Saturday, February 28, 2009

Quid Pro QEO

As we get closer to post-QEO life, school finance and the QEO are hot political topics. We've talked about the QEO in generic terms, but the devil is always in the details. How does the QEO work (or not)? That's the question we hear a great deal. A good beginning to such a discussion, is an informal comment from board member Terry Shimek, who said, "The fate of the QEO is really a non-issue for Sun Prairie because we [the board] have never issued a QEO-based offer."

Mr. Shimek is correct. Since the QEO was established, Sun Prairie educators have not had to come face to face with what the QEO means. Some people see the QEO as simply a means to cut or rigidly control the rising cost of salaries an benefits. Can it do that? Sure. But the QEO is merely a tool, not a panacea. And issuing a QEO-based offer has far reaching long-term ramifications.

To better understand the QEO, we have to first look at the rules behind it (that are not simple, by any means). Then we need to look at an example. First off, why have the QEO? The answer was stem the rising costs of salaries and benefits that were occurring in the late 80's and early 90's. According to the Wisconsin Association of School Boards, average annual raises for teachers dropped from 6.5% for salaries and fringe benefits in 1991-1992 to 3.6% for 1996-1997. The Wisconsin Education Council claims that since the QEO was first applied in 1993, salary increases have averaged just 1.6% per year. ( The QEO is/was a means to basically make the infamous offer that could not be refused. Making a QEO offer eliminated the threat/concern of going to binding arbitration. Under law, if the two sides can not reach agreement on a contract, negotiations go to binding arbitration. Binding arbitration is scary for both sides because the two sides basically turn in their final offers and an independent arbitrator decides which one is "it". (S)he who hath brought forth the fairest proposal wins. That, mes ami, is a high stakes game of chicken.

Once again, fair warning, we're providing a stripped down approach to facilitate understanding.

So...what are the rules of the QEO?
1. Fringe benefits and contribution percentages must be maintained.
The district must maintain both the existing employee fringe benefits package and the district's percentage contribution effort to that package. So...benefits cannot be reduced, and if the district is trying to increase the percentage of employee contributions to things like health care, then the QEO is NOT an option.

2. The typical "step" increases that result from another year of teaching experience must be funded, to the extent possible based on the rules below. Sun Prairie includes step progressions of 3.0%, 3.3%, or 3.6% increases, depending on whether a teacher is in the "Bachelors", "Masters", or "PhD" lane of the funding highway.

3. The 3.8% rule. For a QEO offer to be valid, step one is that the offer must result in a 3.8% increase to the "total package" (the total cost of salaries + fringe benefits). A QEO offer has two components, the fringe benefit component, and the salary component. Fringe benefits must be increased at least 1.7% and salaries must increase at least 2.1%.

4. The 1.7% rule: fringe benefits. The district must provide for a benefit package increase which is at least 1.7% of the "total package". If the cost of maintaining current fringe benefit package is LESS than 1.7%, then the "savings" must be reflected in an increase to the salary portion of the offer. The 3.8% must always be maintained. So....switching to a different health care provider may make sense logically, but the district doesn't really save any money, as the savings are passed on to the other component of the QEO offer. For example, if switching health are providers actually results in a net 1% decrease in the cost of fringe benefits as a %age of the total package, then the salary component of a QEO offer would have to be 4.8% (-1.0% + 4.8% = 3.8%).

Conversely, if the cost of maintaining fringe benefits rises above 1.7% of the total package, then the salary portion begins to be gnawed away. If increasing health care costs mean that the cost of maintaining fringe benefits results in an increase of 2.5% to the total package, then the required salary increase component drops to 1.3%. Maintaining fringe benefits always comes first.

In a worst case scenario, if the cost of maintaining fringes exceeds the magic 3.8% mark, then the law allows the district to adjust the salary "grid" --for a 12-month period--to reflect a salary reduction for teachers. The amount of the reduction would be the amount necessary to offset the fringe benefit cost increase in excess of 3.8%. Just as those teachers with more tenure and in the higher "lanes" earn progressively more in salary, they stand to lose more (dollar-wise) in this worst-case scenario.

5. The 2.1% rule: salaries. This rule is to a large extent governed by the fringe benefit rule as outlined above. Barring an huge increase related to the cost of maintaining fringe benefits, the salary component of a QEO offer must reflect at least a 2.1% increase to the "total package". If the 2.1% cannot be offered due to fringe increases, then the first priority defaults to funding the annual step increases according to the rules established by the existing contract.

6. Pay the step increases, then provide "raises". If there is insufficient salary funding generated under the QEO to provide a full single step increase for each eligible employee, the amount of the required step increase must be prorated. The salary funds generated under the QEO that remain once the employer has provided for all step costs must then be used to fund general salary increases for all eligible employees in the bargaining unit.

7. The QEO means status quo; no lane reductions, no cutting steps . The salary range structure, number of steps, requirements for attaining a step, or assignment of a position to a salary range may not be modified unilaterally under a QEO. However, a school district employer and its represented professional employees may, by mutual agreement, decide to alter the existing salary range structure, number of steps, requirements for attaining a step, or the assignment of a position to a salary range. So, basically, if you want to change the grid, the QEO is not an option.

8. No penalty for changing lanes. Since July 1, 2001, the costs associated with any salary increases to eligible employees due to a promotion or the attaining of additional professional qualifications (generally referred to as "lane" progression) are no longer included under the salary component that must be funded within the QEO. As a result, any such amounts represent additional costs to the employer that are funded outside the QEO. This means that any teacher that has attained the necessary credits or degree to "change lanes" within a salary grid must be provided with the additional compensation associated with that move, and the cost of funding that increase is NOT a part of the QEO offer. That remains additional cost born by the district (and taxpayers).

In reality, most school districts do not stay within the QEO, agreeing to settlements in excess of the 3.8 percent limit. The WASB (Wisconsin Association of School Boards)reports that the average total package of salaries and benefits was 4.29% during 2006-07, 4.25% during 2005-06, and 4.31% during 2004-05. The percentages are higher than the rate of inflation, and more than likely are greater than increases provided in the private sector. ( )