There is no getting around it. The 2010-11 school year will go down as one of the tough ones for Texas districts. Forced to cut their budgets due to a drastic cut in state funding, many had to resort to reductions in force (RIFs) to make ends meet.
One trend that emerged in the spring of 2011 helped some districts cut costs through attrition: the use of early resignation incentives. Teachers have until mid-July to let districts know if they intend to return the following year and many do wait until the last minute. The use of incentives to give the district an early heads-up on potential staffing issues is a practice we’ve reported on in earlier issues of HR Exchange. But in 2010-11, many more districts used them and not because they wanted to get a handle on which employees they would need to replace. They were looking at the long-term cost savings of eliminating positions through attrition.
With budget cutting a seemingly never-ending process, more districts are likely to try offering early resignation incentives this school year. The Texas Education Agency (TEA) provided a bit of good news for districts that want to try that option.
In October, TEA sent a letter to administrators 
stating that districts can request approval to use Education Jobs Funds to provide early resignation incentives. TEA provides additional details and frequently asked questions on its Education Jobs Fund—Guidance Web page . The agency also provides a link to the form districts must complete to get approval on the same page.
HR Services informally tracked district use of these incentives in 2010-11 through media reports and observed both a sharp increase in the number offered and the size of the incentives themselves.
The incentives were structured in many different ways:
With so many different configurations offered, it was not possible for us to effectively isolate and analyze which factors most affected employee participation. We can tell you that the districts we interviewed were pleased that they offered the incentive and were able to avoid RIFs.
Like all Texas school districts, El Campo ISD district leaders were watching the 82nd Texas Legislature and knew that major budget cuts were imminent. The district’s early projections had it losing between $3.5 and $4 million in state revenue. District leaders knew that the size of the cuts would require spending less on personnel. They considered different options, including nonrenewing all probationary contract teachers, but the district’s board pushed for other solutions.
“We did not want to do anything that would be a major disruption to the educational process or hurt morale,” said David Bright, El Campo ISD assistant superintendent of finance. “If possible, the district wanted to avoid the use of a reduction in force.”
The board approved an exit incentive of 20 percent of an eligible employee’s base salary for his or her voluntary resignation at the end of the year. Classroom teachers, administrators, and professional support personnel were eligible. The district capped the number of participants it would accept by position: 15 elementary classroom teachers, 20 secondary classroom teachers, 4 administrators, and 5 professional support personnel.
At the same time, the district offered an early resignation incentive for paraprofessional and clerical employees, offering up to 33 of them 20 percent of their base salary for early notice of their intent to resign.
Six elementary teachers, 14 secondary teachers, 2 administrators, 3 professional support employees, and 11 paraprofessional/clerical employees turned their paperwork in on time and received incentives through the program. El Campo ISD Superintendent Mark Pool said that the incentive cost the district more than $329,500. The net payroll savings was more than $1,486,800.
Districts that have many long-term employees with large local leave balances may want to look to West Orange-Cove CISD (WO-C CISD) for a unique example of an early resignation incentive combined with a change in leave policy that offers both short- and long-term cost-saving benefits.
In the short-term, the district was looking to reduce its personnel costs by up to 50 positions. The long-term goal was to limit reimbursements paid to exiting employees for local leave days. Paying employees when they left for the local leave they had accumulated proved to be an expensive proposition. According to Executive Director of Human Resources Anitrea Goodwin, “The district could no longer afford the cost associated with this benefit.”
District leaders made the decision to couple the resignation incentive with a change in leave policy that would cap the local leave days for which employees would be paid at 100. The WO-C CISD board voted to approve the policy change and incentive plan at the same time.
The district was, in effect, making employees with lots of accumulated local leave an offer that they would have a very hard time refusing: take the incentive and get paid for your leave days or refuse the incentive and limit your leave reimbursement. “Many of our participants had large leave balances for which they would not have been compensated had they not taken advantage of the incentive,” Goodwin said. According to a story in The Orange Leader newspaper, 97 employees had accumulated more than 100 days of local leave and 7 had accumulated more than 300 days.
The district offered the incentive to the first 60 full-time employees that turned in their paperwork and got 48 takers by the deadline, March 14. They received the incentive—10 percent of base salary (minus stipends or supplemental duty days)—plus reimbursement for all of their accumulated local leave. The district’s new leave policy went into effect on March 18, right after the resignation incentive deadline.
For employees who took the incentive, contract employees who retired received $100 per leave day, while those who resigned got $50 per leave day. Retiring paraprofessionals got $50 per leave day and those who resigned earned $25 per day. The threat of losing substantial local leave day reimbursements was just too much money for many long-term employees to leave “on the table.”
Goodwin believes pairing the incentive with the leave change was beneficial for the district and for employees. The incentive attracted enough participation to allow the district to avoid a reduction in force, limit its liability for future leave reimbursement, and cut its budget deficit. The district estimated that cutting up to 50 positions would save $2 million in salaries and benefits.
Like many districts, Manor ISD was looking to reduce the number of paraprofessional and professional employees who could be subject to a reduction in force when leaders decided to try an early resignation incentive.
Manor opted to offer an incentive of 8 percent of base salary for professionals and paraprofessionals for those who offered early notice of their resignation. The district offered an additional $500 for classroom teachers who took the incentive and had perfect attendance from April 1 through the end of the school year. All regular Manor ISD employees with at least 10 years of in-district service were eligible for the incentive and the district limited participation to the first 20 eligible employees who applied.
Manor ISD leaders chose the amount of the district’s incentive by informally surveying neighboring districts to come up with a benchmark. “We also wanted to make the amount meaningful for serious consideration for qualified employees,” said Willie, Watson, Manor ISD’s executive director of Human Resources.
Nine employees took advantage of the incentive. Participants received a minimum of $2,000 and the maximum payout was capped at $5,000. The district spent $29,500 on the incentive and is saving $366,607 on salaries and benefits this year.
Watson believes the outcome helped the district. “Although we only had approximately 100 employees who were eligible for the incentive, Manor ISD was able to accomplish our financial reduction objectives without a RIF or a financial exigency being declared,” Watson said.
With austere budget conditions expected for the foreseeable future, district interest in employee resignation incentives is likely to remain high in 2011-12. HR administrators must keep a few things in mind if their district tries an incentive:
—“WO-C CISD to consider staff reduction,” by Tommy Mann, Jr., The Orange Leader, March 1, 2011.
