Why Step Increases Do Not Cost the City of Westfield More Money, Take 2


But in case there is still doubt in anyone's mind about this strange fact, we put together a simple spreadsheet and created a hypothetical town called "Little Westfield" with a hypothetical payroll of ten teachers. We made the following assumptions:

  • Step increases are frozen, year after year, with no cost of living adjustments. This is the same assumption that Flaherty has made in his arguments.

  • Each teacher works 40 years and then retires. There are no layoffs and teachers never quit.

  • One teacher is hired every 4 years.

  • All teachers have a Master's degree and have the same contract as Westfield's teachers.

Though this is a far simpler scenario than what we have in Westfield with 570 teachers who were hired in clumps and have different degrees, the end result is precisely the same. Here's what the figures look like with these assumptions. Our comments are on the right:

FY2009    
TeacherYearsSalary 2009 Here are all the teachers on the payroll for the city of “Little Westfield.”
Teacher #1444348  
Teacher #2850493  
Teacher #31261806 There are 10 teachers. Each of them have a Master's degree.
Teacher #41663206 Next to each teacher is the number of years they have worked in Little Westfield.
Teacher #52063556  
Teacher #62463556 In the last column is the calculated salary based on the step increases plus the longevity benefits they might be entitled to.
Teacher #72864306 The teachers have the same contract as the teachers of Westfield, MA so the salaries here are the same as our teachers would receive.
Teacher #83265006  
Teacher #93665006  
Teacher #104065006  
 Total606289 In 2009, the total compensation package was $606,289.
     
FY2010    
TeacherYearsSalary 2010 Now, it's 2010. Every single teacher got an average raise of 4% except for Teacher #8 and Teacher #9 because they are maxed out on their step increases and longevity benefits.
Teacher #11138835  
Teacher #1545892 Since all the teachers got a raise or stayed the same, the City of Little Westfield must have paid more in teacher's salaries, right?
Teacher #2952340  
Teacher #31361806 WRONG! What happened?
Teacher #41763206  
Teacher #52163556 What happened was that Teacher #10, making $65,006 retired and was replaced by a new teacher, Teacher #11, starting at $38,835.
Teacher #62564306  
Teacher #72964306  
Teacher #83365006  
Teacher #93765006  
 Total584259 As a result, we see that the total salary paid out actually went down, despite every teacher getting an average 4% raise.
     
FY2011    
TeacherYearsSalary 2011 Now it's 2011, salaries are creeping back up.
Teacher #11240371  
Teacher #1647431  
Teacher #21054181  
Teacher #31462706  
Teacher #41863206  
Teacher #52263556  
Teacher #62664306  
Teacher #73065006  
Teacher #83465006  
Teacher #93865006  
 Total590775  
     
FY2012    
TeacherYearsSalary 2012 And they are going up more because no teachers have retired.
Teacher #11343253  
Teacher #1748964  
Teacher #21157088  
Teacher #31563206  
Teacher #41963206  
Teacher #52363556  
Teacher #62764306  
Teacher #73165006  
Teacher #83565006  
Teacher #93965006  
 Total598597  
     
FY2013    
TeacherYearsSalary 2013 Now we are back to the 2009 teacher salary levels. But next year, just like in FY2010, salaries will fall again because Teacher #9 will retire and get replaced with Teacher #12.
Teacher #11444348  
Teacher #1850493  
Teacher #21261806 So you can see here that giving all teachers raises will not cause costs to spiral because teacher are always leaving and getting replaced with lower cost teachers.
Teacher #31663206  
Teacher #42063556  
Teacher #52463556  
Teacher #62864306  
Teacher #73265006  
Teacher #83665006  
Teacher #94065006  
 Total606289  

 

We want to be careful here to point out that these figures should not be taken to mean that Westfield does not face increasing labor costs over the next few years. As you can see by this hypothetical example, the total salaries went up from 2010 to 2013. So total salary pay outs will fluctuate from year to year and increase for a stretch of time. But eventually they will go down, too. Just how sharply they rise and fall is determined by how many teachers are receiving step increases as compared to those who are not and the rate at which teachers retire. But eventually, given enough time, the total compensation package will hover around the same dollar figure.

It's also important to note that the total pay out will permanently decrease if teachers are laid off or take early retirements as the student population decreases. From what we understand, that day is coming soon.

Finally, we want to be clear that we're not suggesting the economic downturn will have no impact on the school budget and that teacher salaries should enjoy the same increases as when tax revenues were pouring in.

The big takeaway is that if step increases are frozen indefinitely as they were this year, then the largest single factor that determines the size of the total compensation is not the size of the step increases, but the total number of teachers on the pay roll. It doesn't matter what the size of the step increases are at all, in fact. Step increases could be fixed at 20%, 50% or 80% per year but that would not change the fact that the total compensation paid to teachers, over time, will not go up.

At the next City Council meeting, City Councilor Flaherty will be making a proposal to tie teacher raises to 2.5% based on his very flawed analysis of how step increases work. Since the size of step increases aren't a factor, his proposed solution makes no sense. It's like proposing a solution to a complex problem like sending a rocket to the moon without understanding the law of gravity.

The real solution will take much more analysis, time, and forethought. It will also take the whole community, not just a few wild ideas that leap from a single City Councilor's head over a weekend. We recommend that the City Council vote no against any of Flaherty's proposals regarding the school budget that come up at Thursday's council meeting.

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