Our Public Schools - The Great "American Equalizer" is In Danger of Disappearing

By: Jeffrey T. Sultanik, Esquire, Chair of the Education Law Group, Fox Rothschild LLP

Every Monday-Friday from 6:00 a.m.-7:00 a.m., I read the online versions of School Business Daily, Employment 360, and The New York Times. I do this so that I can keep not only up-to-date to satisfy my own intellectual curiosity, but also to provide that type of broad-based legal advice that all the consultants say is necessary to provide the value-added legal advice that clients deserve.

Over the past year, the focus of these publications (primarily School Business Daily) has been to report about the crises that are being faced by public school entities throughout the nation, along with Canada. There isn’t a day that I read stories outlining extensive furloughs of teaching and support staff, referenda failing to raise taxes, state pension funds being seriously underfunded, school entities seeking protection under Chapter 9 of the bankruptcy laws, increasing labor strikes because of constrictions in the ability of school districts to pay a fair compensation level to its professional and non-professional staff, proceeding to shorter school years and work weeks for the purposes of saving money, and state legislatures grappling to deal with mounting debt and an inability to meet the educational needs of the students.

Indeed, in the State of Pennsylvania, Pennsylvania’s only way to fulfill the obligation to pay the basic education subsidy to Pennsylvania school districts was as the result of the federal stimulus funds, which are scheduled to run out at the conclusion of the 2010-2011 school year. The State will then be forced to make up the $760 million it received from a tax base that is suffering from a prolonged recession that does not seem to benefit most of the school entities in the State. Coupled with state statutory restrictions on districts’ ability to raise additional income because of our reduced statewide average weekly wage and a reduced employment cost index for secondary schools, the future of public education in Pennsylvania as we know it is in serious danger. Pennsylvania is not alone.

In my 31 years of observing public school entities, primarily in the State of Pennsylvania, I will be the first to say that the school districts that I have represented over these years have not always done things in the most optimal and efficient manner. I am also aware that the school districts I represent are laden with a myriad of federal and state mandates and competing community concerns about the delivery of the educational program that stretches the ability of any board to effectively satisfy its constituencies.

That being said, I do believe that the future of public education is clearly at risk. In Pennsylvania, the state legislature is faced with a serious funding shortfall for the state pension system for state employees (SERS) and for public school employees (PSERS). The projected rate spike will start in 2012-2013 and has the potential of making almost every one of the 500 school districts in the Commonwealth of Pennsylvania insolvent and unable to fulfill its statutory requirements to pay its pension obligation.

Thusfar, the reaction of the Pennsylvania legislature is to hold hearings and study the issue. In the meantime, the failure to address the “pension spike,” which was exacerbated as the result of our poor economy, is putting the brakes on the viable negotiations of successor labor contracts and essentially paralyzing the ability of even the most reasonable of school boards to resolve any compensation or wage-related issues that will extend beyond the 2011-2012 fiscal year.

Unfortunately, I have not seen that either the state legislature or the federal government has exercised the kind of intestinal fortitude that it will take to address the crisis that will affect us even if the economy slowly improves and recovers from the October 2008 collapse.

Unless our legislature and federal government successfully addresses the issue of education, the system is, in my opinion, on the verge of collapsing within the next 2-3 years.

What will it take to resolve this problem? As stated before, it will take a level of intestinal fortitude that is typically not seen at the legislative level. We have to unfortunately come to terms with the fact that we will no longer have the financial horsepower to operate our educational system in the way that we know it. There will have to be significant changes both structurally and substantively in order for us to inch our way out of the “educational depression” of our time.

Specifically, this is what needs to occur:

  •  Districts themselves have to be more aggressive in negotiating labor contracts that are affordable to the district with substantive concessions.
  • State legislatures need to give boards the leverage under state law to unilaterally implement its last best offer when the labor contract is at impasse.
  • State pension systems need to be overhauled with the pension systems that provide for defined benefit programs having to be “frozen” so that additional accrued defined benefit obligations will not occur and that the pension systems have to move to purely defined contribution programs. Making it applicable to only new employees is too little and too late, given the broad-based nature of the economics facing school entities.
  • School districts will no longer be able to create golden handcuff benefits at all levels in the organization and will have to substantively live within their means moving forward.
  • The use of distance learning and technology to pool district resources to deal with low enrollment programs and to rethink the traditional virtues of a bricks and mortar education will be necessary.
  • Teachers will no longer be able to have expensive/Cadillac healthcare plans that are substantively different than that received by the taxpayers who fund our education.
  • State legislatures will need to remove, to the extent possible, as many of the mandates that preclude efficiencies of school districts as possible.
  • Legislatures should eliminate archaic bidding laws in favor of electronic methodologies.
  •  Legislatures should eliminate prevailing wage laws on public building projects, even though they support unions. Our communities can no longer afford the impact of prevailing wage predeterminations on building projects.
  • School districts should be able to furlough professional and non-professional staff for economic items only, notwithstanding any statutory requirements or strictures.
  • School district traditional notions of having a high school class of 25-30 students may have to change. Districts may want to consider having a full-time teacher who is supported by assistant teachers earning a lesser sum of money following a university model. Perhaps school districts will have lecture courses that would have between 50-75 students with smaller group discussion courses led by assistant teachers.

These ideas and more ideas will need to be implemented in order to assist our school entities that are going through the most difficult time since the Great Depression. The future is not completely bleak and rethinking education as we know it may be a valued outcome.

I, for one, cannot sit idly by while the world around us seems to be closing in on our educational establishment. The time is now to intensely pressure our state and federal legislators that we do need to changes and the flexibility to continue to operate and we do need their courage to address issues that they may not want to address. Their failure will be our failure, and the failure of generations to come. Please do not let our state legislators and legislatures to mortgage our future by amortizing the debt of our pension obligations for many years to come. We need to deal with the issue now, limit benefits, and begin to live within a standard of living more commensurate with the output of this country, which is no longer a manufacturing power. Unless we do this, the great American equalizer will fall the way to a mediocre educational delivery system that will cater to the needs of those with exceptionalities only, while the more affluent population will be educated in private or charter schools. I do not believe that this was what our constitutional framers thought was in the best interest of our community. It is time for the wake-up call.

Otherwise, I envision the next 20 years of my practice to be devoted to be a “workout lawyer.” The term “workout lawyer” primarily refers to private sector attorneys who spend their time legally untangling debtor businesses and either winding them down and sending them to bankruptcy or working out their economic situation so that they can continue to operate. This is not an exciting prospect for the educational industry.

Open Source Textbook Websites Are Wonderful Options But Have Legal Traps

By: Jeffrey T. Sultanik, Esquire, Chair of the Education Law Group, Fox Rothschild LLP

There are a number of non-profit 501(c)(3) entities that have sponsored open source textbook websites that provide either free or open source textbooks that enable elementary and secondary schools to put together their own textbooks at no cost subject to the provisions in the open source website. A number of the non-profits have established projects that are scanning millions of books and making them available on-line for educational purposes. Some of the books (especially those out of copyright) are available for free, and a number of the projects enable a school administrator to cherry pick chapters from different allegedly open source textbooks to put together a district-specific textbook without paying the huge cost normally necessary to obtain new textbooks from textbook publishers.

Most of these non-profits are established with a view toward providing schools with open access materials that will enable students who otherwise would not be able to get the advantage of new and updated textbooks to have the advantage of comprehensive materials that become district-specific curriculum methodologies.

The utilization of these services, however, does not come without risk. The websites for many of these non-profits clearly limit the liability of the altruistic non-profit, which technically does not verify the copyright or open source nature of the materials that would be downloaded or put together by a school entity using the software of the website. Independent verification or care must be utilized by the school to determine whether or not the material being downloaded does comply with copyright rules and is truly “open source.” At a minimum, the district should attempt to verify the open source nature of the materials or run the risk of a copyright violation action.

As with all good things, care must be used when open source materials are placed on the web.

 

Health Care Reform Act

 

By: Jeffrey T. Sultanik, Esquire, Chair of the Education Law Group, Fox Rothschild LLP

 

The passage of the Health Care Reform Act has caused quite a stir, both in the public and the private sectors.  We are aware that there have been many questions about its impact on your organization.

 

Our office is working on materials and handouts that will contain a complete analysis of the law.  To date, our office has published the first three parts of a six (or maybe seven or eight) part series that breaks down the Act piece by piece so that employers can consider how it impacts them.  This is available at  http://employeebenefits.foxrothschild.com/.

 

If you have any questions about the Act, please let us know, and we will try to explain it further, absent the needed regulations to interpret the Act.

What is the Future of School Districts Given our Current Economic Situation?

By: Jeffrey T. Sultanik, Esquire, Chair of the Education Law Group, Fox Rothschild LLP

What is the future of school districts given our current economic situation?

Examining Governor Rendell’s proposed budget for the 2010-2011 school year would lead one to conclude that there is a major new focus for more dollars to educational entities. Though it is true that Governor Rendell’s new budget represents a continued commitment on the Governor’s part to increase dollars for education, most of the dollars that are increased are going to districts with higher aid ratios (i.e., districts with less wealth from a market value/personal income perspective). Further, given the track record of Governor Rendell obtaining what he is proposing for education from the State Legislature has not been particularly good, one can only surmise that some of Governor Rendell’s budget proposals were motivated from a partisan perspective to place the State Legislature in a position that it would have to cut back the education proposal of the Governor.

All of this bodes very poorly for school districts in the future. Regardless of a school board’s political party affiliation, for the first time, many school boards are grappling with wanting to offer a fair level of compensation for its professional staff, yet faltering revenues, the prospect of the PSERS’ cataclysm, and the need in many cases of reducing staffing and programs in order to balance the budget. Going to the taxpayers to fund huge increases in pension costs, even though it is an exception to Act 1, is not politically acceptable in an environment where most private sector employees do not receive a defined benefit pension plan and have also seen their pension, to the extent that they even exist anymore, evaporate as the result of the decline in the stock market.

What has the teachers’ union response to this been? If you go to the “special pension pull-out section” on the PSEA website, PSEA points back that in 2001-2003 employers had a respite in making a contribution to the pension system. Though that may be the case, that still does not deal with the underlying problem of the huge PSERS’ pension spike moving forward over the next few years.

The lack of willingness of many union affiliates to recognize what is going on in school entities in the Commonwealth of Pennsylvania has become apparent at the bargaining table. Until such time as there is a realistic understanding of what is being face by most school entities in the Commonwealth of Pennsylvania, we are looking at a lengthy period of labor strikes in the Commonwealth of Pennsylvania where contracts will not be settled for a long time. Districts will be living with status quo situations, potential work-to-rule situations, and other labor disputes moving What is the future of school districts given our current economic situation?

Examining Governor Rendell’s proposed budget for the 2010-2011 school year would lead one to conclude that there is a major new focus for more dollars to educational entities. Though it is true that Governor Rendell’s new budget represents a continued commitment on the Governor’s part to increase dollars for education, most of the dollars that are increased are going to districts with higher aid ratios (i.e., districts with less wealth from a market value/personal income perspective). Further, given the track record of Governor Rendell obtaining what he is proposing for education from the State Legislature has not been particularly good, one can only surmise that some of Governor Rendell’s budget proposals were motivated from a partisan perspective to place the State Legislature in a position that it would have to cut back the education proposal of the Governor.

All of this bodes very poorly for school districts in the future. Regardless of a school board’s political party affiliation, for the first time, many school boards are grappling with wanting to offer a fair level of compensation for its professional staff, yet faltering revenues, the prospect of the PSERS’ cataclysm, and the need in many cases of reducing staffing and programs in order to balance the budget. Going to the taxpayers to fund huge increases in pension costs, even though it is an exception to Act 1, is not politically acceptable in an environment where most private sector employees do not receive a defined benefit pension plan and have also seen their pension, to the extent that they even exist anymore, evaporate as the result of the decline in the stock market.
 

What has the teachers’ union response to this been? If you go to the “special pension pull-out section” on the PSEA website, PSEA points back that in 2001-2003 employers had a respite in making a contribution to the pension system. Though that may be the case, that still does not deal with the underlying problem of the huge PSERS’ pension spike moving forward over the next few years.


The lack of willingness of many union affiliates to recognize what is going on in school entities in the Commonwealth of Pennsylvania has become apparent at the bargaining table. Until such time as there is a realistic understanding of what is being face by most school entities in the Commonwealth of Pennsylvania, we are looking at a lengthy period of labor strikes in the Commonwealth of Pennsylvania where contracts will not be settled for a long time. Districts will be living with status quo situations, potential work-to-rule situations, and other labor disputes moving down the road.

All of this is unpalatable for those individuals who cherish education in the Commonwealth of Pennsylvania. Until we all recognize that the State is bankrupt and our communities are dollars-deprived, the status quo may continue. However, the status quo is no longer good enough since the foundation of our educational system in the Commonwealth of Pennsylvania is currently at risk. The individuals who helped build that system, our valued teachers, are not recognizing the warning signs. Unless there is a dramatic shift in what happens at the bargaining table, our future of public education in Pennsylvania is in serious danger.
 

Who is Really Being Hurt by the Great Recession from a School District Perspective?

 

By: Jeffrey T. Sultanik, Esquire, Chair of the Education Law Group, Fox Rothschild LLP

Who is really being hurt by the Great Recession from a school district perspective?

For those school districts that currently have aid ratios of 0.4 or less (i.e., the wealthiest school districts in the Commonwealth of Pennsylvania), the real squeeze is currently taking place on districts – and we are only seeing the beginning. The base Act 1 index for 2010-2011 is 2.9%. This represents a 1.2% reduction over what was available in the current budget for those districts that have aid ratios of 0.4 or less. It is fully expected that this index will trend downward over the next few years, since the index is composed of the statewide average weekly wage, as well as the employment cost index for secondary schools, both numbers that have been trending downward.

In this environment, health benefits, which are not an exception to the Act 1 index, still continue to outpace inflation and the index by a substantial degree. According to the Employer Health Benefits 2008 Annual Survey prepared by the Henry J. Kaiser Family Foundation, the average monthly worker’s premium contribution over the time period of 1999-2007 for single coverage was $58.00 per month and for family coverage $273.00 per month. According to the same study and over the same time period, the average covered worker contributed 16% for single coverage and 28% for family coverage over the same time period. This has clearly not been the case in the Commonwealth of Pennsylvania or in collectively bargained contracts.

What is a school district to do? The only way to do this is to negotiate health benefit programs that do not substantially outpace the cost of the index.

Because of a school district’s obligation to maintain the “status quo” at the expiration of a collective bargaining agreement or face an unfair labor practice with the Pennsylvania Labor Relations Board or an allegation of a lockout before the Pennsylvania Unemployment Compensation Board of Review, teachers’ unions continue to come to the bargaining table taking the position that unless they get a substantive increase in salary, they would be better off living with the current collective bargaining agreement from a health benefits perspective.

Putting aside efforts both on a statewide and federal perspective to overhaul the health benefits system, including the Commonwealth of Pennsylvania’s push for a statewide healthcare plan (that will benefit some districts and hurt many other districts that currently do not provide coverage levels for certain classes of employees), there is already legislation on the books that is causing a substantive increase in the cost of health benefits.

For example, Michelle’s Law prohibits employers from terminating group health plan coverage for seriously ill or injured college students. The coverage must be continued for up to one year. Under the law, group health benefit plans cannot terminate coverage of a dependent child due to a medically necessary leave of absence before the date that is the earlier of: (i) the date that is one year after the first day of the medically necessary leave of absence; or (ii) the date on which such coverage would otherwise terminate under the terms of the plan or health insurance coverage.

Effective July 1, 2009, the Pennsylvania State Legislature passed an autism mandate where coverage must be provided for the treatment of autism up to $36,000.00 per benefit period.

In addition, the Mental Health Parity and Addiction Equity Act was signed on October 3, 2008, as part of the emergency economic recovery bill. In addition to the current requirement, the Act known as the Wellstone Act added significant new parity protections under a group health plan including:

·                    Adds protections for substance use disorder benefits on the same basis as the protections for mental health benefits;

·                    Prohibits differences in copays, deductibles, coinsurance, and out-of-pocket costs for mental health and substance use disorder benefits as are applied to medical/surgical benefits;

·                    Prohibits the use of day or visit limits for mental health and substance use disorder benefits that are more restrictive than treatment limitations applied to medical/surgical benefits; and

·                    Adds new requirements for employers seeking a cost exemption.

All of these pieces of legislation have added new demands on our healthcare dollars that did not exist before that period of time. This is an important issue that all school districts need to address in the Commonwealth of Pennsylvania.