At Alpena Public Schools, the district's fund balance has dwindled from $5.6 million in 2007 to $594,581 in 2010 because expenditures have exceeded revenues the last four years. The fund balance has been drained so as to balance the district's annual budget.
The current fund balance is now 1.6 percent of the district's $36.3 million annual operating budget. The Michigan School Business Officials recommends a 15 percent fund balance, said Michael Van Beek, the director of education policy for the Mackinac Center for Public Policy.
Yet, the school board just ratified a two-year contract with the teachers union that includes annual "step" increases, regular raises that generally range from 3 to almost 6 percent for teachers with less than 13 years of service.
Those teachers are also eligible for "across-the-board" raises that were negotiated. Alpena teachers will all get a .5 percent raise during the second year of the deal.
It's a scenario playing out throughout Michigan, where school districts fight unions for health care contributions only to lose any savings to annual yearly "step" increases, said Van Beek.
"When money is tight, handing out step increases for teachers simply for logging another year virtually guarantees that the district's financial picture won't improve without substantial cuts elsewhere in the budget," Van Beek wrote in an e-mail. "Automatic step increases are often viewed by unions as a natural-born right. In reality, they're a luxury that districts pay mightily for."
But Deb Larson, a Michigan Education Association staffer who worked with the Alpena teachers, said those teachers "absolutely" deserved the raises.
"The reason they can give those step increases is because teachers or support staff have made staff concessions in order to get those through health concessions," Larson said. "It has always been a balancing act. Their compensation has been offset by increased cost in health insurance."
Alpena Superintendent Brent Holcomb said the "hill to die for" in negotiations was keeping the district as the policy holder for health insurance and not going with the MEA's MESSA plan. Many districts have found it far less expensive to use alternative health insurance contractors rather than the MEA-affiliated MESSA plans, and recent budget battles in the state capitol have been fought over whether to make it easier for districts to contract out for health insurance alternatives.
Holcomb said maintaining its own insurance allows the district to set deductibles and decide what will and will not be covered.
But Holcomb said there was little hope of challenging guaranteed "step" raises.
"Trying to change the culture of steps and those expectations — that would be Mt. Everest-ish," Holcomb said. "You have to pick your battles."