Tuesday, May 04, 2010

School Unions Hit Back on Furloughs

The three public school unions – MCEA, SEIU Local 500 and the Montgomery County Association of Administrative and Supervisory Personnel (MCAAP) – have written the County Council in opposition to the intention of some Council Members to spread furloughs to cover the school system. The council cannot mandate school furloughs, but it can cut the schools’ budget by an equivalent amount and leave it to the Board of Education and the Superintendent to figure out how to deal with the cut. Needless to say, this option is not favored by the school unions.

The three unions sent a joint letter to the council raising a number of logistical issues associated with furloughing school employees. Notably, they asked what would happen if the state denied the county’s newest Maintenance of Effort (MOE) waiver application. Would the fine be applied to the schools or to other parts of the budget? The unions also raised the question of whether furloughs are truly a way to deal with long-term deficits. Finally, the unions alleged that the county would not have to furlough anyone if it allowed Sunday sales at county-owned liquor stores and postponed restoring the rainy day fund to 6% of revenues by a year.

Our sense is that the council is rather united in asking for more cuts from the school system – an attitude reinforced by the schools’ consideration of legal options. The Management and Fiscal Policy Committee, which unanimously called for a “principle of equity” in furloughs, is comprised of union nemesis Duchy Trachtenberg as well as union allies Valerie Ervin and Nancy Navarro – both former members of the school board. If Ervin and Navarro are favoring furloughs in the school system, the school unions have nowhere else to go.

Following is the unions’ letter.

May 4, 2010

Ms. Duchy Trachtenberg, Chairperson
Management and Fiscal Policy Committee
Montgomery County Council
100 Maryland Avenue
Rockville, Maryland 20850

RE: Proposed Furloughs

Dear Ms. Trachtenberg,

Last Thursday, your committee voted (3-0) to support the “principle of equity” in proposed employee furloughs for next year, as illustrated by a Council staff option presented to the Committee. Council staff made clear that the Council does not have the authority to mandate furloughs within the Montgomery County Public Schools. It is the Board of Education that has the ultimate decision-making authority over how to operate the school system to best achieve its desired outcomes. The option presented by Council staff proposed a five day furlough of all county employees, including all MCPS staff, at a cost of $34 million to the school system.

We understand, as Committee member Valerie Ervin made clear, that the ultimate decision on the budget is in the hands of the Council members and not the Council staff. However the option presented to the Committee raises a number of questions about what it means to apply furloughs “equitably” and whether there is any such thing as an “equitable” furlough.

As we have made clear in recent discussions with Council President Nancy Floreen and Vice-President Ervin, we do not believe it is possible to do furloughs equitably, and we believe the Council should be working to avoid furloughing anyone in county government or the agencies. The County Executive presented a budget that saved only $15.1 million through furloughs. We believe the Council can make choices to find that $15.1 million elsewhere and avoid furloughing anyone.

Can Furloughs Ever Be “Equitable”?

We have a number of questions about the “five-days-for-all” scenario presented by Council staff to your Committee and what it means to be “equitable.” We would appreciate your responses to the questions below, so we can better understand the thinking of the Committee on what you mean by “equitable.”

1. What is an “equitable” formula for determining the allocation of furlough costs across agencies?

MCPS represents approximately 50% of the tax-supported county budget. Yet on the scenario, MCPS is identified for absorbing $33.7 million of the total furlough costs of $48.2 million – or 70% of the furlough costs. Is that equitable and if not, how would the formula be adjusted?

2. Should MCPS be treated differently from other agencies?

The Council staff scenario proposed that Montgomery College and the Park and Planning Commission be allowed to develop a furlough plan to absorb the budget reductions already recommended by the County Executive, but in contrast suggested that the $33 million cost of the furlough plan be an additional cut to the MCPS budget on top of the budget reductions already recommended by the County Executive. Is that equitable and if not, how would the formula be adjusted?

3. Is a “five-days-for-all” furlough plan equitable when employees have different work years?

Most county employees are paid for a full work year of 260 days. Most MCPS employees are only paid to work 195 days. Is a furlough plan equitable if it represents 2.6% of some employees annual income (5/195) but only 1.9% of other employees annual income (5/260) and if not, how would the formula be adjusted?

4. Is it equitable to furlough part-time employees who are already having their hours permanently reduced?

More than 5,000 MCPS supporting services employees are part-time workers. We recognize that up to 244 county employees in filled positions face possible layoff, if they do not qualify and avail themselves of the proposed retirement incentive program. In MCPS, rather than laying off employees, the Board’s proposed budget reduces the work hours for several hundred part-time employees, and does not include any retirement incentive program. Primarily para-educators and media assistants, these employees have already been notified of permanent reductions in hours that are cutting their annual income from an average of $23,000 to just $15,400 (based on a reduction from 6 hrs/day to 4 hrs/day). Is it equitable that they be furloughed on top of that, and if not, how would the formula be adjusted?

5. How can the Committee ensure equitable treatment of pension impacts?

At last week’s meeting, the MFP Committee also unanimously recommended support for Bill 18-10, designed to prevent any adverse impact of furloughs on the defined benefit pension plans covering approximately 4,750 of the county’s employees. Under this bill, the county would still make pension contributions based on the full annual salary of these employees, as if they had not been furloughed. In addition, any employees retiring in the next three years would have their pension benefit calculated as if they had not been furloughed. We agree this is the right thing to do. However within MCPS, the majority of employees are in a state-controlled pension plan - and one that is less generous than the County’s defined benefit pension plans. Therefore MCPS has no ability to provide similar pension protection to its employees if they are furloughed. How can furloughs across agencies be equitable if some employees will have their pensions impacted and others will not?

6. How can school bus drivers and cafeteria workers be furloughed without reducing the number of school days?

The Council staff memo asserts that school employees can be furloughed “without affecting instructional days or the classroom.” However, school bus drivers and cafeteria workers only work on days that are student instructional days. So we are unclear on how they can be furloughed unless schools are closed. The Council staff memo refers to vacation days as an option; however none of the approximately 19,000 10-month employees in MCPS get vacation days. So how would furloughs be equitably applied to school bus drivers and cafeteria workers?

7. When is a furlough just a pay cut?

A furlough is typically defined as a temporary layoff from work. When an hourly employee is furloughed, they work fewer hours. However when salaried employees are furloughed, there’s usually no reduction in work. If teachers were furloughed on grading days, wouldn’t they still be expected to complete grades? If they were furloughed during pre-service week, wouldn’t they still be expected to have their classrooms set-up and be prepared to teach on day one? If “furloughing” salaried employees is really just a reduction in salary with no reduction in work, isn’t that really just a pay cut?

Will additional savings from expanding furloughs be dedicated to reducing layoffs?

The scenario presented to the Committee by Council staff suggested expanding furloughs to save the County more than $48 million, compared to the $15.1 million in savings recommended by the County Executive. No one wants to see employee layoffs, just as we hope no one wants to see reductions in hours for part-time workers who are already low- paid. If the Committee decides to expand rather than reduce furloughs, will the additional savings be used solely to avoid layoffs, or will the added savings be used to reduce the proposed energy tax or build up the reserves?

Will the Council absorb the state penalty for failure to meet the Maintenance of Effort (MOE) requirement if the State Board of Education rejects reductions to the MCPS budget beyond the $137 million already proposed?

The State Board is scheduled to meet on May 25 to consider Montgomery County’s request for an MOE waiver based on the County Executive’s proposed $137 million reduction. If the Council imposes an additional reduction on MCPS in the name of furloughs, what will happen if the State Board rejects that additional reduction and withholds the $53 million in increased state aid already built into the proposed budget for MCPS? Will the Council absorb that additional shortfall, or is it your intent that MCPS would have to suffer that loss on top of whatever additional reduction the Council has imposed in the name of furloughs?

How Do Furloughs Help Solve the Long-Term Deficit?

Much has been made of the analysis that Montgomery County faces a long-term structural deficit. Addressing this will require difficult choices to bring projected revenues and projected expenses into line. The reality is that furloughs are not a solution to the long-term structural deficit. Furloughs are simply a one-time savings. Whatever is saved due to a furlough in FY11 has to be built back in to the FY12 budget – unless the intent is that it be a permanent pay cut for employees. Montgomery County needs solutions to the long-term structural deficit, not one-time quick fixes.

We understand that these are difficult times. We know that the shortfall in county revenue is real, and is deep. We know that vital county services all across the government and agencies are being reduced. By sacrificing their pay raises this year, and their pay raises and step increases next year, county employees across all agencies have collectively lost more than $281 million.

There Are Alternatives

Based on the most recent budget presented by the County Executive, the Council would only have to identify $15.1 million to avoid furloughs altogether. We believe that the Council could get there by doing the following:

1.Approval of the proposal to allow Sunday liquor sales is estimated to yield $1.5 to $2 million.

2.The County Executive originally proposed maintaining the County’s reserve funds at 5% of the budget for next year. In his most recent budget amendments, he realigned $36.6 million in order to increase the reserves to 6% next year. Instead, the Council could phase in restoration of the reserve by going to 5.6% next year and fully to 6% in FY12. Doing so would save an additional $14.6 million.

3. Combined, those steps would restore the $15.1 million needed to avoid furloughing anyone in the county.

We fully appreciate the concerns about maintaining Montgomery County’s AAA bond rating. However we are also mindful that the Fitch Ratings agency only stated a need to return to the county’s 6% reserve policy in FY12 – not in FY11. We also understand that these same rating agencies give Prince Georges County a AAA bond rating, despite their TRIM tax cap that so inhibits sound fiscal policy. And finally, we cannot help but point out that these are the same credit rating agencies that consistently gave AAA ratings to the credit default swaps and complex Wall Street derivatives that we now know were toxic junk and brought the country to the brink of economic collapse. Surely Montgomery County passes a much higher bar.

The Fitch Rating agency also said the following about Montgomery County in its most recent analysis:

“While reserves have declined, Montgomery County retains considerable flexibility…. A considerable and formidable economic base, anchored by the extensive presence of the U.S. government and expanding broadly into biotechnology, shows excellent prospects for continued expansion. Strong wealth and unemployment indicators underscore the county’s economic strengths.”

Given that strong assessment, there is little reason to believe that a phased restoration of the reserve (from 5% this year to 5.6% in FY11, to 6% in FY12) would put the County’s bond ratings at risk. Ultimately the County Council must make this decision. However given the emphasis that is being placed on ensuring that furloughs are “equitable”, we look forward to your responses to the questions outlined above, so we can better understand what the Committee means by equitable and what steps you would take to ensure that.

We look forward to hearing from you.


Doug Prouty

Merle Cuttitta
SEIU Local 500

Rebecca Newman

cc: County Council Members
Board of Education Members
Montgomery County Legislative Delegation
All Association Members