Breaux: “A Suggested New Paradigm for Budget Requests and Presentations”

The following letter was sent from Harold J. Breaux to members of the Harford County Council, County Executive, Board of Education Members, HCPS Superintendent and staff. A copy was provided to The Dagger for publication:

Subject: A Suggested New Paradigm for Budget Requests and Presentations- Addressing the Issue of Required “New Money” for Personnel Salaries Arising from Progressive Pay (Increment Systems)

As a concerned citizen following news event in Harford County I have observed the current dilemma County Council Members and Candidates have with respect to voting for raising/or not County Council member salaries. It is clear to this observer that the proposed raises are appropriate to properly attract and reward quality individuals to and in these important positions in the near and far term. It is also clear that decisions and actions of County Officials as a whole in the last several years regarding pay adjustments (and increments) withheld from Education personnel, deputy sheriffs and other County staff makes it difficult and almost impossible for the Council and the Executive to do what is appropriate (for County Council Member raises) due to political considerations. These considerations are that you would be branded ( unfairly or not) as hypocrites given that the county paid personnel described above have gone so long without pay adjustments. I view the tie in of these two issues as inappropriate but the tie in is inevitable. My suggestion herein would serve to eventually remove the described dilemma.

Several months ago I forwarded to you an early draft of a paper that dealt with the subject of costs associated with the amount of “new money” or increase from prior year payroll needed to fund progressive pay systems generally referred to as increments. On April 4, 2014 I made a Power Point presentation to the Board of Education that was a synopsis of the paper and was titled:

“The Cost of the Teacher’s Experience Increment in Harford County-An Historic Misperception of the Added Yearly Cost When the Increment is Provided”

The Power Point presentation and the paper (based on an extensive analysis using a first principle model) make the case that you (the addresses collectively) approach the budgeting and funding issue, associated with progressive pay increases, with a fundamental misperception and as a result misrepresentation of the “new money” needed to fund the progressive pay systems that are an inherent part of employee understanding when they are hired.

I have created a website and placed the paper and the Power Point charts as Posts on the site so that all interested parties, employees included, can view my analysis of what I describe as misperceptions and “The Fallacy of Required New Money” which is a sub title of the paper titled

“The Mathematics of Budgeting for Experience Increments in a Teaching System or Other Workforce” .

The paper and power point charts are on my web site at:

http://complexpolitics.wordpress.com

The paper chronicles how over several decades County Officials and the press have popularized and perpetuated the myth that providing the increment leads to payroll cost increase of 3.0%, 3.5% and more. Results listed in the two page Executive Summary (Table 2 page 6 of the paper) [based on the extensive detailed analysis for current staffing conditions in the HCPS system] indicate that providing the increment leads to a nominal 1.78% increase if all staff remained in place with no new hires. This is the quantity called [PCIA- Percentage change Increment Alone]. The 1.78% figure is accounted for by the fact that a significant fraction of the work force is not eligible for the progressive pay increments. This is shown dramatically in a color coded table of salaries on page 25 of the paper. The paper shows, additionally and most significantly, that large staffs like the HCPS are dynamic with a continual retirement, drop out, and replacement process and that any estimation of new money costs must appropriately account for this predictable/routine staff turnover. The model shows (through extensive analysis of the average turnover in the HCPS for the last three school years) that the average annual percentage drop in payroll costs due to turnover is 2.09%. [PCTO Percentage Change due to Turnover]. The overall change in payroll [PCP in the paper] is shown to be the difference [PCP = PCIA – PCTO] with the result being an actual reduction in payroll costs [PCP= 1.78% – 2.09% = -.31%]

In recognition that circumstances in staffing and turnover will vary from year to year and era to era the paper does an extensive parametric analysis varying all the parameters that normally would influence the required new money. The overall conclusion is that the quantity PCP would normally be bounded by the interval (-.5% <= PCP <= .5%) . See, e.g., the graphic on page 28, depicting the variation of PCP caused by variation in the number of dropouts and retirements. This bound of plus or minus .5%, of course, is vastly different than the described 3% or more perception which has been ingrained in the public through the year to year representations by Harford County Officials and the Press. To correct the misperception described the writer suggests the following shift in Paradigm during the budgeting and funding process and representations to the public as the process wends through its annual trek. Suggested Change in Paradigm Related to Personnel Payroll:

The budget documents prepared by the HCPS and the County Officials dealing with budgets for HCPS personnel, the Sheriffs deputies and other staffers who are on an increment system, would be separated as follows and so described to the press so as to foster an informed public.

Section Related to Progressive Pay System and Total Personnel Costs

P1- List the reference year payroll cost (in dollars) due to current staff

P2i- List the projected payroll (in dollars) for all current staff assuming progressive pay is provided and assuming that no one retires or leaves the system during the projected year.

PCIA- List the percentage change Increment alone [ PCIA = 100*(P2i – P1)/P1]

Pto –List the predicted payroll adjustment (in dollars) due to turnover

PCTO- List the percentage change due to predicted turnover [PCTO = 100 * Pto/P1]

PCP – List the percentage change in payroll predicted to arise from providing the progressive pay system
per normal schedule [PCP= PCIA- PCTO]

Adjust PCP arising from “Fixed charges”. [See the writer’s issue with respect to the HCPS description of how it computes “fixed charges” in Appendix B, pages 58, 59 and 66 and 67 of the paper.]

Section Related to Other Changes in Payroll Costs

List the details, dollar changes and percentage associated with any proposed increases or decreases in staff

List any fixed charges associated with these other proposed changes in payroll costs.

Benefits Provided by this Change in Paradigm

The writer contends that Harford County has been poorly served by the system of representing to the public (and to its institutional self composed of the working partners in the HCPS, County Council, Executive and the Press) budgeting and appropriation decisions relating to pay of personnel for the last several years (and actually several decades as shown in a separate Chronicle by the author) . This has resulted in sheriff’s deputies not having had any progressive increment pay for seven of the last eight years and Education personnel similarly not having increments in 5 of the last 6 years. The writer contends that this has happened because of the misperception and misrepresentation of required “new money”. The flawed and broken process is described in the paper in Appendix B, page 58 where actual HCPS data and its definition of “new funding” is critically examined. The flaw, which misleads both the public and those making decisions on the budget, can be summarized from an extract on page 60 of the paper”

“The reality, based on the above data and quotations, is that HCPS proposed funding for the increment is continually lumped into a proposed and perceived increase in Wages and Salaries that connote the concept of the package as a whole (and by implication all of its parts) having a need for “new money” for funding to occur. Additionally, Turnover, an integral component of the Increment System, is not so identified as a component of the Increment System nor is it acknowledged as having a very significant influence on the increment cost and is routinely lumped under “Cost Savings Measures”

Additionally, Appendix B provides a simple analogy designed to help understand the major thesis of the paper and the critical role played by turnover.

The benefit of this suggested change in paradigm is that Harford County would turn the page in this era of unfair treatment of its personnel staff and can begin correcting the conundrum that has been created as witnessed by the large turnover in Education staff in recent years magnified by the huge number of departing teachers recently described in the press for the current year. Of course, providing the increment in the next fiscal cycle, using the rationale of relatively little or no “new money required, as shown by this writer, would only be the beginning. The total conundrum is characterized by the issue of correcting for the many years of pay adjustments not made because of the misperception (and related decisions) documented by the writer.

Sincerely yours

Harold J. Breaux