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Early Retirement Incentive Program – Is It Really Worth Doing In Your District? Due to the current budget situation, school districts throughout California are looking at ways to cut costs and save money. Most districts have turned to increasing class sizes and virtually eliminating class size reduction programs all together. So what happens when the Class Size Reduction (CSR) program goes away? Class sizes increase, and the number of teachers decrease. And who are the teachers that “go away”? Many times they are your newer, more energized and (yes) less expensive teachers, with fewer years of service on the salary schedule. Who remains? The seasoned, more experienced, sometimes not so energized and (yes) more expensive teachers – teacher that may even be only a few years away from retirement). Faced with this situation, many school districts turn to an early Retirement Incentive Program (RIP) in order to avoid layoffs and potentially lose some great teachers. How does a RIP work? Money is offered to a predetermined number of employees if they decide to retire by a set date. The replacement teacher’s total compensation costs are much lower than the retiree (at least that’s the plan); therefore a savings should be realized, right? Sounds like a money maker . . . That’s pretty much the general consensus: that RIPs save money. But be careful, because that is not always the case. Why? Because there are so many “what ifs” in the assumptions. In order to make a RIP feasible, districts have to rely on a certain number of people taking the incentive, and cannot control the outcome, meaning your retirements may come at the hard-to-fill subject areas, such as math, science and special education. What’s more, certain costs sometimes do not get factored into the equation. For instance, what is the cost of the incentive program for those teachers that would have retired without a RIP (for free)? Make sure you know your district’s yield rate for retirements, as well as the average retirement age. Sometimes the assumptions used for calculating replacement salaries are understated. Most districts allow 10 years experience for placement purposes. I’m pretty sure salary placement isn’t considered whether or not a person is hired – let’s hope! Often times, when RIPs are discussed, there is so much talk of savings, which can lead to the community thinking the district is going to save money, when in reality the savings is passed onto the retirees (at least for the short term). RIPs are not always offered just to save the district money. Many times they are offered solely for educational purposes. Imagine that . . . So if you are contemplating whether or not to offer a RIP, just remember to check your assumptions and do the math first. Make sure the assumptions your district is using are not overly optimistic. Source: Nancy Walker is Director of District Support Services with the education consulting firm Total School Solutions. Walker is an experienced former director of fiscal services with a California school district |
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