Sunday, January 30, 2011

National City Schools - Central Falls Deja Vu?

Item 1. I wrote yesterday, but posted this morning, on the schools and municipal situation in Central Falls, RI. Right on cue, this morning's headlines detail some issues locally that mirror the issues back east. It appears that the National City schools are bracing for a strike, as teachers reject budget cutting measures like six furlough days per year. From this morning's U-T:
Faced with a $3 million deficit, the National School District said it was forced to take drastic measures by imposing six furlough days and raising class size caps this year to balance its budget — without the union’s consent. But labor leaders say the district is hording millions of dollars in its reserve account, exploiting the bad economy and bullying teachers to drive down wages and benefits.

Another case of defiant teachers clinging to their privileges and not recognizing the new political realities? Maybe. But here is what I found curious in the article. Management had a chance to settle on terms close to their desires:

When an independent fact-finding mediator issued a report that included a proposed settlement on July 19, the union’s representative signed off on the proposal that — among other things — called for five furloughs, representing a 2.7 percent pay cut.

A lawyer representing the district signed the same document, but said the district would not agree to all of the recommendations. The school board met in closed session the next day and rejected the proposal, in part because it called for a two-year contract when the district wanted a three-year agreement.

Why is the school board so adamant about getting all of their demands met? Can't answer that, but the fact that the teacher's union reps signed off so quickly makes me wonder about what is really going on. It may be that management is overplaying their admittedly strong hand. What is clear is that the district has serious budget difficulties, to the tune of $3 million dollars in the current school year budget. At least some of the pain to be endured must come from the teachers, but it remains an open question as to whether the school board erred in not taking the deal offered by mediation. Either way, fiscal realities like this are going to start impacting districts across the nation, causing reductions in pay for government employees such as teachers.

Item 2. Mayor Sanders not yet released plan to convert new city employees to a 401(k) style retirement plan is already drawing criticism. Public employee pensions are at the heart of the Central Falls post as well. One criticism is that by keeping new workers out of the old plan, there won't be fresh cash to keep the old system afloat. Said criticism is an implicit acknowledgement that the current system amounts to a Ponzi scheme. If the current system were properly accounted and funded, this change wouldn't matter. The other criticism comes from Michael Zucchet, union leader and former council member, saying that a properly funded 401(k) that has to include a decision on whether to account for placing the new workers in the social security system (current workers are exempt), would not save appreciable amounts of money. Maybe so, but that is totally beside the point. First, such a system insulates the city from the risks of investment fluctuation. Second, the workers themselves are better off because it forces the city to fully fund its contributions in the year earned, preventing a later reneging on promises. That Michael Zucchet would be opposed only shows that he has an agenda different from actually helping city employees.

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