By: Todd Smekens
Muncie, Indiana – The state’s “Fact-Finder” chose the Last Best Offer (LBO) submitted by the Muncie Teachers Association in a 30-page ruling opening the door for an appeal by Muncie Community Schools (MCS). Within hours, a press release came from MCS informing the public that it will most likely appeal the state’s decision as opposed to closing four elementary and one middle school. The ruling is attached below for your review.
MCS has thirty days to appeal the ruling, so it’s likely this process will linger on until late Spring. Therefore, it’s extremely difficult to reach sound conclusions. The fact-finder (FF) on several occasions was extremely critical of the findings made by MCS or felt like the financial evidence didn’t support the testimony made by Superintendent Baule during the LBO process. As I’ve mentioned before, this is consistent with having multiple CFOs in the last three years, with the last CFO lasting only three months. He was employed during the LBO process but resigned before the testimony. The inconsistent or lack of financial evidence was an obvious theme throughout the FF’s results.
A couple of areas did stand out to me. For one, the fact-finder discussed the health benefits for teachers which are the second largest expense besides payroll. In the report, the FF states:
The Fact Finder acknowledges the trend for employers providing health insurance coverage to encourage rational and cost-effective decision making by all employees relating to health care through the use of high-deductible insurance plans combined with health insurance savings plans. The current teacher health insurance plan, as described in the FY 2007 – 2014 CBA does not appear to be consistent with this trend.
As I noted in my previous article, the decisions made prior to hiring Steven Baule as superintendent, don’t reconcile with fiscal realities. The previous board and administration should have been shifting the teachers toward market-based insurance plans where teachers made larger contributions toward health plans, higher deductibles with health savings plans. As the ruling noted, and Dr. Baule reiterated in his press release, the problems impacting MCS have been a decade in the making.
The FF further writes:
While the present health insurance plan provided to teachers may be in need of adjustment to improve the stability of MCS’s financial health, the Fact Finder is cognizant that significant increases in health care costs combined with significant reductions in income compounds the potential hardship faced by teachers.
Again, because MTA was able to bargain for better than market health benefits, the school district has suffered financially, or taxpayers have been paying too much for wages and health benefits. The lucrative benefits package further supports my conclusion that MTA had undue influence on the school board and within school administration. Those “bargaining” on behalf of MCS failed the community by not responding to market conditions. This behavior is not sustainable.
Another area I find concerning is the FF ignores why MCS used designated funds, including the $10 million general obligation bond, to pay the higher wages and above market benefits. Several teachers union members were critical of my previous article, saying the role of the union is to bargain effectively for teachers. This is true, but it also assumes a strong bargaining effort was made by the previous boards and administrations. As I concluded and was partially found by the state’s FF, before 2015, there doesn’t appear to be a strong bargaining effort made by MCS. Quite the opposite.
MCS was recommending retroactive cuts to compensate (pay-back) the school district for these above market rates due to the union stalling contract negotiations since 2015. The FF said this about the proposal and testimony of Baule:
MCS has offered no description of the withholding plan to be implemented to recover overpayments of salaries and salary related fringe benefits from the teachers. Upon questioning by the Fact Finder, Baule testified that the repayment plan would not result in a teacher working without receiving any compensation, however, Baule provided no elaboration. The Fact Finder observed Baule’s demeanor and the content of his testimony regarding this issue to be tentative and unconvincing.
The FF was unable to follow the school district’s rationale for recouping the $10 million bond proceeds as soon as possible. For one, they need to make repairs and perform maintenance on existing buildings, but the money went to cover wages and health benefits. The district has until 2018 to put the $10 million back into the designated fund or risk dire consequences with bond holders. Despite the consequences spelled out for the FF, she responds:
Without a doubt MCS is facing significant consequences for past mishandling of financial resources. The Fact Finder clearly understands MCS’s interest in improving its financial situation and building a small surplus for emergencies as quickly as possible. However, it is imprudent for MCS to act in such an aggressive manner to effect its financial recovery.
I’m not sure I can agree with this statement. It may be more “imprudent” not to respond aggressively. There was clearly a disagreement between MCS, MTA, and state FF about the district being in “deficit-spending.” The mere fact designated funds were used to meet payroll, health benefits and vendor obligations would be an indication there is MUCH deficit-spending. For some reason, MCS could not communicate this convincingly enough to the FF because she ruled for MTA.
Upon release of FF’s ruling, MCS and Dr. Baule issued a press release saying the school board may appeal the decision. Dr. Baule states:
…MCS will have to investigate all other ways to reduce costs. Simply to make up the projected increased costs of the teachers’ insurance plan, we will need to cut nearly $2 million. This is about the amount saved by closing four elementary schools and a middle school. However, MCS must live within its means; all other MCS staff members have already seen reductions in either compensation and/or insurance benefits. MCS regrets having to make additional cuts and close schools, but the fiscal realities make this necessary in order to remain viable.
Don’t expect firm resolution on this matter until late May or even beyond the end of the school year.