no one will beleive me!) of a starting teacher in the… Read more »
Tom W, I do call them as I see them – it is scary that so many people think that Social Security is a stand alone retirement system. Well, under the old expectations when the “typical” case was someone starting teaching and staying in that career only, not being in social security probably makes more sense (but virtually no one is disciplined enough to save the funds that would otherwise be contributed, and for the pre-1987 folks, no Medicare was a big problem.) But with so many mid-career folks looking at teaching, and with much greater mobility between districts and states, the weird quirk in federal law that offsets social security and survivor benefits otherwise earned from those retiring from government systems not in Social Security has become a growing problem. (A teacher in a social security district and having earned 40 quarters of service will see that benefit virtually erased if they take a job and retire from a non-social security district, same problem for a career change to teaching – if you go to a non-social security district, lose up to 2/3 of your social security – hits the military folks particularly hard.) – Assume the same 8.25% annual average return that the retirement system does (and has achieved). Under the old system, if employees started working at a very early age (more state employees than teachers) and retired as early as possible, the numbers don’t work, but even then the supplemental contribution needed was not great. While many people question whether the system needs to be fully funded or if it is OK to keep reamortizing it, I am a full funding advocate although I understand the other arguments. That said, the unfunded liability is so huge mostly because of political decisions (demographics such as increasing lifespans… Read more »
Bob – In what can only be described as a minor miracle, it appears that there may be some things about which we actually agree. The General Assembly – as politicians are wont to do – is guilty of short-term thinking and political expediency, most notably for present purposes playing games with the pension system. The same has been true with their quick fixes over recent years, such as spending the tobacco money by selling the future annuity stream at a discount (would not it have been better had they left it intact and funneled the proceeds straight into the state pension system)? On the one hand, the rank-and-file employees of the state and municipal governments are innocent parties in all of this. On the other hand they aren’t. Due to unionization and their status as a collective, we must treat them as a collective. In turn, the collective’s leadership wields great influence, if not control over the decision-making at the General Assembly. to borrow a phrase from the law of equity, the union leadership and its members don’t exactly come to the table with “clean hands” regarding the budgetary antics at the General Assembly. As you’ve gleaned from my prior postings, my opinion is that the pension system should be frozen and state and local employees converted to a 401(k) type plan (if memory serves, the counterpart in the public sector is a 403B plan). The older employees would still get attention based on their vesting to date, as with the younger employees who would still have time as well to accumulate assets in their 403B. As you also know, I am a proponent of banishing the teachers unions from Rhode Island. It is safe to say that you oppose both of those concepts. But let’s say that for… Read more »
Indeed, much common ground – Gary Sasse (from RIPEC) has joked that I am the only other fiscal conservative left in Rhode Island. Don’t misunderstand, I still want to spend much more government money than folks here are comfortable with – I just want to know where it is coming from first.
One time revenue sources should either go to the unfunded pension liability or to reduce bonded indebtedness, whichever makes the most economic sense at the time. This was one of the unanimous recommendations of the Governor’s pension study committee a few years ago, and never acted upon.
I’d be pelased if the law required us to stick with the amortization schedule in place with no further tinkering – although it has about 23 years left to full funding, at least the goal would be in sight.
Bob, 1. Give me two more numbers (actually functions) to start: The schedule of salary increases, over the course of a career The cost-of-living increase in pension payments, post-retirement …and I’ll put together a simulation and post the results. I’ll then invite people to submit numbers for their town and state pensions, and we’ll see what kind of shape we are in going forward. 1A. I’ve tinkered with some simple pension numbers in the past, and the results based on some of the current Rhode Island numbers I’ve been able to find seem largely sustainable, mainly because it’s usually not a whopping large percentage of salary that gets paid out for shorter career lengths. The problem comes, as I believe you have pointed out before (and correct me if I’m wrong [which I’m sure you will]) with plans that try to pay out a high-percentage of salary, after say a 20-year career, and expect to be solvent for 25 years after retirement. (And yes, that does present a special problem for people in physically demanding jobs like firefighting, but at some point the system won’t be there for anyone, if it needs to pay out more than it takes in). 2. You don’t need a defined pension plan to get everyone an average market rate of return on investment on 9.5% of their salary over their career; you can get the same result by offering everyone a 401(k) (or by using some of the even more radical proposals out there to drastically reduce or eliminate taxation on savings). The additional advantages that come from a defined-benefit pension over a 401(k) is the free insurance effect not present in a 401(k), i.e. if a market rate of return doesn’t generate the promised benefits, then it is assumed that the plan can… Read more »
>>Couldn’t some really smart finance guys come up with a mechanism to create an insurance effect for a 401(k) type system? For example, people would have the option of buying into a fund that, in really good years, put a certain percentage of its return would go into an insurance fund that would be used to help bolster funds that weren’t having such good years. This way, people would still legally own their own money, moving it beyond the possibility of governmental games? Andrew – Great question! After several years of contemplating Social Security (contemplation driven by the fact that I’m one of the people getting screwed by the system, i.e., I’ll never get back what I put in, much less the opportunity cost of what I could have made had I been allowed to invest my Social Security contributions in an IRA type account) I believe that I’ve developed an idea which would be a win-win for all concerned. Though my libertarian leanings make me uncomfortable with any coercive government program, such as forced individual savings, that train has left the station. On the other hand I recognize that human nature being what it is, most people when left to their own devices, will not save for retirement. As a conservative, I very much believe in so-called privatization of accounts, for a whole host of reasons including the fact that in the end one can’t have true human dignity if one is dependent upon a government program (e.g., that monthly Social Security check). Of course Democrats vehemently oppose privatization, and want to keep Social Security as it is, which is really a welfare program disguised as a retirement program (in this welfare program eligibility is more determined by age than by income). Hybrid proposals have been floated in which… Read more »
Probably the best figures to use are from Don’s spreadsheet, so you get the effect of the steps for the first 10 years (remembering to additionally increase them by, say 3% each year, and then to inflate the top step annually by a similar amount each year. The COLA’s are CPI capped at 3% starting 3 years after retirement – use the full 3% to see the “worst” (or best, depending on perspective) case scenario. (Under the old system, they were a straight 3% starting the January of the third year after retirement, which ususally meant 2 1/2 years for teachers.) The five reasons that come to mind for pension plans over 401 (k) type systems are 1) employer benefits from return generated on fully funded plan, eventually lowering employer contributions for similar or better benefit; 2) pension plans usually contain a disability component, which would otherwise have to be purchased or negotiated separately; 3) pension plans smooth out market flucuations to increase probabilty of getting desired rate of return over time (versus individual investors chance of getting same) and allow immediate diversifacation of investments, which are hard for an individual to get (lower fees, too); 4) employer and employee have more predictability in retirement timing; and 5) the unpredictability of prevailing interest rates impacting retirement decisions is not a factor. Number 5 needs further explanation – most folks want predictable income to make the retirement decision, which ultimately means buying an annuity with all or part of the 401 (k) savings, the returns on which are impacted greatly by prevailing interest rates, so in an unfavorable interest rate environment, all those saving could be worth a lot less. One way around this is to structure 401 (k)’s to allow annuity purchases over time to smooth the interest rate impact,… Read more »
The option of investing in an annuity via periodic 401k investments are starting to appear, which takes care of the interest rate at time of purchase issue.
The problem with pensions is that given today’s employee mobility within the private sector (hopefully coming to the public sector), employees aren’t with a company for their working career, or even often enough to vest.
Also, companies go bankrupt, and their pensions defunct. Yes, there is PBGC, but its protection is limited (just ask all the airline pilots whose pensions are now just a fraction of what they anticipated).
Better that the employee own the money. Index funds and “life stage” combo funds more than adequately resolve the issue of employees’ lack of knowledge of investing.
As for expenses, Vanguard index funds run about a .3% expense ratio. Peanuts.