Sacramento City Unified School District Selection of a Retirement Incentive Program.*

No written comparative analysis of retirement incentive options was prepared for the public, staff or the Board of Education. Response to Finding 1: Disagree. The District contacted two companies that offer ➣ and administer early retirement incentives, Keenan & Associates (Keenan) and PARS. The District provided data to Keenan and PARS regarding several categories of personnel and associated salary / benefit costs. Keenan and PARS took the District's data and prepared proposals that showed cost-savings projections, using various options common to retirement incentives. Keenan's proposal provided a detailed written cost-savings analysis dated January 21, 2004. This analysis reviewed both Keenan's proposal and retirement incentive options sponsored by the California State Teachers Retirement System (CalSTRS). PARS provided a detailed written analysis of its retirement incentive options dated March 11, 2004. These proposals disclosed detailed projections of the potential cost savings resulting from each option, using several different sets of assumptions for each employee group. The former Chief Financial Officer Joan Butt and her staff compared the options and the projected cost savings resulting from each option. While no single document compares each of the proposals and all of the options within each proposal, the former CFO analyzed each proposal and set of projections side-by-side. This comparison showed that the PARS retirement incentive was projected to save more money than the other incentives studied and therefore was the more attractive option in view of the budget shortfall of approximately $26 million for the 2004-2005 school year. This option also satisfied the District Wide Budget Advisory Committee's recommendation for cost savings. Before action by the Board of Education, the District also engaged the expertise of School Services of California to review the assumptions and projections submitted by PARS. School Services orally confirmed to CFO Joan Butt that the PARS proposal was sound. School Services, however, identified some projected savings that might have been counted twice (i.e., some retiring teachers would not be replaced in a time of declining enrollment). This independent review, along with information of employees who had elected to participate in PARS, resulted in a revision to the projected savings. Staff reported these changes to the Board of Education at the Board meeting on June 3, 2004. Throughout the process, the Keenan and PARS proposals for cost savings were available for public inspection. <b>Recommendation 1.</b> On matters of significant cost, detailed analyses should be in writing, rather than oral summaries. Response to Recommendation 1: Concur. This recommendation is already implemented and has been part of long-standing District practice. As stated in response to Finding 1, staff asked for and received detailed written analyses regarding retirement incentives. A written summary of PARS proposal and projections was presented to the Board of Education and the public at its April 1, 2004 meeting. The District will continue, through its staff, to review and prepare analyses on matters of significant cost as a normal part of the yearly budget process. As a general rule, staff reviews 3 and prepares written analyses on matters of significant cost as a normal part of the yearly budget process. Projected salary and benefits costs, including comparisons from prior years, are an integral part of normal budget development. These figures and projections are reviewed by the Administrative Services Division, the District Wide Budget Advisory Committee, the Board of Education, and the Sacramento County Office of Education.

Staff could not provide the Grand Jury with documentation that the Board of Education received clearly understandable written information outlining the assumptions underlying the PARS proposal. <math>\triangleright</math> Response to Finding 2: Disagree. As noted in response to Finding 1 and

No analysis was done by the District to determine the effectiveness of the program in relation to the stated goal of saving $2.6 million in the first year. ➣ Response to Finding 4: Disagree. As of June 2004, the pool of participants who sought to participate in PARS was known and quantifiable. The Board of Education received a projected estimate of annual savings on or about June 25, 2004 based on the salary and benefit costs of these participants. Although the goal was to save $2.6 million, the fact remains that the actual savings achieved a significant budget reduction which enabled the District to meet its fiscal obligations. The District is continually negotiating its salary and benefit costs, while at the same time taking steps to attract qualified employees. Early retirement incentives are a valuable tool to reduce significant budget shortfalls, but even they are subject to many variables that do not allow for 5 exact figures. For example, once the retirement pool was known in June 2004, the average salary of new teachers who replaced retiring teachers was subject to the salary requirements of individual replacements. The District estimated a high average replacement salary for the PARS program, but is not in total control of its labor costs. This is why estimated cost savings cannot be expressed as a certainty but rather as a projection. In response to the Grand Jury's request, the Chief Business Officer reviewed the actual savings to the District for 2004-2005 and estimated that the savings amounted to $2.01 million. This compares favorably to the projections given to the Board of Education on June 3, 2004 of $2.1 million for the first year.

District staff and the Board of Education did not take adequate steps to ensure confidence in the process used in adopting the PARS program. In light of the failure of CASA for SCUSD, the District should have been especially careful in entering into another retirement related program. Response to Finding 5: Disagree. PARS is a standard early retirement incentive in ➣ wide use throughout California and elsewhere. It is not comparable to the CASA program, which the Board of Education took immediate steps to curtail once its deficiencies became known. In light of problems with internally run retirement incentives, the District reviewed and selected PARS, an outside program which was in wide use and has a proven track record. In addition, the District engaged the expertise of School Services of California. These measures were undertaken to ensure confidence in the process. It is clear that the decision to use PARS was appropriate and within the sound discretion of the District. PARS has saved the District money and has enabled the District to meet its fiscal obligations.

Board of Education meetings are currently video taped, but the tapes are only retained by the Sacramento Public Library for 60 days. ➣ Response to Finding 6: Agree. The District has videotaped its meetings since the early 1990's. Those tapes are on file and are available for public inspection. In 2002, the District moved its central office from downtown Sacramento to new facilities located at the Serna Center on 47^th Avenue. From that time until early 2005, videotaping systems were not in place; however, meetings were audio taped. Now that video capability has been restored, Board of Education meetings are once again videotaped and are broadcast on local cable television networks.