The Hidden costs of the ASD contracts

Education — By on August 16, 2010 at 9:59 AM

By David Boyle

Just recently, the Anchorage School Board approved a contract for the Anchorage Education Association (AEA) for the period 2010-13.  We expressed concern at the School Board meeting (May 24th) that the board may not have been informed of the total costs of this contract.  When asked at this meeting if they were aware of these total costs, no Board member answered “yes.” Because the Board is entrusted by the community with the fiduciary responsibility of managing the District’s funds, the Board should fully understand all budgetary impacts of approving any contract.

The Anchorage School District administration did provide its analysis of the cost of salary and benefit increases to both the School Board and on the ASD website.  However, the analysis was very difficult for the public to find. More importantly, the analysis was misleading and minimized the costs to the District and taxpayer. For example, this analysis only showed the increases for each year of the contract, rather than the total cumulative costs of the contract for the three years. This creative accounting misleads the public and the Board on the total costs because only the increased costs for each year are estimated by the ASD.

As a comparison, if one were to buy a car and make a $1,000 payment for the first year, a $2,000 payment increase for the second year, and a $2,000 payment increase for the third year, the total cumulative cost of the car would be $9,000. Using the ASD type analysis, it would point out only the three annual increase in payments for a total of $5,000.  This is a very significant difference when dealing with millions of dollars. 

As one can see, the cumulative costs are nearly double the “increase” costs from the School District.  The ASD analysis makes it difficult for the public to make a value judgment concerning the return on investment. Any increase in costs to the District should add to the education value for students and Anchorage citizens, and this education value should be measurable and correlated to the costs.

To further minimize the appearance of the costs, the ASD added a note at the bottom of its analysis stating that, by the way, regular step and educational attainment costs another $5,270,000 per year, for a grand total of $15,810,000.  This should have been added as a line item for each year of the contract in the analysis to provide a clearer cost picture.  There are also other costs associated with this contract that should have been added to the total costs.

An additional contract cost is the added health insurance premiums mandated by the “me too” clauses in the other various collective bargaining agreements.  This requires that the ASD provide the same health insurance benefits to several collective bargaining unit members as the AEA members.  This adds $2.65M in 2013 which ASD did not disclose. 

Because of the salary increases, the ASD also must increase its contributions to the Teachers Retirement System (TRS).  The contribution rate for the District is 12.65% which adds another $5.15M over the life of the contract.  This cost was not disclosed to the public.

The ASD estimates a “total estimate of yearly budget increases from the tentative agreement” of $34.82M.  Add to this the “footnote” of $5.27M per year (3 years) for educational attainment and step increases, and the ASD total for this contract is $50.63M.  However, the actual figure is much greater than the figure presented to the public by ASD. Our research shows that the actual figure is closer to $94.75M. Why are these estimates so far apart?  The ASD estimates are either intentionally misleading or incompetent.

I remember talking with an elected official a few years ago about the need to keep the public better informed about what was happening in government. We were standing at one end of a room full of citizens, and this person turned and motioned at them, and asked me very pointedly, “How many of these people do you think really care about what happens in government? No one. No one cares.” This fallacious argument is known as the self-fulfilling prophecy.

How can we expect a citizen to become engaged without clear, honest communication about the value they are getting in education? Transparency in government is essential for citizen engagement. It’s not easy, and sometimes it can be downright discouraging. But, it must be done nonetheless, because it is the right thing to do.

Different Estimates: Anchorage School District vs. the Alaska Policy Forum

* Per ASD, this is total estimate for yearly budget increases from tentative agreement plus the regular step and educational attainment costs.

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