YSU expects savings from new pay scale

Savings are projected to pay off an early retirement program in four years.
By HAROLD GWIN
Vindicator education writer
YOUNGSTOWN -- A reduced salary scale negotiated for newly hired employees in the Association of Classified Employees union is expected to have a long-term positive impact on Youngstown State University's financial health.
"The savings to the university are significant," said John Habat, vice president for administration.
Information provided by the university in response to a public records request from The Vindicator outlined the potential savings of the two-tier salary schedule negotiated as part of the new ACE contract in August. The three-year contract runs through 2008.
ACE union employees have multiple pay ranges or levels in their pay scale, depending on their job classification, and those who were hired before Aug. 16 of this year won't be affected by the lower schedule that covers only new hires.
Not only are the salaries lower, but the new hires won't be getting additional pay increments for longevity like current workers receive. Longevity wasn't something ACE negotiated as part of the contract, according to the university.
The projected salary savings information was presented to the YSU Board of Trustees in a closed-door session in October.
Example of savings
It uses "pay range 3," near the bottom of the salary scale, as an example of what the difference in the two-tier schedule will mean to the university.
For example, under the old scale, an employee would start at $12.27 an hour under pay range 3, and, based on 40 hours a week for 52 weeks, would make $24,877 annually. (They could earn more if they work overtime.)
Under the pay schedule for new employees, a worker in pay range 3 would start at $11.31 an hour and make $23,524 a year.
Assuming annual pay increases of 3 percent, the old-scale employee would make a total of $178,178 over six years. Someone on the new pay schedule would make $153,754, a difference of nearly $25,000 in savings to the university.
The projected savings are even more apparent when expanded over a 15-year period, again assuming 3 percent annual pay increases, according to the YSU information. It shows that total wages for a pay range 3 employee under the old scale would be $556,303, while an employee hired under the new schedule would earn $454,771 over 15 years, a difference of just over $100,000.
That's just for one employee at the lower end of the pay scale. The difference in hourly rates is more significant for higher-paying jobs. For example, the top starting hourly rate for someone hired before Aug. 16 was $27.78. The top starting rate under the new salary schedule is $25.62 per hour.
Expected to increase
The savings are expected to be much larger as the number of retirees at various pay levels increases, and the new ACE contract includes an Early Retirement Incentive Plan in the new contract to entice more workers to leave early.
If 100 employees retire and are replaced with lower-pay-schedule workers, the savings could translate into $10 million or more over that 15-year period.
The university is hoping that the number of early retirees exceeds that mark.
The early retirement plan was initially offered only to an estimated 131 ACE employees who would be eligible to retire early but has since been offered to all university employees who contribute to the Ohio Public Employees Retirement System.
The university estimates that, in all, 184 employees will be eligible to take advantage of the plan. ACE union officials think the total number will be even higher, perhaps as many as 220 employees. Some 60 YSU employees have already notified the university of their intent to take advantage of the early retirement plan.
Offsetting costs
The savings realized by bringing on new employees at lower hourly rates will be used to offset the cost of the plan, which requires the university to buy up a limited amount of service time of employees as an enticement to retire early or at a higher pension rate.
If all 184 people on the university's list retired when eligible, the program would cost YSU $9.91 million over the next three years in buyout costs.
However, bringing new employees on at the lower hourly rates would save the university $7.84 million over that same period, leaving the university to come up with the $2.07 million difference.
The board of trustees has already agreed to set aside $1 million out of fiscal year 2005 unencumbered year-end revenue as a down payment on the retirement incentives.
Borrowing
The information provided to the trustees suggests that the remaining $1.07 million could be covered temporarily by borrowing from other university funds, a loan which could be repaid in fiscal 2009 when YSU should experience a permanent base annual salary savings of $3.6 million as a result of the lower pay schedule.
All of the numbers are predicated on employees' taking the early retirement as soon as eligible, though university administrators say that may not occur. Employees must notify the university by the end of June 2007 if they are going to take advantage of the plan.
Habat said the same savings will eventually be realized as more senior workers retire. It just may take longer.
Union skeptical
ACE officials aren't convinced the university's cost savings will ever be realized.
"I've been through three buyouts at the university and projected savings never materialized," said Ivan Maldonado, ACE vice president.
Maldonado said it's true that longevity for people hired under the lower pay scale isn't addressed in the new contract, but the union thinks it still exists for them. Past contract practice and Ohio law provide for it, he said, adding that it is an issue that may be contended later.
ACE President Christine Domhoff thinks the early retirement incentives will end up costing the university more than $10 million in buyout costs.
The only way it will be able to save money is by not replacing retiring workers, she said.
gwin@vindy.com