Advocacy Issue Brief: The Business of School Districts
January 2002
The Issue
In addition to increasing student achievement, school board members must focus time and attention to the business of managing their school district. In fact, in many places the local school district is the town's largest employer and among the largest businesses. A variety of legislation is considered by Congress that can have an impact on how effectively school districts operate. Local school board members should urge their members of Congress to enact legislation that will enable school districts to operate more effectively so that greater time and resources are devoted to increasing student achievement.
The following information highlights early retirement incentive plans and legislation on school districts' self-insurance pools as examples of legislation that can help school districts operate more effectively. This issue brief also provides information on the privatization provisions in the newly reauthorized Elementary and Secondary Education Act (ESEA) that highlight the new requirements on school districts to partner with private entities. Congress is increasingly likely to require expanded opportunities for private entities to receive federal funds for efforts to improve student achievement.
Early Retirement Incentive Plans (ERIPs)
In March 2001, NSBA's Delegate Assembly adopted a resolution on early retirement incentives. The resolution urges the federal government to amend the Age Discrimination in Employment Act (ADEA) to allow all public school districts to make age-based reductions in early retirement incentive benefits offered to its employees without violation of the ADEA.
H.R. 2558, the Teacher Voluntary Early Retirement Incentive Act of 2001, was introduced by Representatives Thomas Petri (R-WI) and Ron Kind (D-WI). H.R. 2558 would clarify that early retirement incentive plans for K-12 public schools are lawful, similar to the amendment enacted for colleges and universities in 1998. The Petri-Kind bill requires that: 1) such benefits are supplemental; 2) early retirement incentive plan options are voluntary; 3) employees are given at least six months to decide to retire; and 4) employees are given at least six months after such election to retire. The bill allows for option at the largest benefit available and provides for similar protections related to medical benefits. A companion Senate bill to H.R. 2558 is desired.
Local school districts could be subject to litigation under the Age Discrimination in Employment Act (ADEA) if they offer certain early retirement incentives. The discrimination is alleged on the belief that early retirement incentives result in additional benefits to younger employees who elect to retire early over the older employees who elect not to retire early. This issue came to light through our Wisconsin Association of School Boards (WASB).
Relying on a 1999 decision of the Seventh Circuit Court of Appeals in Solon v. Gary Community School Corp., 180 F.3d 844 (7th cir. 1999), the Equal Employment Opportunity Commission (EEOC) began a sweeping audit of hundreds of Wisconsin school districts demanding information from their collective bargaining agreements and their retirement records with the intent of challenging the legality of such ERIPs. Similar audits were scheduled in Minnesota, Ohio, Massachusetts, Illinois, Pennsylvania, and Indiana. Throughout the 1980s and 1990s public school districts had every reason to believe their ERIPs were lawful. It was not until the Solon decision was rendered in 1999, that these benefits were threatened for the first time.
In 1998, Congress amended the ADEA as part of the 1998 amendments to the Higher Education Act–by clarifying their intent that voluntary early retirement benefits are NOT discriminatory under the ADEA. However, this action was limited to higher education institutions.
Subsequently, the chief legal counsel at EEOC has suspended further audits, pending clarification of the legislation. He has indicated that revised EEOC guidelines will be issued as well–thus precluding any further EEOC audits. But this is a temporary fix at best; it is more important for a legislative remedy to occur.
School board members should convince their members of Congress how beneficial ERIPs are to teachers and school districts in restructuring the workforce: 1) to accommodate emerging needs as a result of new standards, new curricula, and increased accountability; 2) to remind them that ERIPs in higher education institutions are already lawful; 3) to get them to recognize that failure to clarify the ADEA for local school districts would result in increased litigation costs and reduced funding for educational programs aimed at improving student performance; and 4) to urge your senators to introduce a companion bill in the Senate.
Saving State Associations' and School Districts' Self-Insurance Pools
In the wake of September 11, Congress began considering proposals to help the insurance industry deal with future acts of terrorism. A legislative remedy was sought to provide a federal safety net because reinsurance companies (that insure the insurers) are already excluding property damage and liability resulting from terrorism. If legislation is to be enacted on this issue, it is critical that school districts that are self-insured or use self-insured pools will qualify for the proposed federal assistance. Failure to include self-insurers or self-insured pools in this legislation could result in too great a risk for school districts to be self-insured or participate in self-insured pools.
NSBA lobbied Congress on this issue expressing that if legislation is enacted, it is critical that school districts that are self-insured or use self-insured pools will qualify for the proposed federal assistance. During the first session of the 107th Congress, the House passed legislation to help the insurance industry deal with future acts of terrorism. Representative Biggert (R-IL) successfully added a provision to protect self-insured risk pools. H.R. 3210, the Terrorism Risk Protection Act, is broad enough to include self-insured districts because the language is broad enough to cover entities that are self-insured in any form. The protection is intended to be voluntary on the part of the insurance and self-insurance industry. Each provider of coverage would have to sign up prior to an event happening. The Senate was unable to pass the bill before Congress adjourned for the year. During the second session of the 107th Congress, additional attempts to pass this legislation are expected.
Thousands of school districts across the nation are either self-insured or participate in self-insured pools as a way to save taxpayer dollars because the premiums in the private insurance industry in many cases are deemed too expensive. If legislation is going to be enacted on this issue, it is critical that school districts that are self-insured or use self-insured pools will qualify for this assistance.
Local school districts strive to provide a quality education for students while spending taxpayer dollars in a responsible manner. Failure to include self-insurers or self-insured pools in this legislation could result in too great a risk for school districts to be self-insured or participate in self-insured pools. This could lead to increased insurance premiums for school districts because they would be captive to more costly and less competitive carriers of insurance. Under this scenario all school districts would be subject to increased costs.
Requirements for Private Entities
There is increased pressure to recognize entities in the private sector as providers of education services for public education students. Advocates for increasing the presence of private sector entities in public education believe that the private sector can enhance student achievement in ways that traditional school districts can not. The degree to which advocates have called for, including private entities in public education, varies from private school vouchers, which totally abandon public schools, to proposals that require local school districts to enter into agreements with or serve as partners with private entities, to proposals that give federal funds directly to private entities. As indicated below, ESEA includes new provisions on this issue. Each provision will require careful monitoring to determine the impact on public schools based on the specific item and in total. Additionally, the impact of ESEA on privatization in general will also need to be analyzed.
Supplemental Services
The newly reauthorized ESEA contains several provisions that expand the role of private providers in public education. For instance, ESEA contains "supplemental services" (after-school tutoring for low-income children) that must be provided after three years of not making adequate yearly progress. An eligible provider for supplemental services is a non-profit entity, a for-profit entity, or a local education agency. Up to 15 percent of Title I funds could go toward supplemental services (the school district must use five percent of its overall Title I Part A funds and may use an additional 10 percent of these funds, as well as funds from the innovative programs block grant). But the requirement to provide supplemental services to additional eligible students ends when the Title I Part A set-aside funds are spent. Each state education agency may use some of its funds to assist local education agencies that do not have sufficient funds to provide services.
The LEA must enter into an agreement with the provider selected by the parents. The agreement requires the LEA to develop (in consultation with parents and the provider) a statement of specific achievement goals for the student, how the student's progress will be measured, and a timetable for improving achievement. The parents and teachers of the student must be informed about progress. The agreement also must contain provisions with respect to making payments to the provider by the LEA, and the provider is prohibited from disclosing to the public the identity of any student. The agreement may be terminated if the provider is unable to meet the goals and timetables.
The state education agency (SEA) will maintain a list of approved providers across the state, by school district, from which parents may select a provider. The bill is silent on the role of school districts in the development of the lists. Providers must ensure that instruction provided and content used are consistent with the instruction provided and content used by the local educational agency and state, and are aligned with state student academic achievement standards. Local education agencies (LEAs) are required to give annual notice to parents that includes a brief description of the services, qualifications, and demonstrated effectiveness of each provider.
21st Century Community Learning Centers
Additionally, ESEA expands the role of private providers in the 21st Century Community Learning Centers. Previously, ESEA provided funds to LEAs for the 21st Century Community Learning Centers Program. NSBA raised objections to community-based organizations and others being authorized to receive funds directly.
Under the recently reauthorized ESEA a "community learning center" means an entity that assists students in meeting state and local academic achievement standards in core academic subjects by providing the students with academic enrichment activities and other activities during non-school hours (such as before and after school or during summer recess), and offers families of students opportunities for literacy and related educational development. Funds will be distributed to SEAs that will award grants to eligible entities. An eligible entity is a local educational agency, community-based organization, another public or private entity, or a consortium of two or more of such agencies, organizations, or entities.
Private Management Companies
The newly reauthorized ESEA also contains provisions regarding private management companies. For instance, alternative governance arrangements are a possible sanction for failing to meet adequate yearly progress. The LEA may implement an alternative governance arrangement for the school, consistent with state law, as follows: entering into a contract with an entity, such as a private management company, with a demonstrated record of effectiveness to operate the public school. In the case of an LEA that is in corrective action, the SEA may choose from a variety of sanctions including removing particular schools from the jurisdiction of the local educational agency and establishing alternative arrangements for public governance and supervision of such schools.
Vouchers
The recently reauthorized Elementary and Secondary Education Act does not include vouchers for private school tuition. Throughout the reauthorization there were several attempts to include voucher provisions, but all of these attempts failed.
The U.S. Supreme Court is considering the Cleveland school voucher case. The Cleveland program was ruled unconstitutional last December by a federal appeals court. The Supreme Court will hear the appeal, and a decision is expected by the middle of 2002. Voucher advocates on Capitol Hill have hinted that the expanded role of private entities in ESEA is merely a stepping stone to a federal voucher program.