District Ties Teachers' Salaries to Financial Health

Port Huron Area Schools negotiated into its teachers’ contract an unusual provision: The compensation of its teachers is tied to the financial health of the district.

According to the teachers’ contract, salaries were frozen in 2011. Instead, the district and union agreed to a compensation plan that is based upon maintaining a minimum 8-percent fund balance. If the expenses exceed revenues and the fund balance drops below 8 percent, teachers will take a reduction in pay to get the fund balance back to 8 percent. No teachers’ salary can be reduced below $50,000, however.

If the district’s revenue is greater than expenses and the fund balance grows, the teachers share in as much as 65 percent of the excess revenue.

Port Huron schools had expenses exceed revenue for five of the previous six years leading into the 2013-14 school year. Its fund balance had dropped from $23.6 million in 2006-07 to $4.8 million in 2012-13 to help make up for the overspending.

Teachers have had to take pay cuts to protect the fund balance from going below 8 percent. School officials said the average percentage reduction of salaries has been just below 9 percent.

According to a FOIA of one teacher’s salary, the reduction was 8.8 percent from 2012-13 to 2013-14.

The pay deductions come despite the state of Michigan giving the Port Huron schools more money each of the past two years, even as enrollment has declined.

In 2012-13, Port Huron Area Schools received $61.9 million from the state for 9,560 students. In 2013-14, the state increased its payment to $62.9 million for 9,236 students. This year, the district is projected to receive $63.9 million for 9,082 students. The state has given the district an additional $2 million the past two years despite there being nearly 500 fewer students, according to the Michigan Department of Education. Not all of the state money is allotted to the general fund, however.

“This helps the school district protect itself,” said Audrey Spalding, director of education policy at the Mackinac Center for Public Policy. “Because of provisions like this, Port Huron won’t spend itself into deficit.”

Kyle Olson, CEO of the Education Action Group in Muskegon, was critical of the policy.

“I think arbitrary pay cuts without respect to performance are ridiculous and counterproductive,” Olson said in an email. “What it tells me is Port Huron schools – and the union – see their teachers as nothing more than cogs in the education wheel that are of equal value." He also said, "They should look at every aspect of their spending, including pay and benefits, but use a scalpel instead of an ax.”

Leon Drolet, chair of the Michigan Taxpayers Alliance, said Port Huron’s solution wasn’t ideal.

“In an ideal world, teachers would be rewarded upon their teaching,” Drolet said. “But we’ve seen that world doesn’t exist. Actual teaching doesn’t play much role in how a teacher is rewarded. But this may be a second-best option.”

Drolet said he liked that it could create an incentive for teachers to look for ways to cut wasteful spending.

“Anything that causes employees to care about the bottom line of their organization is generally a good thing,” he said.