I happened to see the teachers picketing the school board the other night. They were out in force to make their point and to right what they perceive is an injustice. More power to them. I believe that Juneau is fortunate to have a lot of caring teachers and, incidentally, administrators and support staff, who work hard to give our kids a quality education. But there is a problem coming that teachers' desire for more money seems to be at odds with.
Because of poor market performance, bad actuarial assumptions and other causes, the twin retirement systems that most government employees in Alaska are participating in, PERS and TRS, are going to have to substantially increase the contributions that the school district makes on employees' behalf in fiscal 2005 (the year that begins on July 1, 2004). The increases will be from the current 12 percent of salary to 16 percent for teachers, who are in TRS, and from about 8 percent to about 13 percent for other employees, who participate in PERS. Calculate it out and this means that the district will have to pay about $1,150,000 more in benefits for district employees next fiscal year over the current fiscal year. This benefit increase doesn't even take into account likely increases in health insurance costs that are currently not known.
In addition, scheduled salary scale step increases for teachers and other district employees are projected at about $850,000 next year. On top of these two huge cost increases is the fact that the current budget (fiscal 2004) for the district is projected to use a little over $900,000 of the district's fund balance to balance the books this year. Guess what - that's pretty much the entire fund balance of the district. This means that the district won't be able to use fund balance again next year.
Add all this up and you get a budget hole of about $2,900,000 for fiscal 2005. Where's this going to come from? Additional CBJ contribution? Not likely - the Assembly already funds the district at the maximum amount allowed by state law (the "cap"). In fact, our Assembly is already using creative means to fund district activities outside of the cap where permitted by state law. Local taxes? Nope, due to legal equity issues - as local residents we are not even allowed to additionally tax ourselves to cover a district shortfall. The state Legislature? Possibly, but that would require the use of some permanent fund earnings, additional income or sales taxes or the like. So far, they've proven unwilling to use any of these means to increase revenue. And remember, they've got to balance the state budget before they increase the amount provided to school districts and other local governments.
Nope, this most likely means the district's financial hole will be filled by some combination of laying off a lot of teachers and other staff, cutting or eliminating programs, or even potentially more drastic measures like closing schools (certainly closing an elementary school would save some money?).
These are some tough issues, but the fact of the matter is, they are on the horizon. The current school board members as well as the successful board candidates are going to face these as they prepare next year's budget. I'm all for teacher's getting paid more on top of their step increases. Certainly they deserve to be paid well for their hard work. But I want to be sure that we don't have to lay off a bunch of teachers or take even more drastic measurers in the process, something the board is likely going to have to do anyway.
Max Mertz is a local CPA and the Juneau School District's auditor.