MDIschools.net

TO: Superintendents, RPC chairs, Municipal officials in regions with pending referendum votes on school administrative reorganization plans
FROM: Susan A. Gendron, Commissioner
DATE: January 16, 2009
RE: Clarifications: Reorganization Plan Costs and Voter Rejection

In recent weeks, three concerns have been raised about how reorganization plans will affect costs for individual school communities and what happens if voters reject proposed plans. To help you and your voters better understand the impacts, I am writing to provide some clarification on these issues.

1) Projected costs of teacher contracts. In several regions, concerns have been raised about bringing all teacher contracts to the same salary level, with the cost then offsetting any savings. This is far from certain, and in most of these regions the impact of common teacher contracts will be far less and far more gradual than is feared.

a. It is necessary to take into account the adjustment that will be made in labor market areas in the state Essential Programs and Services formula for teacher salaries. As the new RSU is formed, the Department will recalculate the labor market adjustment for the region. In most regions, the adjustment will be to the new RSUs benefit and would reduce the perceived additional costs significantly because the increased labor costs would be figured into the state's calculation of EPS costs. Because the units with lower teacher salaries are already paying the statewide mill expectation, the state would pick up the entire additional cost of higher teacher salaries, up to the new labor market adjustment.

b. All contracts must be negotiated and planners should not predetermine the result of that process. Regions should not assume that all contracts will go to the same salary scale, and that they will do so by the second year of the new RSU. To try to predetermine the results of contract negotiations is a mistake, and also impossible. In the past, school units and bargaining units have worked together successfully to adjust salary scales in ways that minimize the immediate impact of adjustments. For example, when the minimum state salary was raised to $30,000 recently over a two-year period, bargaining units worked with districts to develop new salary scales that incorporated the new minimum teacher salary while providing for teachers at the top end of the scale. Both parties to the negotiations remained mindful of the impact on local budgets and taxpayers.

c. If the collective bargaining process does, in fact, lead to higher salaries, those higher salaries will influence the labor market adjustment and provide additional allocation for all salaries and benefits (not only teachers) and result in an increase in state support for the new unit.

d. The reorganization law allows for a transition period for the creation of a common contract. While the law requires a common contract, it does not require that salary scales be identical across the new RSU. While it is unlikely that any teachers would be asked to lower their salaries to match newly joining units, units should plan on a transition period during which not all salary scales would be equalized across the new unit. Some new school units, such as the one on Mount Desert Island, have planned for a transition period of up to seven years to equal salary scales. Such a plan would greatly reduce the impact of disparate salary scales.

2) Cost impact of property value decline in one community on other communities in an RSU. Some communities have raised the concern that if the property value in a member community of the RSU drops significantly, then the remaining communities in the unit will take on an added burden. For all defined EPS amounts, the state will pick up this added cost, not the other communities in the district. All communities in an RSU or AOS are expected to raise the minimum mill expectation - this year that amount is $6.55 per $1,000 of property value. The state then contributes the balance. If the value of property in a community drops, the state will contribute the additional share. It is true that for "over-EPS" amounts, a decline in property value in one community could affect the burden placed on the other communities in the RSU, depending on the agreed-upon formula in the reorganization plan. This can be avoided (and amended at any time by the RSU board) through the creation of an over-EPS cost-sharing formula that relies on more than just property values. It is important to consider that sharing costs among more communities with a more diversified property tax base creates a cushion for all communities, so they are not subject to the variability in the valuation of any one community.

3) Continuing reorganization work/penalties. Press reports suggest that some regional planners believe that if voters reject a plan but start work on a new plan they will avoid penalties. I must inform you that this is not guaranteed and there is nothing in statute that suggests or supports this. The law indicates that units must vote in the affirmative on a reorganization plan by January 30, 2009. Until there is an affirmative vote, the penalties will apply.

The Department and I will do everything we can to assist those regions seeking to pursue reorganization after January 30, 2009. Regions that move extremely quickly after January 30 and that succeed in passing reorganization plans before the Department has issued unit-by-unit GPA projections for 2009-10 may be able to avoid penalties for the upcoming fiscal year. Once those printouts have been prepared for communities, it will not be possible to recalculate the subsidies for the benefit of regions that subsequently reorganize.

The other constraint, of course, will be the time necessary to implement a new RSU by July 1, 2009. You may recall that the original legislation included a November 4, 2008 deadline for reorganization votes. This deadline was moved to January 2009, but legislators understood that after that date it would be extremely difficult to elect an RSU school board, hire a superintendent, draft and approve a budget, and merge the operations of multiple units by July 1, 2009.