Anatomy of a Teacher’s Contract: Blueprint for a Taxpayer Mugging

One More Reason Why Illinois Needs A “Fairness In Compensation Act.”

I recently received, via a Freedom of Information Act request, a copy of the most recent teachers’ contract with High School District 214 inArlington Heights,IL.  What I found was 67 pages of gifts for the teachers at the direct expense of the taxpayers. This document represents the definition of “special interests”.

As you review each of the following eight items ask yourself this simple question: is this element of compensation available anywhere in the private sector? My answer is “No”; this is political payback for $35 million in political contributions by the teachers unions.

Contract Salaries:

  1. For 2009, $48,062 (no experience) to $113,907 (18 years or more). See contract page 31.
  2. Plus additional amounts for non-classroom activities (see below).
  3. Increase each year by the CPI plus the normal step increase.
  4. If CPI is 3.5%/yr then average increase for 18 years will be about 8.5% per year not including at least three new contracts which will certainly drive the percentage increase even higher. If new contract increases average 3% every 5 years then average salary increase goes to 9.3% per year. Compare this with the average worker increase of 3.9% (including inflation) as calculated by Social Security.
  5. Average teacher salary 2009 is $90,112 or $10,000/month.
  6. Automatic salary increases of 6%/yr each of last 4 years before retirement.

Fringe benefits

  1. School district pays the teachers pension contribution of 9.4% or $8,500 for average teacher.
  2. Average family insurance paid for by district approx. $15,000.
  3. Four personal days off.
  4. Fourteen sick days to be taken or accrued for retirement (see below).
  5. Up to $300,000 Early Retirement Option payments (see below).

Average compensation: $113,612 or $12,600/mo ($90,112+$15,000+$8500).

Probable Compensation at age 40 (18 years after college graduation): $129,977 or $14,441/mo.

Other Payments: Co-Curricular Pay.

  1. Head coaches $10,400, Pom-pom $7,100, Chess Club $4,300 per year. See contract pages 35-39 for other examples.
  2. Ushers, timekeepers, scorers, etc. at sporting events – $ 74 (You thought they were volunteering didn’t you?)
  3. Summer school, $54/hr.
  4. All of the above payments accrue pension benefits too.

Teachers Work Schedule (see contract pages 17-19):

  1. Contract year: 185 days.
  2. Less 4 personal days and 14 sick days = 167 work days.
  3. Work day: 8 hrs including lunch (7 hrs and 10 minutes if you subtract lunch period)
  4. Work day = 480 minutes broken down as follows:
  • Five classes/student support = 300 minutes
  • Fifty (50) minute lunch or free period
  • Fifty (50) minutes “unassigned”
  • Eighty (80) minutes “other”

      5. Total hours worked per year = 1,197 (167 days times 7hrs and 10 minutes per day).

But as they say in the TV ads, “That’s not all folks.” As bad as the above examples are of unearned largesse, I have saved the two worst examples for last.

Buy Sick Days for $20 Each

UnderIllinoislaw, teachers may, at retirement, use up to 340 unused sick days as 2 years service credit i.e. it is just as if they worked those 2 years. Under this contract teachers can buy extra sick days for $20 each up to the maximum (see page 54 of contract). So for $3,400 a teacher could buy an extra year of “work” and receive about $3,000 in extra pension each year for the rest of their life. How does that compare to the return on your 401K?

And it leads to this perverse incentive: Why not take your sick days while you are working (while being compensated in excess of $100/hr) and then buy them back for $20 when you retire? That would only be rational.

School District Could Pay $300,000 or More to Allow Teachers Early Retirement

UnderIllinoislaw teachers may use ERO (Early Retirement Option) to retire early without penalty. The plan is very complicated but basically involves large lump sum payments from the school as well as the retiree to the Teachers Retirement System at the time of retirement. For example a teacher wanting to retire 5 years early would pay 57.5% of her highest salary and the school district (the taxpayer) 117.5% in order to retire penalty free.

Under this contract, page 53, the school district pays both the employer’s portion and the employee’s portion up to a maximum of 175% (57.5%+117.5%) of the teacher’s highest salary.

So lets do an example of a retiring teacher based upon this contract.

A 45 year-old teacher with 20 years experience making the contract maximum $113,907 decides she wants to retire in 10 years at age 55. Let’s further assume a very modest 3% per year salary growth for the next 6 years followed by the 6%/yr contractual increase for each of the last 4 years before retirement. This gets the salary up to $171,710. Per the above, the school district then makes a lump-sum payment to the TRS of $300,492 (175% times $171,710) to preserve her full retirement. That represents a $10,000/yr fringe benefit for the teacher amortized over her 30-year career. So total compensation for this teacher in her final year is $212,000  ($171k salary+$16k pension contribution+$15k insurance+$10,000 lump sum retirement payment). What ever happened to a gold watch?

If we calculate the hourly compensation for this example it comes out to $176/hr ($212,000/1200 hrs). This could be a drivers-ed teacher or an art teacher or a French teacher or a nurse. I think it is reasonable to say that this teacher’s hourly compensation is at least 300% more than someone in the private sector would make at age 55 with those same skill sets. Also note she is retiring after 30 years at age 55 instead of 40 years at age 65 for her peers in the private sector.

Her pension at age 55? More than $112,000/yr plus 3% per year COLA compounded.

Conclusion – We Need “Fairness in Compensation” Legislation

What justification is there for private sector workers to be forced to pay higher taxes so that their peers in the public sector can be compensated at levels 50%, 100% or even 300% more than their own compensation?

There is no rational or reasonable explanation; there is only a political one. Since public sector pay, fringe benefits and retirement benefits are determined by politicians only politicians can change them. It will take courageous politicians (an endangered species here inIllinois) to confront the most powerful special interest in the country: public sector workers and their unions. But it must be done. 

The purpose of a “Fairness in Compensation Act” would be to bring public employee total compensation into reasonable alignment with their peer groups in the private sector. In order to do this fairly we need to determine the value to the employee of each of the following compensation elements:

 

 

  • Salaries
  • Health, life, disability and dental insurance
  • Vacation days
  • Holidays
  • Work day/week
  • Sick leave policy
  • Retirement health care
  • Employee Pension contribution
  • Employer Pension contribution
  • Age at retirement
  • Job security provisions such as tenure.
  • Unemployment rates private vs. public
  • Promotion schedules and policy

 

Once this determination has been made then public workers who are considered to be under- compensated (there are not many that I have found) will be granted compensation allowances over some period of time to bring them up to par. On the other hand, public employees who are considered to be over-compensated will have a menu of compensation cuts over a period time to bring them into alignment with their peers in the private sector. Any employee unhappy with this plan is certainly welcome to find other employment.

In a time of budget crisis at every level of government, now is the time to begin this process. Since 80-85% of government operational expenses are employee compensation elements it can be shown that if “compensation fairness” had been implemented years ago there would be little or no budget crisis at this time. For example if Illinois public employees had been on Social Security plus 401K for the last 30 years there would be no $100 billion unfunded pension and retiree health care liability. What could be “fairer” than Social Security and 401K for ALL employees public and private?

Fairness in compensation: how can that possibly be unfair?

Sources:

  • IllinoisSchool Board – Teacher Service Records 2008-2009
  • IllinoisSchool Board – School Report Cards 2009
  • TownshipHighSchool District214 – “Cumulative Agreement 2009-2014″
  • Teachers Retirement System ofIllinoiswebsite

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