Alternative

Facts:
How TUSD Administrators
Cut the Pay of Substitute Teachers
While telling the board and the public
J outsourcing = pay raises J

1



Background

On May 12, 2015, substitute teachers in TUSD gathered for a
meeting at Rincon High where they were told they could have their
questions answered about having their labor outsourced to a company
called ESI. A district administrator explained that the district had to
do this because of requirements of the Affordable Care Act. Presenters
stressed that the transition would be seamless, our pay rates would
stay the same, and we would not be responsible for any fees the
outsourcing company charged. The presenters also told us we would no
longer be responsible for paying into the Arizona State Retirement
System, so we would see a little bump in take home pay once we were
outsourced. In response to questions, presenters told us we would be
able to qualify for health insurance through ESI, but they would not
directly answer a question about how many days a sub would have to
work to qualify. Everything was presented as a done deal, and many
subs expressed anger and skepticism.
Indeed, the Affordable Care Act did pose a budget challenge for
large employers like TUSD. It required that employers keep track of the
hours worked of employees who worked variable hours, like subs,
who may work one day this week, five days the next week and 4 days
the next week. Those averaging 30 hours per week were supposed to
be offered affordable, employer-sponsored health insurance. Dr.
Sanchez estimated that providing qualifying subs health care coverage
would require the district to take on between $1.6 million and possibly
up to $3 million in added expense. That is because coverage through
TUSD costs the district about $5,385 per employee who elects
coverage. (Employees pay premiums of less than $48 per month.)
If the board decided to outsource, it would not only avoid the
expense of health insurance for subs, it would save the expense of the
contributions it had been making to the Arizona State Retirement
System on behalf of qualifying subs. Subs who work at least 20 hours

2
per week over 20 weeks must start paying 11.6 percent of their pay
into the system, and the school district must match that amount.
Around the country some school districts bit the bullet and
absorbed the expense of covering qualifying subs. Others responded to
the law by limiting the hours subs could work, which isnt really an
option at TUSD. Another option was to accept fines for refusing
coverage to subs. Or, like TUSD, some districts outsourced subs.
On June 2, 2015 members of the TUSD Governing Board discussed
the outsourcing proposal, and on June 9 board members voted 3-2 to
approve outsourcing. In these meetings ESI President Phil Tavasci told
the board that his company would offer qualifying subs health
insurance that was less expensive than the kind offered by TUSD, and
that his company intended to offer a 401K with a 4 percent match to
employees who worked at least 20 hours for 20 weeks.
Just 10 minutes before the vote was taken Chief Financial Officer
Karla Soto told the board: But potentially, you know, like the long-
term sub rate is being increased by 25 percent, and the daily sub rate
is being increased by 33 percent. A subfor examplea daily sub
working every day of the school year would make $4500 more in a
year. (3 hours 22 minutes into the video recording of the June 9, 2015
board meeting.)
Despite such a clear statement that subs would get raises under
outsourcing, when subs returned to work for the 2015-2016 school
year, they found pay rates had, indeed, been cut. Instead of the
increased earning potential Soto had assured, a daily sub who worked
every day of the year would see earnings drop between $440 and
$5,940, depending on the mix of schools served.
Upon listening to video recordings of the June 2 and June 9, 2015
board meetings, it is clear board members---and the public-- were
repeatedly told outsourcing meant pay increases for substitutes. There
was apparently never any explanation given to board members about
the complicated, multi-tiered way the district structured pay in 2014-
2015, nor were board members reminded that the district cut pay for
substitutes rather drastically after the recession, around 2011.
It is unclear from these meetings if administrators actually
intended to give all subs a raise, but then diverted the money
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elsewhere by time the school year started; or if administrators simply
failed to offer an accurate description that explained the way they were
proposing to re-structure pay for subs.
If administrators had described the imposed changes accurately,
they would have told the board and the public simply that they were
proposing to replace the multi-tiered pay rates for subs to flat pay
rates, eliminating the lowest rates of pay as well as the highest rates of
pay that the district was offering. Administrators would have had to
acknowledge they intended to cut the earning potential of someif not
mostemployees.
Moreover, not only was pay for subs cut, but the promise of
matching funds for a 401K never materialized. The opportunity to
receive 401K matching funds was supposed to be the reason that the
district was paying fees to ESI on behalf of subs that were higher than
the fees return-to-work retirees employed through ESI were paying.
Statements that subs would qualify for health care with ESI appear to
have been misrepresented, as well, as the company exploits every
allowable (and perhaps not allowable?) way to deny subs coverage. If
subs DID qualify, the premium cost to subs is $311 per month, which is
not affordable on a subs wages.
If administrators had told subs upfront at their May 12 meeting
that outsourcing meant pay cuts in addition to losing state retirement,
would subs have stayed home from board meetings? Would the same
number have returned to work when the 2015-2016 school year
opened, or would more have ended their employment in May, finding
new jobs before the school year started?
More importantly, if administrators had accurately told board
members that the outsourcing proposal would mean pay cuts for subs,
loss of retirement benefits, and health insurance that would be almost
impossible to attain, would the proposal have garnered the three
necessary votes?
Before casting his vote in favor of outsourcing, Board Member
Cam Juarez said, And so now were not only doing the cost-avoidance
but now were also looking to insureto take care of these folks. Or
make sure ESI is going to be taking care of these folks. I think were
talking about an increase, were talking about health insurancewhich
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they would get one way or the otherbut also were also talking about
covering..[fees to ESI] so we are not infringing on their income,
essentially. (3 hours and 22 minutes into the video recording.)
Before casting her vote in favor of outsourcing, Board Member
Krystal Foster said, Again, I want to re-iterate: it is a higher per hour or
per day rate, and its a 401K option . . .(3 hours 24 minutes into the
video recording.)
Board Member Grijalva gave reasons for supporting the contract,
but asked that a mid-year evaluation be scheduled; Juarez added that
he would want to see some kind of satisfaction survey conducted.
However, it seems that instead of publicly hearing these reports before
renewing the contract with ESI a year later, the contract renewal was
placed on the consent agenda with 40-some other items on June 14,
2016. The consent agenda was approved 3-2, without hearing any
progress report. Board members did not hear a report of survey
results and costs associated with the ESI contract until the next month,
on July 12, 2014.
Numbers from the July 12, 2016 report indicate by outsourcing
TUSD avoided the cost of insuring potentially as many as 156 qualifying
substitute employees. If all eligible employees opted to have
themselves covered, the district would incur expenses of ($156 X
$5,385= $840,060 for health insurance, plus an unclear additional
amount for state retirement benefits. (The report shows the district
avoided $248,826 in retirement contributions by outsourcing several
categories of employees.) Of course, if the district stopped
outsourcing, it could stop paying fees to ESI on behalf of these
employees, which could help pay some of the cost in taking them back.
The adoption and renewal of the ESI contract that outsourced
substitute teachers was based on misinformation. The pages that
follow show how pay for substitutes has compared during various
years, and they document misrepresentations administrators and ESI
publicly made about pay and retirement benefits subs would receive if
the board voted in favor out outsourcing; it hypothesizes that
misrepresentations were made about employee access to health care
coverage, as well. Based on this data, this contract should be

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terminated as soon as possible, and substitutes should once again be
employed by TUSD.

(This page blank. Insert pay chart here.)

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(This page blank. Insert pay chart here.)




















8
PAY

Thesis 1: TUSD administrators misled board membersand the publicinto believing
outsourcing would lead to significant raises in take-home pay for subs. In fact, TUSD and ESI re-
organized the pay schedule in a way that resulted in cuts for many. Instead of saying simply that
the district would move to pay subs flat rateseliminating lowest rates and highest rates
administrators consistently presented the proposal as a pay raise for subs. ESI and TUSD have
also provided inaccurate information about WHO received pay cuts. Also, while many long-
term subs did receive an increase in take home pay, the amount of the increase was wildly
exaggerated by a TUSD administrator (and would have been off-set by loss of retirement
benefits). Meanwhile, some long-term subs received pay cuts as high as 14 percent.


June 2, 2015 Board meeting, 25 minutes 30 seconds:
http://www.tusd.k12.az.us/contents/govboard/gbvideo060215.html
Dr. H.T. Sanchez, as he introduces updates to the proposed budget: . What we are going to
present are going to be reductions at the central office level and some restructuring that in
the end will allow us to pay almost $20 more for our long-term subs and daily subs and make
filling those positions much more attractive.

June 9, 2015 Board meeting, 3 hours, 20 minutes:
Dr. H.T. Sanchez: Taking a look at what were proposing, it is more money on the daily rate.
And the opportunity to put into a 401K with a match, and the opportunity for benfor
medical if that threshold is reached.

June 9, 2015 Board meeting, 3 hours, 22 minutes:
Chief Financial Officer Ms. Karla Soto: But potentially, you know, like the long-term sub rate
is being increased by 25 percent, and the daily sub rate is being increased by 33 percent. A
subfor examplea daily sub working every day of the school year would make $4500 more
in a year. And thats more than enough to pay the fees they would be responsible for.

Fact check and commentary: At most schools the long-term sub rate went from $100 per day to
$107 per day, an increase of 7 percent, NOT 25 percent. Moreover, the long-term sub rate was
CUT at 7 schools, from $125 per day to $107 per day, a DECREASE of 14 percent.
The most galling misrepresentation is that the earning potential of a day-to-day sub
working every day of the school year stood to make $4,500 more a year under ESI. In fact, with
the rate frozen at $92 regardless of which school the assignment took place, with the rate
frozen at $92 to eliminate they pay increase all subs earned after working 40 days, a day-to-day
sub working every day for the district actually suffered a PAY CUT of between $440 and $5,940
under ESI, depending on school assignments. [See the pay chart and think about the formulas to
understand this.] These were CUTS to the earning potential of day-to-day subs that range from
2 percent to 26 percent, NOT raises of 33 percent.





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PAY (continued)

About 10 minutes after Soto made this re-assuring statement that subs would get
significant raises if the district went with ESI, the board voted 3-2 to contract with ESI. A few
weeks later the school year started and subs began to realize how the higher pay rates had been
eliminated. If there really was an intent to give daily subs a $4,500 increase in their earning
potential and to give long-term subs nearly a 25 percent increase in their earning potential,
where the heck was previously earmarked money diverted to in between the vote and when the
school year started?

Feb 22, 2016. Dr. Sanchez delivers his state of the district address. (See video at
http://www.tusd1.org/contents/events_scpc_state.html, exactly 1 hour into the video.) In
response to a question about pay cuts to subs, he simply denies subs received pay cuts.

Dr. Sanchez: So the pay rate for subs is actually higher, its not lower. Theyre actually paid
$92 a day, last year it was $75 a day. So we are paying subs more this year than we did last
year.

July 12, 2016 Board meeting, 4 hours, 57 minutes:
ESI President Phil Tavasci: Additionally TUSD increased the daily rate from $80 to $92. This
impacted 72 percent of the pool. 28 percent of the pool was retired, though. Retirees got a
deductiona reduction, from $100 to $92. But the majority of the pool got the increase.
That helped with the fill rate, we believe.

Fact Check: Tavasci offered an inaccurate description of who received pay cuts. ALL day-to-day
subs received a minimum of $100 per day after 40 days. Also, during the first 40 days a sub
would earn either $75, $85, or $125 per day, depending on the school; there was no $80 rate.

July 12, 2016 Board meeting, 5 hours, 13 minutes:
Chief Human Resources Officer Anna Maiden: So 72 percent of the poolthat sub pool you
saw therereceived an increase. They went from $80 a day to $92. Ok? But only 28 percent
of that group is what we call retireestheyve already retired from the system and they came
back to work as subs. The year they were the retirees that we direct-hired-- as subs they were
making $100 a day. But in order to increase one we had to level the playing field, so thats
where you are hearing they had a reduction. Our long-term sub rate is $107 per day. There
were other rates for hard-to fill schools, schools that were further out. But, again, we wanted
to equal the playing field so everybody would go to whatever school needed them because
the higher rates werent helping getting them to go there, either.

Fact Check: No one was ever paid $80 per day, so Maiden is inaccurate right off the bat. In
2014-2015, day-to-day subs earned either $75 or $85 or $125 per day during their first 40 days
of employment in the year, depending on which school in which they worked. After the 40th day
they earned $100 or $125 per day, depending on the school. Maiden finally comes clean that
there were other rates available to subs before outsourcing, but she interestingly it takes her a
while to get around to saying higher rates. And she repeats the myth that only retirees could
make $100 per day. If Maiden and Tavasci are calculating the percentage of people who
received a pay cut on the percentage who are retirees, district administrators are providing false

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PAY (continued)

information. In point of fact, ALL day-to-day subs lost earning potential with the switch to ESI.
In 2014-2015 a daily sub who worked all 180 instructional days would earn a minimum of
$17,000, but as much as $22,500, depending on which schools the substitute covered. Under
ESI a daily sub working every day earned $16,560, representing a loss of between $440 and
$5,940.
When Maiden says But, again, we wanted to equal the playing field so everybody would
go to whatever school needed them because the higher rates werent helping getting them to
go there, either, she gives the impression that the board has had multiple discussions on the
merits of paying different rates at different schools. Did the board in fact have such discussions?
Did the board see data comparing fill rates at various schools from year-to-year and consider
what factors were impacting those rates?

October 1, 2016
Kristel Ann Foster-TUSD Governing Board Member Subs make $20 more a day with
ESI,, but do not qualify for state retirement (because ESI is not a public school district)
So there are pros & cons. Subs had to work full time to qualify for that retirement, and
not all subs worked full time. We didn't want to leave those depending on this benefit
high & dry so we created itinerant teaching positions so they could stay with us if thy
chose. Like I wrote above, we have had less vacant classes with no sub, because there
are more subs to fill our need. We said we'd try it and revisit the decision, which I am
open to doing. Again, these decisions are hard, and no decision will make every person
happy.
Like Reply 1 October 1 at 8:45pm

Fact Check and Commentary: 16 months after the board approved of outsourcing
with ESI, a very studious board member was apparently still under the impression
that subs were making more money per day with ESI than before ESI, and
distributing this misinformation on her Facebook page. There are absolutely no
scenarios where any sub was earning $20 per day more with ESI. Even though
there were pay boosts for many employees within their first 40 days of
employment, those same employees were expected to absorb pay cuts imposed on
days 41 to 180.

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Minimizing the real cost of ESI fees

At the June 9, 2015 board meeting at which the board voted in favor of outsourcing, Dr.
Sanchez repeatedly referred to the fee that ESI charged per substitute employee as a 2
percent fee. The district in fact pays ESI $8 per day for each sub. So if the sub earns $92 per
day, the fee due to ESI is actually a fee of higher than 8 percent, but one wonders if the
repeated references to the 2 percent fee planted the idea in some board members minds
that the fee really wasnt very much.

June 9, 2015 3 hours 15 minutes:
Sanchez: I know there was some question about the two percent so we are going to give folks
on top of the $92, $8 dollars to cover the 2 percent. So theyll get $92 as their take home and
on top of that well give them the $8 to cover the 2 percent so that they can cover the two
percent. The two percent isnt going to come out of that $92, thats money were giving them
on top.

Commentary: After this statement, both Stegeman and Juarez ask about ESI fees, repeating
Sanchezs language, calling it a 2 percent fee. Soto then clarifies that for subs the fee will be an
$8 flat fee, saying it is the same fee paid for the return-to-work retirees who arent subs,
which for them is 2 percent. The information did not sink in for Juarez, who then makes a
statement referring to the 2 percent fee. Foster also makes a reference to 2 percent in a thought
she did not complete, so it is unclear if she was referring to the fee.

























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RETIREMENT


Thesis 2: ESI and TUSD administrators misled board members into believing if the outsourced
subs, subs would have access to a 401K pension that matched their contributions at 4 percent
after they worked 20 weeks/ 20 hours per week. In fact, ESI does not offer any matching funds.

June 2, 2015, 1 hour 16 minutes 30 seconds
http://www.tusd.k12.az.us/contents/govboard/gbvideo060215.html


Dr. Stegeman: You said you were just adding a 401K provision. Is that the same as exists in your
current contract?
Tavasci: Yep, we currently have a 401K, weve had it since our inception.
Stegeman: Ok
Tavesci: Now for the first time were looking at adding a match. The reason being is all of our
past employees are return to work retired ASRS employees. A 401K match has never been
important to them. With some of these subs, that, that are losing the ability to contribute to
the ASRS through the 20/20 rule we are now going to look at offering a match for those folks.
Stegeman: But thats not in the current contract. So youre basically saying thats something
you are going to plan to negotiate with the district.
Tavesci: Correct.
Stegeman: And, of course, at some cost to the district. You are not going to just going to throw
this money in (unclear)
Tavesci: It comes out-in comes out-- of our fee. Our current fee.

Dr. Stegeman: I guess the issue. . . I wasnt being quite clear, so let me step back. I need to
understand for my purposes how the 401K option is going to compare to the existing option.
So those are both pre-tax options, so you are comparing two different pre-tax options, but
what is the impact on the employee?
ESI President Phil Tavasci: Great question. The ASRS is a defined benefit pension plan. Our 401K
is a defined contribution plan. To be honest it doesnt compare. The ASRS pension plan is the
Holy Grail of retirement plans. Theres less and less defined benefit pension plans in existence
today. They are all going to defined contribution 401K plans. So it certainly is not apples to
apples. Its not as good, Ill be the first to admit that. But up until recently we have not
matched on our 401K. We determined that this was the right thing to do. What we are offering
is the biggest match that we can. It doesnt compare as far as apples to apples. It is what we can
do.
Steegman: Right. So how big is that match? What are you offering?
Tavasci: Were looking, were still penciling it out. Were looking at a 4 percent match.
Stegeman: Ok. So if the employee contributes 4 percent, you would contribute another 4
percent.
Tavasci: Right.




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RETIREMENT (continued)

June 9, 2015 Board meeting, 3 hours, 30 minutes:
Dr. H.T. Sanchez: Taking a look at what were proposing, it is more money on the daily rate.
And the opportunity to put into a 401K with a match, and the opportunity for benfor
medical if that threshold is reached.

Commentary: If an ESI return to work employee earns a $40,000 salary and must pay ESI a 2
percent fee, he or she would pay ESI about $800 per year. If a full-time long-term sub works 188
days and earns $20,116, ESI receives fees from the school district on behalf of said employee
equaling $1,504. The reason fees for subs were set so high compared to the fees for retirees is
that subs were meant to be able to get a portion of those fees back in the matching funds
offered by the 401K. Without the 401K match, the fee the district is paying to ESI on behalf of
subs is ridiculously high.

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HEALTH INSURANCE
Hypothesis 1: ESI misled board members to believe that substitutes would qualify for insurance
through ESI, but that insurance just wasnt as valuable as the insurance they would qualify for if
employed directly by TUSD. In reality ESI makes a profit by denying insurance to subs by
limiting the hours credited to long-term subs and requiring subs to work summer school or
after school jobs to qualify for health insurance. Tavasci never explicitly stated this in public
meetings. Below is how it was presented to the board. To determine if the hypothesis is
correct that ESI is covering few if any subs with insurance--we would need to find out how
many of the 156 employees who would have qualified for insurance if employed by TUSD
actually were offered it by ESI, and how many bought health insurance from ESI.

From the June 2, 2015 Board Meeting 1 hr 31 min.,
http://www.tusd.k12.az.us/contents/govboard/gbvideo060215.html

Dr. Stegeman: As I understand itcorrect me if Im wrong because this is all still pretty new
to meas I understand it if we go forward with this plan, then theyll be getting health
insurance on the exchanges, youre not providing that. Do I misunderstand that?
ESI President Phil Tavasci: We do provide it. So
Stegeman: Oh, ok.
Taveski: We will track. If a sub qualifies for health insurance with us we when we incorporate
Stegeman: Oh, if theyre over the--right.
Taveski: We incorporate whats called the 12-month look-back period. If they work more than
1560 hours in a given year we provide them health insurance.
Stegeman: So youll be providing health insurance under essentially the same conditions that
we would be providing them health insurance? [Silence. Taveskis non-verbal responsesuch
as facial expressions or gesturesare unclear from the video, but he did not verbally correct
or clarify Stegemans assumption that ESI would provide health coverage under essentially
the same conditions .] Stegeman continues: Ok, so if thats true, and that makes sense,
wheres the economic---wheres the economic advantage to having you do it instead of us do
it?
Taveski: Great question. So we dont offer a plan nearly as good as the school district. So that,
that, that school districts have Cadillac insurance plans. We offer a minimum value plan thats
compliant with the Affordable Care Act. We make it affordable for our employees and were
incompliant [sic, I assume he means in compliance] legally that way. And it is much less cost
to us than the school districts Cadillac plan.
Stegeman: Right, ok, thats sort of what I thought. So. So there is another loss to the
employee there. I understand the rationale but there is a loss in coverage, in health insurance
coverage, the reduction, as well as the loss in the tax advantage in the retirement plan.

From June 9, 2015 http://www.tusd.k12.az.us/contents/govboard/gbvideo060915.html 3
hours, 22 minutes:
Board Member Cam Juarez: So in years past and conversations past we talked about fiscal
responsibility. In years past ACA was not an issue for subs and our part-time employees, and so
now it is. Now were not only doing the cost avoidance but were also looking to insure-- to take
care of these folks--or make sure ESI is going to be taking care of these folks.

15
HEALTH INSURANCE (Continued)


June 9, 2015 Board meeting, 3 hours, 30 minutes:
Dr. H.T. Sanchez: Taking a look at what were proposing, it is more money on the daily rate.
And the opportunity to put into a 401K with a match, and the opportunity for benfor
medical if that threshold is reached.

Commentary: It is unclear from the public meetings whether Dr. Sanchez understood that the
threshold of hours ESI would require subs to work in order to qualify for health insurance would
require subs to work summer school or an extra district job. He does seem to indicate at the
June 2, 2015 board meeting around 1 hour and 33 minutes in that he understands subs would
likely not have opportunities to work during summer school.

16
MORE QUESTIONS


Hypothesis: If current board members ask the additional questions, it may turn out that ESIs
performance isnt as stellar as portrayed in a presentation July 12, 2016.

Commentary and Questions about the ESI Satisfaction Survey:: At the June 9, 2015 board
meeting at which board members voted in favor of outsourcing, Board Member Cam Juarez
asked that board members see results of a satisfaction survey.. Results of four questions were
presented July 12, 2016, the month after the contract had been renewed. The exact questions
were not reported to the board, but they dealt with a level of satisfaction, timely and accurate
pay rate, payroll questions answered in a timely manner, and whether their perception of ESI
had improved since hire date. The report indicated that on each question the company had 96
to 99 percent approval.

The report did NOT indicate how many or what percent of employees returned surveys, nor did
it indicate if those surveys were sent to all employees or to the substitute teachers only. The
report did not indicate if employees were asked to respond to other questions, the results of
which were not reported. Does it make logical sense to anyone that substitute employees would
give ESI such high approval rates in light of the fact that so many employees received pay cuts?
Do any subs actually remember receiving this survey?

Commentary and Questions about the ESI the reported number of substitutes hired: The July
12, 2016 report from Tavasci and Maiden indicated there were 841 current substitutes, 310
newly-hired through ESI, and 646 applicants. Tavasci said of the new hires This is one of the
main reasons the fill rate went from 80 to 88 percent. At first glance, it might seem like ESI did
a remarkable job at recruiting new people into substituting. But did it? Are there now more
substitutes available? You would have to compare the number at different years to really know.
That data has not been publicly presented, but on at the June 2, 2015 board meeting, Karla Soto
states at 1 hour 9 minutes and 51 seconds We currently have over 800 subs in our pool, and
yet, you know we still have some that went unfilled. So if there were over 800 in the pool
reported on June 2, 2015 and 841 reported July 12, 2016, it doesnt really sound like ESI was
able to increase the pool in any dramatic fashion.
Finally, did the fill rate really go up as much as was presented? With all the mis-
representations it took to convince board members outsourcing was great , is it possible
someone was playing with numbers there, too?

17