IN THE MATTER OF THE FACTFINDING	FACTFINDER'S
BETWEEN	FINDINGS AND  RECOMMENDATIONS
NORTH KITSAP EDUCATION ASSOCIATION "THE ASSOCIATION" OR "NKEA"
AND
NORTH KITSAP SCHOOL DISTRICT "THE DISTRICT"	Salary Increments

 

HEARING:	January 18, 1983 District Administrative Office Poulsbo, Washington
BRIEFS:	None
HEARING CLOSED:	January 18, 1983
FACTFINDER:	Timothy D.W. Williams 4350 S.W. Galewood Street P.O. Box 2029 Lake Oswego, Oregon 97034

REPRESENTING THE ASSOCIATION:

Marline Rennels, UniServ Director, Spokesperson

Michael R. Schoeppoch, Executive Director Bellevue Education Association

REPRESENTING THE DISTRICT:

James Dionne, Attorney at Law

APPEARING AS WITNESSES FOR THE ASSOCIATION:

Joann Slye, Washington Education Association Field Representative, Research

Greg Enright, 5th Grade Teacher

Dick Ballard, NKEA Negotiator

Stan Harrison, NKEA President

Christopher Gilbreath

APPEARING AS WITNESSES FOR THE DISTRICT:

Robert Alford, Superintendent

Bill Christenson, Business Manager

Dorothy G. Diets, Personnel Coordinator

Kent Martin, Director of Business and Financial Services

EXHIBITS

Joint

1. NKEA Agreement, 1980-82
2. Memorandum of Agreement extending labor agreement through June 1983
3. Budget Extension No. 1

District

1. Review of salaries - Administrators vs. Teachers
2. Special levy elections
3. Appointment formula
4. Enrollment chart, 1982-83
5. Enrollment chart, 1981-82
6. Levy lid legislation, 1977-82
7. Basic education NERCS
8. Letter dated January 4, 1983 to Marline Rennels
9. Salary controls
10. Cost data on substitutes
11. LEAP document #2
12. LEAP document #4
13. Staff mix factor (generic)
14. Derived Base for Kitsap County
15. Comparison of salary schedules, December 14, 1982
16. Bulletin No. 1-83
17. Calculations on difference between actual salary and what the state pays
18. Cost data on sick leave buy-out
19. Summary of financial data as supplied by arbitrator

Association

1. Form 1191
2. Rationale for salary proposal, 1980-81
3. Analysis of class size vs. wage increase
4. Recommendation of Administration for contract approval, September 10, 1980
5. List of high school teacher
6. Request for course approval
7. Budget trend analysis
8. Budget trend analysis, summary of ending balance
9. Comparison of budgeted salaries vs. salary expenditures
10. Complete copy of letter from Superintendent to Marline Rennels, January 4, 1983
11. Salary and fringe benefits projection
12. Comparison of salaries with other districts
13. 1979-80 comparison of school districts on basic education certificated and classified staff ratios
14. 1981-82 comparison of school districts on basic education certificated and classified staff ratios
15. 1982-83 staff/pupil ratio

BACKGROUND

This matter came on for factfinding regarding a dispute between North Kitsap School District (hereafter the District) and North Kitsap Education Association (hereafter the Association). The dispute concerns payment of salary increments for 1982-83 for teachers covered by the parties' collective bargaining agreement. On November 4, 1982, the parties agreed to extend their 1980-82 collective bargaining agreement until June 30, 1983, exclusive of Article XII, Section 1, Salary (Jt. Ex. 2). With respect to that section the parties agreed as follows:

If the Association is able to verify that the District is unable to pay increments for 1982-83, the parties shall immediately write language for Article XII Section 1, Salary, reflecting this. If the Association is unable to verify the District's inability to pay increments for 1982-83, then the Association will request a fact finder's opinion and a hearing shall be held by such fact finder prior to January 30, 1983.

The Association was unable to verify the District's inability to pay increments for 1982-83. Accordingly, the parties selected Timothy D.W. Williams as factfinder and a hearing was held before him on January 18, 1983 in Poulsbo, Washington. At the hearing the parties had full opportunity to make opening and closing statements, examine and cross examine sworn witnesses, introduce documents, and make arguments in support of their positions. The factfinder tape recorded the hearing as an extension of his personal notes.

POSITION OF THE ASSOCIATION

The Association first asserts that the sole issue befor the Factfinder is whether the District has the financial ability to pay salary increments for 1982-83. The parties' memorandum of agreement, extending their 1980-82 contract through June 30, 1983, makes it clear that a Factfinder's opinion is to be sought if the Association is unable to verify that the District is unable to pay the increments. Thus the District's ability to pay is the only issue. Accordingly, the Factfinder should not consider the District's evidence or argument regarding such other issues as whether the District should pay the increments based on other budgetary priorities.

The Association further argues that nothing in the state funding scheme prohibits the District from granting the increases. The state funds and allows for teacher increments. It is true that SHB 166, passed in 1981, prohibits districts from granting salary increases beyond those provided in the state appropriations act and that subsequent legislative appropriations delayed state funding for 1982-83 salaries. But SHB 166 contains a grandfather clause permitting greater salary increases established by contracts in effect on March 20, 1981. Thus the two 10% annual increases negotiated into the parties' 1980-82 contract were proper. Therefore, the Association argues, the District cannot deny teachers the salary increments due them simply because it granted more funds for salaries thah the state subsequently allowed and funded.

Rather, the District can only deny the increments if it is financially unable to pay for them. The Association strenuously argues that, despite the District's assertions to the contrary, the District indeed has the ability to pay. According to the Association, analysis of budget trends since 1977 clearly indicates that the District consistently underestimates revenues and overestimates expenditures. The Association asserts that the District's budget projections for 1982-83 continue this trend and that in fact the District has the ability to pay the $120,000* needed for increments.

More specifically, the Association takes issue with much of the budgetary information contained in the District's January 4, 1983 letter (with attachments) to the Association (Assn. Ex. 11). Under the state funding system, certificated and classified FTE staff units are derived and funded on the basis of projected student enrollment. The January 4 letter discusses funding based on 178.360 FTE certificated and 51.427 FTE classified staff units. On the basis of the 3,746 enrollment figure as of October 12, 1982 (see Assn. Ex. 1), however, the District is entitled to state funding of 188.090 certified and 62.430 classified FTE's. In short, the District is understaffed and the understaffing provides additional funding of $393,409.96 that legally can be spent on salary maintenance, including increments.

Further, the District has had an enrollment increase. Rather than the 3,746 FTE pupil enrollment used in the October 12, 1982 computation (Assn. Ex. 1), the September through December 1982 average enrollment was 3907.2. Calculating on the basis of 3,900 FTE enrollment, the District is entitled to an additional 7.7 certificated FTE units and 2.57 classified FTE units. These additional units also generate additional salary dollars of $215,649.40.

Attached to Superintendent Alford's letter is a memo from District business manager Bill Christenson projecting salary and benefit expenditures for 1982-83. The Association asserts that this memo is based on inappropriate assumptions. For example, Mr. Christenson projected revenues on the basis of the 3,746 FTE pupil enrollment discussed earlier but projected expenditures on the basis of the staff necessitated by the increased enrollment also discussed earlier. That is, he understated revenues by $175,583.10.

In addition, the Association contends, Mr. Christenson's projection of 1982-83 certificated salary costs is inflated. Mr. Christenson took actual costs for September through December and projected costs for the remaining 8 months of the year based on the December figure. This method is inappropriate because the December costs were unusually high, the Association asserts. Utilizing a method more reflective of actual costs, the Association contends that the projected cost should be $5,226,031.96, which is $173,286.04 less than the $5,399,318.00 budgeted. Thus, these too are available dollars for increments, the Association asserts. Adding to this amount the District acknowledged excess of $102,846.00 in budgeted dollars over current projections for fringe benefits, the Association concludes that $276,132.04 is available.

The Association also disputes the portion of Mr. Christenson's memorandum that purports to demonstrate that the District's basic education budget exceeds the state apportionment figure by $621,600. For example, the apportionment figure of $4,253,377 for certificated salaries, as stated earlier, understates revenues by $175,583.10 because it does not reflect increased revenues generated by increased enrollment. Adding to this the additional fringe benefit revenue generated by this increased enrollment, $25,596.26, the Association projects $201,179.36 in added salary and benefit revenues.

As another means of calculating the excess revenues available, the Association examines Report 1191 (issued by the state Superintendent of Public Instruction-SPI) (Assn. Ex. 1). Dividing the total available revenue presented on this form as of October 12, 1982 ($6,788,171.58) by the pupil enrollment as of that date (3,746), the Association concludes that the District receives $1812.11 annually per FTE pupil. Multiplying this figure by the 154 increase in enrollment (to 3,900 FTE), the Association asserts that the District has $279,064.94 available. The District's extended budget (Jt. Ex. 3) reflects an increase of only $154,820 in state apportionment. Subtracting this amount from $279,064.94, the Association asserts that the projected revenue available is $124,244.94.

The Association also contends that the District will receive $91,545 more revenue in the form of federal PL 874 funds than budgeted.

In summary, the Association asserts that the following revenues are available:

State apportionment	$124,244.94
PL 874	91,545.00
Inflated salary & benefit expenditure projections	276,132.04
Total	$491,921.98
Less total cost of 4 portables	120,000.00
	$371,921.98

Subtracting the $120,000 needed to fund salary increments, the District will still have $251,921.98 available for discretionary use in addition to its budgeted ending net cash and investment balance of $104,948.00

For all these reasons the Association concludes that the District has the ability to fund increments and urges the Factfinder to find accordingly.

POSITION OF THE DISTRICT

The District contends that it does not have the ability to pay salary increments for 1982-83. The District notes that, although the state is now legally required to fully fund basic education, in fact it is not doing so. The District is already subsidizing teachers' salaries to the extent that they are under-funded by the state. The District contends that it should not have to increase its burden by also funding salary increments and that in fact it does not have the funds to do so.

According to the District, the basic education shortfall for 1982-83 is $560,573, as demonstrated in the budget extension document (Jt. Ex. 3). Although school districts in Washington are authorized to fund up to 10% of their budget through local levies, voters in the District, with few exceptions, have consistently rejected levies over the last ten years. The last approved levy was in 1978. Therefore the District is forced to subsidize the state revenue shortfall through use of its cash balance and other funds.

The District further notes that the revenue shortfall is largely attributable to teacher costs. The District currently has $179.66 FTE certified BEA staff units. The average salary for BEA Certs is $23,741.49 (Dist. Ex. 8, 9). The actual funded average salary, however, is only $23,099.64, assuming that the July and August raises are funded by the state as anticipated (see Dist. Ex. 17). The District has had to fund $115,314.77 the difference between the actual average salary and the state funded level (23,741.49 - 23,099.64 = 641.85 x 179.66 = 115,314.77). Adding to this the other teacher costs that are not funded by the state ($70,000 for substitutes, $30,000 for sick leave buy-out, and $76,900 for extracurricular activities), the District concludes that $292,214.77 of the total shortfall is attributable to teacher costs (Dist. Ex. 18). Dividing this figure by the average funded salary of $23,099, the resulting figure of 12.65 represents the additional FTE cost to the District. Adding this to the 179.66 FTE certificated units already discussed the District concludes that 192.31 FTE's are an actual budgeted cost to the District for 1982-83. (Dist. Ex. 20)

Thus the District disputes the Association's contention that, based on its FTE pupil enrollment, the District is entitled to funding for more certificated units than it has and that the excess funding may be used to fund increments. According to the District, taking into account the 2.85% reduction in state funds, the 2.5% reduction represented by the adjustment in the state mix factor, and the reduction in state funds for special education, only 183,3234 FTE certificated units are actually funded. When compared to the 192.31 FTE certificated units already established above as a budgeted cost to the District, it is clear that the District does not have the excess funds for staffing costs the Association claims (Dist. Ex. 20). Rather, it has underfunded by approximately 9 FTE's at an annual average cost of over $23,000 each for salaries alone.

The District further notes that the only employee group in the District receiving salaries in excess of the amount funded by the state is the teachers. Both classified employees and administrators are being paid within the level of state funding. In view of this fact it would be inappropriate to add to the excess teacher costs by paying increments, the District contends.

The District challenges many of the Association's assertions, particularly with respect to the District's January 4, 1983 memo outlining its current financial situation (Assn. Ex. 10, 11). For example, the Association claims that the District consistently has underestimated revenues and overestimated expenditures with resulting substantial cash carryovers from year to year, that this trend has continued in 1982-83, and that therefore the District in fact has ample funds to pay the increments. The District freely acknowledges that it has attempted to build up cash reserves over the last several years. It contends, however, that it acted properly in doing so because it anticipated potential future state revenue shortfalls. In 1982-83 these shortfalls in fact have occurred in even larger amounts than the District anticipated. Thus for the first time the District expects to use virtually all available funds to subsidize the shortfall and currently projects an ending cash balance for 1982-83 of only $2,000.

The Association further asserts the attachment to the January 4, 1983 memo (Assn. Ex. 10) inflates projected salary costs by relying on an unusually costly month, December 1982, to project costs for the remainder of the year. The District disputes this assertion and challenges the Association's contention that an average of the September through November costs (with some adjustments would be more representative. The District contends that it has had steadily increasing salary costs and a September through November average would understate actual costs. Moreover, December 1982 was not an isolated month made costly by several staff retirements with resulting sick leave buy-out and other one-time costs. In fact, two retirees were not fully cashed out in December; the District still owes them several thousand dollars. Indeed, the District anticipated a greater sick leave buy-out in February 1982 than it had in December 1982.

Further, the District disputes the Association's assertions with respect to PL 874 monies. In the past, the District budgeted only that amount it was certain it would receive in these federal funds at the time of budgeting. As a result, it is true as the Association contends that the District frequently received more PL 874 funds than it budgeted. In 1982-83, however, the District projected these funds on the basis of its second half payment from the prior year and what it expected to receive in the first half of the current year. In subsequent meetings with representatives of the Department of Education, however, the District learned that it might not receive a second half payment at all or would not receive it until after the end of its 1982-83 fiscal year. To date, the District has received only $22,000 more than what it budgeted for the first half of the year.

For all these reasons the District concludes that it does not have the ability to pay the salary increments. The District further argues that, even if it did have the ability to pay, it has higher priorities for funding than increments. First, the governor has proposed a further 4.5% reduction in state funds, which translates to a reduction in the District's budget of $375,000. Second, the District obviously needs to maintain a greater cash balance than the $2,000 currently projected. Third, other employee groups, who have received much lower salary increases than the teachers, deserve, as a matter of equity, to receive increases before the teachers are allowed to add to the increases they have already enjoyed. For all these reasons the District urges the Factfinder to find in its favor in this matter.

ANALYSIS

The first question the Factfinder must address is the scope of the issue before him. the Association contends that the only issue is whether the District has the ability to pay increments and that the Factfinder should not consider other issues raised by the District, such as whether teacher salary increments should be deemed a higher priority than other funding needs in the District. The parties' memorandum of agreement, extending their 1980-82 collective bargaining agreement to June 30, 1983 states:

If the Association is able to verify that the District is unable to pay increments for 1982-83, the parties shall immediately write language for Article XII Section 1, Salary, reflecting this. If the Association is unable to verify the District's inability to pay increments for 1982-83, then the Association will request a fact finder's opinion and a hearing shall be held by such fact finder prior to January 30, 1983.

As the Factfinder interprets this provision, it means that if the parties agree that the District cannot pay increments, they will simply draft a contractual salary provision to that effect and the increments will not be paid. If they disagree - that is, if the District asserts that it is unable to pay but the Association cannot "verify" that assertion - then a Factfinder's opinion will be sought to resolve the disagreement. In other words, the Factfinder will determine whether or not, in his opinion, the District has the ability to pay the increments. The Factfinder agrees with the Association that the memo of agreement gives him no authority to address issues other than the narrow issue of ability to pay. Moreover, he will interpret the phrase "ability to pay" to mean monies available beyond those needed to maintain the current programs and upkeep of the District. Therefore the Factfinder will confine himself to the question of whether there are sufficient additional monies to fund increments.

The parties agree that the projected cost of salary increments for 1982-83 is approximately $120,000. In determining whether the District has the ability to pay this amount, the Factfinder will not attempt to define exact revenue and expenditure projections for the District or to determine specific figures on particular budget items on which the parties disagree. Rather, he will examine the budget areas emphasized by the parties with a view toward determining whether, as the Association claims, underestimated revenues or overestimated expenditures would provide the $120,000 needed or otherwise, as the District claims, it is indeed unable to pay this amount.

The parties have debated at great length the amount the District can expect to receive for 1982-83 through state apportionment formula funds. The parties do not dispute that the District funds teachers' salaries at a level higher than that paid by the state. For ease of argument, the Factfinder will accept the District's assertion, as displayed in District Exhibit 17, that the District is picking up the $641.85 difference between the negotiated average salary of $23,741.49 and the state funded average salary of $23,099.64. Also accepting the District's statement that it currently has 179.66 FTE certificated salary units (CERTS), this means that the District must fund the resulting $115,314.77 shortfall (641.85 x 179.66 = 115,314.77).

In the Factfinder's view, however, the District did not successfully rebut the Association's claim that, based on FTE pupil enrollment, the District is entitled to state funding of more than 179.66 CERT units, whether or not it chooses to hire the additional staff allowed. Under the state apportionment formula, the District is entitled to 50 CERTS for every 1,000 students, or 1 CERT for every 20 students. Multiplying 179.66 x 20 = 3593.2 FTE pupils. Yet every FTE enrollment figure used by the parties at the hearing exceeded this number. The evidence indicates that current enrollment is 3,916 and that 3,900 would be a representative figure for computation. This translates to approximately 195 CERTS, an increase of 15.34 over the District's current staffing level of 179.66. Multiplying 15.34 by the state funded average salary figure of 23,099.64 yields $354,348.47 excess dollars in CERT salary monies alone. Even deducting the District's projected shortfall of $115,314.77 from this amount leaves available $239,033.70. Moreover, even using the lower 3,745 FTE enrollment figure contained in the most current official state report (Report 1191, as of October 12, 1982 - Assn. Ex. 1), the District is entitled to 188.09 CERTS, 8.43 greater than the 179.66 it currently has. Multiplying 8.43 by $23,099.64 yields $194,729.96 available. Again, even after deducting the $115,314.77 shortfall would leave $79,415.19 to fund increments. The Factfinder concludes from this evidence that the District has at least $79,000 available in state apportionment entitlement funds to fund increments.

The other area emphasized by the parties is salary and benefit expenditure projections. The parties disagreed strenuously over the proper methodology for computing these projections based on September to December 1982 expenditures (See Association Exhibits A-10 and A-11). The average certificated salary figure for September to November was $427,660.33. The December figure was 5474,288.00. The District projected the eight remaining months based on the December figure. The District did not persuade the Factfinder, however, that this was an appropriate method. While the September to November average may understate costs, as the District asserts, the Factfinder is not convinced that costs will continue at the December level throughout the year and therefore rejects the District's resulting deficit of $152,255 in projected costs as compared to budgeted costs for salaries.

On the other hand, the District did demonstrate that the Association's cost projection for certificated salaries, $5,226,031.96, underestimates costs to some degree. (See Assn. Ex. A-11, p. 4) The Association failed to take into account additional sick leave buy-out and other costs the District will incur in 1983. The District was not able to specify the total amount of these added costs, however. The Association's projected costs of $5,226,031.96 are $173,286.04 less than the $5,399,318.00 budgeted by the District. Even if the excess salary dollars were only half the $173,000 amount, however, the resulting $86,000 available, when combined with the available apportionment revenues of at least $79,000, would easily cover increment costs.

Moreover, the Factfinder notes that the district's own projections, in the January 3, 1983 memo from the District business manager (Assn. Ex. A-10), estimated a savings of $102,846 in projected benefit costs as compared to the budgeted amount. This savings, together with only minimal savings from underestimated revenues or overestimated costs, would fund the increments.

The Factfinder is fully aware that the above analysis does not take into consideration such issues as the imbalance between the state funding formula and the average teacher salary, the problem of withholding increment from current teachers while giving increment to new hires, the issue of teachers' pay versus administrators' pay and all of the other sub-issues raised during the hearing. The Factfinder emphasizes that these sub-issues are not properly a matter for his determination. The memorandum of agreement establishing the Factfinder's authority grants only the right to examine the sole issue of availability of funds for increments.

For all of these reasons, the Factfinder concludes that the District indeed has the ability to pay salary increments for 1982-83. The Factfinder is not unmindful of the uncertainties surrounding future state funding levels but emphasizes that his opinion regarding the District's ability to pay must be, and is, based on current information rather than speculation about future cuts in state apportionment funds. The Factfinder will enter a formal opinion based on the foregoing findings and conclusions.

IN THE MATTER OF THE FACTFINDING	FACTFINDER'S
BETWEEN	RECOMMENDATIONS
NORTH KITSAP EDUCATION ASSOCIATION "THE ASSOCIATION" OR "NKEA"
AND
NORTH KITSAP SCHOOL DISTRICT "THE DISTRICT"	Salary Increments

After careful consideration of all oral and written arguments and evidence, and for the reasons set forth above:

1.                                 In the Factfinder's opinion, the District has the ability to pay increments for 1982-83.

Respectfully submitted on this the 21st day of February 1983 by

[SIGNED]

Timothy D. W. Williams
Factfinder