Download Sustainability Analysis

Sustainability Analysis
Proposed Collective Bargaining Agreement
between DCPS and the Washington Teachers’
Union and Proposed Pay for Performance System
Aprilil 9,
9 20
2010
0
T HE PARTHENON G ROUP
Boston • London • Mumbai • San Francisco
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ti experience
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2
Background for Parthenon’s
Parthenon s Work
T HE P ARTHENON G ROUP
 Parthenon was engaged to work with DCPS in estimating the cost of the new WTU
contract. As covered in this document,, these estimates cover two areas:
– Costs related to the CBA: these costs are driven by the number of teachers in the system, the years
of service of the teaching force, and the raises and other compensation agreed upon in the contract
– Costs related to a potential pay-for-performance system: these costs are based on a potential
structure proposed by DCPS, and are driven by bonus levels, teacher effectiveness ratings, and
participation rates in the performance system
 Parthenon did not conduct any analysis of the sources of funding available to DCPS
to support the contract. All information in this document concerning sources of
f di – both
funding
b th public
bli and
d private
i t funding
f di
– was supplied
li d to
t Parthenon
P th
by
b DCPS
– Budgeted revenues for DCPS were confirmed by DCPS for FY10. This presentation assumes no
increase or decrease to the FY10 budgeted revenues through FY15
– Federal and private sources of funding are based on numbers supplied by DCPS
 On the basis of prior work conducted nationally and in other districts, Parthenon
also identified for DCPS a few areas where financial savings may be possible
– These represent areas that DCPS could explore to support the sustainability of the contract beyond
FY13 The
FY13.
Th specific
ifi llevell off savings
i
available
il bl tto DCPS may vary ffrom external
t
lb
benchmarks.
h
k
3
Contents of this Presentation
T HE P ARTHENON G ROUP
 Cost of WTU Compensation Under the Pre-Existing Collective Bargaining Agreement
((“CBA”))
 Overview of the Cost of the Proposed DCPS-WTU CBA
 Year-by-Year Cost of CBA (FY10-FY12) and Costs after Contract Expiration
(FY13-FY15)
 Sources of Funding for All CBA Costs FY10-FY15
 Proposed Pay for Performance System: Costs FY10-FY15
 Sources of Funding for Proposed Pay for Performance System FY10-FY15
 Sustaining the CBA and Pay for Performance Beyond the Proposed CBA (FY13FY15)
4
Current Cost of WTU Compensation
Under the Pre-Existing CBA
T HE P ARTHENON G ROUP
 Currently, DCPS Spends a Total of $345 Million on WTU
Members. This Consists of:
– $279 Million in Base Salaries
– $28 Million in “Other Compensation,” such as payments for summer
school
h l and
d other
th ““outt off school
h l titime””
– $38 Million in Benefits
5
Overview of the Cost of the Proposed
Collective Bargaining Agreement
T HE P ARTHENON G ROUP
 The cost of the p
proposed
p
CBA consists of three basic components:
p
– Raises of 21.6% compounded over five years (FY08 through FY12), including a
one-time payment in FY10 for retroactive salary increases for FY08 and FY09
• The contract covers the five years from FY08 to FY12,
FY12 with annual raises in
each year of 3% (FY08), 3% (FY09), 5% (FY10), 4% (FY11), and 5% (FY12)
– Additional contractual provisions that add to the cost, such as increases in dental
and optical benefits
benefits, increases in the funding teachers receive for classroom
instructional supplies, etc.
– Other factors that reduce the cost, such as assumed attrition and natural
demographic trends
 The cost of the proposed CBA does not include the costs of a Pay for
Performance System. The structure of a pay for performance system
is at the discretion of DCPS
DCPS, after first consulting with the WTU
6
Year-by-Year Cost of the CBA
(FY10 through FY15)
T HE P ARTHENON G ROUP
Although the CBA expires at the end of FY12
FY12, costs through FY15
are shown for informational purposes:
Additional Cost Because of the CBA (Above Current Spending):
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
$59 M
$46 M
$39 M
$27 M
$27 M
$27 M
Contract Expires
Implied Total Spending (Additional Cost plus Current Spending):
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
$404 M
$391 M
$384 M
$372 M
$372 M
$372 M
Contract Expires
Notes: FY10 costs include retroactive payments for FY08 and FY09. Numbers may not add due to rounding.
7
Sources of Funding for All CBA Costs
(FY10 Through FY15)
T HE P ARTHENON G ROUP
 Parthenon’s work focused on estimating the cost of the contract and did not analyze the sources
of funding available to support the costs
 All data for sources of funding was supplied to Parthenon by DCPS. The sources of funding in
the table below consist of three categories:
– “Budgeted,” which refers to the FY10 Budget for WTU salaries plus funds that were accrued to pay for retroactive
salaryy increases. No additional Cityy funds for WTU salaries are assumed through
g FY15.
– “Private,” which refers to funds raised by the DC Public Education Fund to support this CBA
– “Federal Payment,” which refers to direct appropriations from Congress to the District, usually to a specific agency
 Cost of CBA (From Previous Slide) and Sources of Funding
Estimated
Costs
(Parthenon)
Year
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
Cost
$404 M
$391 M
$384 M
$372 M
$372 M
$372 M
Sources of
Funding
(DCPS)
Budgeted
$397 M
$379 M
$379 M
$379 M
$379 M
$379 M
Private
$7 M
$8M
$6 M
$0
$0
$0
Federal
Payment
Surplus
(Deficit) *
$0M
$4 M
$0
$0
$0
$0
$0
$0
$0
$6 M
$6 M
$6 M
(*Surplus will assist funding Pay for Performance System)
Contract Expires
8
Proposed Pay for Performance System:
Costs for FY10 Through FY15
(Not Included in the Costs of the CBA)
T HE P ARTHENON G ROUP

Under the proposed CBA, DCPS would establish a Pay for Performance System. The exact structure of the
system as well as the amounts are in the discretion of DCPS after first consulting with the WTU.

Parthenon
P
th
worked
k d with
ith DCPS to
t estimate
ti t the
th costs
t associated
i t d with
ith a proposed
d Pay
P for
f Performance
P f
System
S t
through FY15. Under this system teachers would receive bonuses for “highly effective” performance as well
as base salary increases for sustaining high performance.

All data for sources of funding was supplied to Parthenon by DCPS. DCPS has assumed no further increase
in City funding through FY15 for WTU salaries
salaries.

Increases in Proposed Pay for Performance System and Sources of Funding
Year
Estimated
E
ti t d
Costs
(Parthenon)
Sources of
Funding
(DCPS)
Bonus
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
$10 M
$16 M
$19 M
$20 M
$20 M
$20 M
$3M
$5 M
$6M
$8M
Base
Total
$10 M
$16 M
$22 M
$25 M
$26 M
$28 M
Salary Line
$0 M
$0
$0
$6 M
$6 M
$6 M
Private
$10 M
$14 M
$11 M
$0
$0
$0
$2 M
$11 M
$17 M
$17 M
$17 M
$0
$0
($2 M)
($3 M)
($5 M)
Federal
Surplus
(Deficit)
$0
Contract Expires
9
Sustaining the CBA and Proposed Pay for
Performance System Beyond the Term of
the Contract (FY13 Through FY15)
T HE P ARTHENON G ROUP
 Based on the cost analysis conducted by Parthenon combined with the revenue data
supplied by DCPS,
DCPS the costs associated with the CBA itself are supported by available
revenues in FY13 through FY15. In supplying sources of funding data to Parthenon
for this analysis, DCPS assumed no further increase in its budgeted revenue for WTU
salaries beyond the FY10 level.
 Under the assumption of zero change to DCPS revenue, the proposed Pay for
Performance system does create a funding shortfall in FY13 through FY15. The table
below indicates the magnitude of that funding shortfall both in absolute dollars (data
from previous slide) and as a percentage of DCPS’
DCPS overall proposed budget for FY11.
FY11
Year
FY 2013
FY 2014
FY 2015
Pay for Performance Shortfall
($2 M)
($3 M)
($5 M)
Percent of DCPS Budget ($757 M)
0.26%
0.40%
0.66%
10
Sustainability Beyond the Contract
Scenario 1: Increase DCPS Revenues
T HE P ARTHENON G ROUP
 One option for addressing the funding shortfall beginning in FY13 would be if the economy
recovers to the point that DCPS’ revenue is increased (data on previous slides has
assumed zero change in DCPS
DCPS’ revenue vs
vs. the FY10 budget level)
 All data for DCPS sources of funding was supplied to Parthenon by DCPS. Based on that
data, the table below indicates the level of revenue increase that would be required to close
the g
gap,
p, expressed
p
in two ways:
y
– As a percent of DCPS’s total proposed FY11 budget of $757 M
– As a percent of the per pupil-based funding allocation that DCPS receives from the City Council
($392MM in FY10, or $8,770 per pupil)
Year
FY 2013
FY 2014
FY 2015
Pay for Performance Shortfall (Previous Slide)
($2 M)
($3 M)
($5 M)
Implied Percentage Increase in DCPS Total Budget to
Cover the Shortfall (Cumulative)
0 26%
0.26%
0 40%
0.40%
0 66%
0.66%
Implied Percentage Increase in Per Pupil Funding to
Cover the Shortfall ((Cumulative))
0.51%
0.77%
1.28%
$45 pp
$22 pp
$45 pp
• Year-over-Year Increase in Per Pupil Funding (in $)
11
Sustainability Beyond the Contract
Scenario 2: Potential Options for
Reallocating Current Spending
T HE P ARTHENON G ROUP
 To cover a funding shortfall in the Pay for Performance system, DCPS could also
seek to reallocate spending
p
g within its current budget,
g , through
g programmatic
p g
changes or other cost savings measures
 Based on work Parthenon has conducted nationally and with other urban districts,
g spending
g to achieve
some potential areas that DCPS could explore for reallocating
cost savings include:
– Reduction in Special Education Referral Rates. Over time, reducing SPED referrals through improved
early grades literacy instruction could yield savings of up to 3% of the a district’s overall budget
– Operational Efficiencies: Central Office Restructuring, Reduction in Administrative Overhead and
Transportation Savings. Savings can be between 1-2% of Overall Budget
4 5% of their budget on
– Restructuring Professional Development. Urban districts spend up to 4-5%
professional development. Opportunities to achieve savings here vary, but online PD delivery,
especially if developed internally, can yield ongoing cost savings
 In addition, DCPS estimates potential savings of up to 2% of the overall budget by
reducing SPED enrollments in non-public schools (lowering tuition and
transportation payments for this population)
12
Sustainability Beyond the Contract
Scenario 3: Option to Adjust Bonus
Structure
T HE P ARTHENON G ROUP
 Another way to cover a shortfall in the Pay for Performance System
would be to adjust the bonus structure, which DCPS has the discretion to
do under the CBA, after first consulting with the WTU
 Th
The ttable
bl b
below
l
iindicates
di t th
the percentage
t
reduction
d ti iin th
the b
bonus
payments that would be required to cover the estimated shortfall in FY
2013 through FY 2015
Year
FY 2013
FY 2014
FY 2015
Cost of Bonuses
$20 M
$20 M
$20 M
Shortfall
($2 M)
($3 M)
($5 M)
10%
15%
25%
Percent of Bonuses
13