Oregon’s Education Equation: Personnel costs are at mercy of outside forces

School districts' personnel costs reflect dozens of interlocking business decisions that ultimately are felt in the classroom. (File photo by Jake Arnold, OSBA)

Schools are a people business.

"We need the people to work with the kids, so that is the majority of the cost in any district," said Tricia Mooney, Hermiston School District superintendent.

For most school districts, personnel costs account for 80% to 85% of their budgets, making them the biggest source of cost increases.

Districts know employee costs must rise each year if they want to recruit and retain employees, Mooney said, but because of an array of outside factors, district leaders have limited control over their total employee costs.

School district finances are a tangle of interlocking income and expenses, where every yank on one thread pulls on something else. Through the rest of the year, the OREdNews series "Oregon's Education Equation" will be exploring different aspects of school districts' spending and revenue. The personnel costs for more than 80,000 full-time positions are buffeted by legislative decisions, market forces and negotiated compromises that make it difficult for any one of Oregon's 197 school districts to fully steer their contracts.

Broadly, personnel costs include salary as well as pensions, health care benefits and contributions to health savings accounts, state and federal taxes, unemployment and paid leave benefits, and any other negotiated employment perks.

Districts have no say in some costs, such as state and federal taxes or unemployment insurance. When the Legislature changes the rules to benefit workers, school districts must pay up.

Legislation expanding unemployment benefits for school workers over school breaks increased schools' unemployment costs. In just the second year since the legislation took effect, unemployment costs for districts statewide are more than five times what they were previously.

Paid Leave Oregon, which allows workers to take up to 12 weeks of paid time off in defined circumstances, has raised districts' needs for substitute workers because classrooms can't be left empty. The paid leave benefits became available in September 2023, and districts say usage ramped up last school year as more people became aware of the option. Kim Cusick, Lincoln County School District business services director, said the district's substitute costs increased approximately $500,000 last school year, doubling the amount they had budgeted.

Legislative requirements that involve training, professional development or even new positions can also increase paid staff time. That time either must be tacked onto the calendar of paid educator working days or something else must come off the calendar.

Lincoln County School District Superintendent Majalise Tolan said one hour of districtwide immigration enforcement-related training related to recent legislative decisions costs the district $37,000.

"It wasn't just a free thing that now we are doing," she said. "It comes with time, and that costs money."

Public Employees Retirement System payments ate up roughly one-fifth of the State School Fund in 2025-27. District rates vary widely, but the statewide average base rate before figuring in side accounts is projected to be 27% of payroll for 2027-29. PERS net average rates are predicted to climb more than 4 percentage points for 2027-29, and districts have no choice but to pay that. A future article in Oregon's Education Equation will look at this closer.

Oregon Educators Benefit Board rate increases are capped at 3.4% by law, and thus that's all districts are allotted in the Legislature's calculations for the State School Fund. But insurance companies and the market decide how much rates actually go up.

Variables such as deductibles and coverage must be juggled to keep premiums within the 3.4% growth allowance. Often districts must opt to compensate employees in other ways to make up for resulting changes in insurance. Oregon's Education Equation will also explore that dynamic more in a future article.

The biggest employee cost component, though, is salaries. School districts are complicated employers, dealing with a lot of employee classes: educators, administrators, school aides, facility workers, service providers, specialists and extra-duty assignments such as coaches and club advisers.

The State School Fund calculations attempt to capture increasing salary costs as a big statewide number, but it is indifferent to the actual increases facing each of Oregon's 197 school districts as they bargain new contracts or attempt to retain employees.

Total district salaries are bound by the finite resources available to them. When a district considers salaries for any group, it affects the pay and employment numbers available for every other group.

Salaries affect each other because the roughly 15% of the budget not going to personnel costs is largely inflexible expenses such as school supplies, facility maintenance, transportation and utilities. The district also must set aside reserves for emergencies, unexpected cost increases and future expenditures, such as curriculum or facilities work.

Districts are most able to adjust their expenses in the personnel costs portion of the budget, but that often means reducing staff or work days - options no district or parent wants. Fewer staff can lead to larger class sizes, and fewer workdays can lead to less instructional time, as recently addressed by Gov. Tina Kotek's executive order.

Most positions have an annual step increase by contract or agreement that provides a starting point for business officials to begin estimating personnel costs.

Lincoln County's Cusick said her district starts by calculating a 2% increase for everyone. Then they work up some numbers for what the district budget would look like with increasing pay at 1 percentage point increments.

Most years, the district is in the process of negotiating a contract with a union while writing its budget, forcing some educated guesses.

The bulk of staff, in many districts more than 90%, are represented by either the teachers union or unions for classified staff. Cusick said that in recent years, unions have started negotiations with requested raise percentages in the double digits as inflation has rapidly driven up costs everywhere.

Hermiston's Mooney said that when the biggest districts settle contracts, especially Portland Public Schools, that resets the bargaining table for the whole state. Smaller districts in more remote parts of the state must compete on pay if they want to attract and retain talent.

Lincoln County has among the highest pay scales in the state, but the cost of living on the coast is also higher than most places in Oregon, with affordable housing being particularly scarce.

Every change in pay scale, though, comes with ripples, including higher pension costs, increased related pay for coaches and other positions, and even changes to grants and awards. Districts use grants and awards to pay for programs using time from existing staff, but if the staff members' pay goes up, it affects how much the grant or award can cover.

"It was kind of eye-opening for me," Lincoln County's Tolan said. "When we fiddle on one thing … it has a lot of other ramifications."

Tiana DeVries, Lincoln County School District deputy superintendent of human resources, said that when school boards see budget proposals for personnel costs, they are seeing the end result of thousands of interlocking decisions balancing student needs against fiscal realities.

Contract negotiations are challenging because a school district is a multi-million dollar business whose mission is to care for children, she said.

"Knowing our board, they have a heart for students and a heart for employees, as do we, but then they are also responsible to make sure the budget is balanced," DeVries said. "It's hard on their hearts."

- Jake Arnold, [email protected]

Oregon's Education Equation series:

• District leaders balance instructional hours against other needs
• Global trends drive insurance calculations