Fixing the so-called Funding Crisis

Only in government could a slight drop in revenue become a crisis.   It's a rerun of the timeworn biennial drama in which well-meaning legislators struggle to come up with ways to meet the government's inexorable demands for more funds.

The problem is simple: too many people on the payroll.  Payroll accounts for about 75 percent of the average school district or state agency budget.  Help them fix this problem and the so-called "funding crisis" disappears

Layoffs won't work because seniority rules force the retention of ineffective yet high-salaried people whom school boards would rather do without. 

The only way to do it quickly, painlessly, drastically and fairly is through early retirements.  This is how businesses reduce payroll to match revenue.  Why not the government?

In Columbus, Ohio our school district has 63,000 students and 9,000 full-time employees.   That's a one-to-seven ratio.  Outrageous by any standard. Particularly when you consider that a substantial percentage of those employees would leave in a minute if they were offered a way out.

Here's the plan

Offer TWO YEARS of retirement credit to anyone who retires now.  Tell the school districts that their budgets will remain flat BUT they can reduce their largest cost by taking advantage of the state early-retirement program.  Since many school districts have attempted early-retirement programs themselves, it stands to reason that most will gladly accept the state's deal.

Here's the math

The cost of purchasing a year's worth of retirement should be no more than 20 percent of a person's payroll cost.  So if someone costs $80,000 (salary and benefits), then it should cost about $36,000 to purchase two years of state retirement credit.  If the person retires, the state has just SAVED $44,000.  The school district can replace that person by promoting or reassigning someone with a lower salary-and-benefit cost.

In other words: spend 40 cents and save a dollar.  Net savings: 60 cents.

Here's how it could play out

As soon as the program is announced, about 40,000 senior state and school-district employees (with a combined payroll cost of about $2.5 billion) will immediately run the numbers in their heads.  Most within two years of their planned retirement will head for the exit. Most of the others within, say, five years of retirement will try to figure out if they can buy additional years of retirement credit.  Those who can will bolt for the door.

Within an hour there will be skid marks in school parking lots all over the state.  Problem solved.

You'll be a hero

• School board members will love you because you've relieved their number one headache.

• The senior employees will love you because you've helped many of them realize their goal, which is to "get the hell out of ___________" (fill in the agency or school district).

• Taxpayers will love you because you've resisted the tax-hike cop-out adopted by less enlightened public officials.

• Most importantly, the kids will love you because you've replaced their tired old math teacher with someone young, engaging and energetic.  When the test scores arrive, you'll see they've responded favorably. 

(Who will oppose you?  The unions and their acolytes in the Democrat caucus.  It means fewer dues-paying members.) 

Obviously a program like this will impact the state retirement systems, so make sure the actuarial plan is sound.  Even if turns out you'll need to spend 50 cents, rather than 40, to save a dollar, you're still saving 50 cents.

Once the 800-pound payroll gorilla has been tamed, then legislatures and school boards can reverse the policies that created these bloated payrolls in the first place.  But not before.

Hope this helps.