Sunday, March 1, 2009

QEO Reality: The Story of Bob & Carol & Ted & Alice

We figure Phil Frei will crucify us for our example, but we need an example to show how things work, and we need it to be uncomplicated. So we're going to create a fictional school district, Pine Stump Consolidated School District, or PSCSD. Pine stump has exactly 4 teachers. Let's stay simple and ignore administrators. Also, Pine Stump being a very simple district, there are no additional salaries associated with things like building leadership, curriculum committee, co-curriculars, or coaching. Yeah...we know...those things do exist and only complicate what's complex to begin with, but to see the QEO in play, we need to use the KISS principle (Keep It Simple, Stanley).

So that's it. Sunny Pine Stump has exactly 4 teachers, and we'll call them....oh...say Bob and Carol and Ted and Alice. Those are nice names.

Steps and Lanes and Moving Off the Grid
We first have to get a basic understanding of steps and lanes. The salary grid is composed of steps or downward cells in the grid. Each full "step" represents an additional year of teaching experience.

For Sun Prairie, a year of additional experience moves you one full step down the grid. This translates to a 3.0% increase in the Bachelor's lanes, a 3.3% increase in the Masters lanes, and a 3.6% increase if you fall in the PhD lane.

Lane movement occurs each time a teacher earns another 6 credits (or a new degree) beyond a bachelors. A change in lane represents an additional 1.9% increase (above base) for any changes in the Bachelors or Masters lanes. Moving into the PhD lane translates to an additional 2.25% increase above base.

Sound easy? OK...fine...but the grid only goes so far. What happens when you've attained enough tenure that you fall "off the grid"? Well, that's built into the contract as well. For teachers off the grid, an annual "step" increase is calculated as the greatest of (A) the last step on the grid, the last step on the grid + 3.62%, or a 3.62% increase to the existing salary.

The math behind the grid
We have to go back to high school math to figure out how to construct the grid.
Salary = Base salary x lane factor x step factor

Lane Factor
There are 12 lanes beyond the base, Bachelor+0 credits lane and the 13th lane is for PhD. Each lane other than the PhD earns a 1.9% increase above base; PhD adds 2.25% above that. So the math is 1.9% time the lane number you are in. a Bachelors + 12 credits is lane number 2 (beyond base). So the lane multiplier for a teacher with a BS + 12 credits is 3.8% or (1.9% x 2).
The lane multiplier for those who have earned a PhD is (1.9% x 12) + 2.25, or 25.05%. Thus a rookie teacher with a fresh PhD starts off at a salary 25.05% higher than that of someone starting off with a Bachelors only.

Step Factor
Calculating the step factor is a little harder because its multiplicative. The formula is simply the step increase amount raised to the power of the step number minus 1. So for a teacher on step 5 (4 years of experience) of the grid in the Bachelors lanes, the step increase is 3.3% raised to the power of 4 (or 3.3% x 3.3% x 3.3% x 3.3% ). We use "n-1" here (or 4, rather than 5) because the grid actually starts at step 1.

Putting it all together, lane+ step factors. put it all together, calculating any particular grid cell salary is done by multiplying the Base Salary times the Base Adjustment Factor. The Base Adjustment Factor is calculated as the Lane Factor times the Step Factor.

Example time
Ok , let's start with the basics. The salary and benefit picture for Pine Stump is as follows:

Total salary..........$ 176,598
Fringe ...............$ 82,295 (46.6% of salary)
Total salary+Fringe...$ 258,893

Pine stump employs 4 teachers, as we've said: Bob, Carol, Ted, and Alice. Their years of experience and current salaries are as follows:

Name Years exp. STEP LANE 2008-09 Salary
Bob........0 (new)...1.....B.......$ 29,706
Carol.....10........10....M6.......$ 45,079
Ted.......12........12....PhD......$ 54,813$ 47,000

We're going to assume no lane changes here. The two key benchmarks to consider are:
3.8% of the total package ($258,893) mounts to $9,838
1.7% of the total package is $4,401

Let's assume that there's a very small increase in the cost of maintaining the fringe benefit package. Let's say that the cost of the fringes rises 2.5% above last year, or $2,057. Remember, however, that the QEO requires fringes to be relative to the TOTAL package. In this case, $2,057 represents only a 0.8% increase to the total package. As we've learned, anything under a 1.7% increase in fringes must be made up in terms of an equivalent increase on the salary side of the equation. That means, to arrive at an offer that represents a 3.8% increase to the TOTAL package, salaries must be increased by a dollar amount equal to 3.0% of the TOTAL PACKAGE. This is NOT the same as a 3.0% increase in salary. In fact, it is more than a 3.0% increase. We'll see.

So we know that a valid QEO must consist of an increase in $9,838 over last year. $2,057 of that will come from the additional fringe costs. That means that the remainder of $7,781 must come as adjustments to salaries.

First, we have to cover routine step increases. Normal step increases are as follows:
Bob: $891, Carol: $1,488, Ted: $ 1,973 and Alice: $ 1,701 for a total cost of $6,053. Adding in the additional fringe cost ($2,057), we need to raise salaries by a total dollar amount of $1,728 in order to come up with a valid QEO offer. How we do that dollar adjustment is open to options, but typically it is done by adjusting the "base" salary factor on the grid.

Here's where the district staff really earn their salaries. Basically they would have to calculate the Base Adjustment Factor for every teacher in the district. Then they would divide the total dollars needed to for a valid QEO by the sum of those factors to determine how the base salary must be adjusted. Of course, we have it easy...we have only 4 teachers.

Bob's Base Adjustment Factor is 1.030 [Lane Factor =1.0, Step Factor = 1.03. 1 x 1.03 = 1.03]
Carol's Base Adjustment Factor is 1.568 [Lane Factor =1.133, Step Factor = 1.384. 1.133 x 1.1384 = 1.568]
Ted's Base Adjustment Factor is 1.912 [Lane Factor =1.2505, Step Factor = 1.529. 1.2505 x 1.529 = 1.912]
Alice's Base Adjustment Factor is 1.0362 [Because Alice is off the grid, we just use the base raise in the contract. ]

So the Total Base Adjustment Factor for the district is 5.546 (1.030 + 1.568 + 1.912 + 1.0362].
The total number of salary INCREASE dollars (above steps) needed for the QEO is $1,728. We divide that number by the 5.546 and we come up with a figure of $311. That is the amount by which the base on the salary grid needs to be raised in order to properly distribute the salary dollars.

This results in the following new salaries for the upcoming year:

Teacher new salary raise% $ raise new $$
------- ------------ ------ ------- ------
Bob ....$ 30,918......4.08%.....$ 1,212..$ 320
Carol...$ 47,054......4.38%.....$ 1,975..$ 488
Ted.....$ 57,381......4.69%.....$ 2,568..$ 595
Alice...$ 49,024......4.31%.....$ 2,024..$ 322

...for an average salary increase across the district of 4.37%

The total package increase for a valid QEO was $9,838. The fringe benefits portion of this increase was $2,057 (0.8%) , and the salary portion totalled $7,779 (3.0%). Yes those two add up to only $9,836. Close enough for government work. We rounded to whole dollars.

So...a QEO offer when the increased fringe costs were less than the 1.7% resulted in gross" raises of 4.37%. Note that the average raises when we consider "new" money---or money above and beyond what was "guaranteed" by step increases is actually only about 1%.

Again...our apologies for over-simplifying a very complex topic. You can do the math. You understand that Sun Prairie has about 537 teaching staff right now. Many are off the grid.

We've increased our total costs to run the district by 3.8% without ANY increase in basic costs like textbooks, maintenance, etc.. Salaries and benefits account for 82% of the general budget for this district and the revenue cap was only increased by 2.2%. Let's hope Pine Stump enrollment doesn't decline...or we won't be able to cover the budget. See how it all works together?