Questions and Answers on the Salary Reduction Plan
Nov 4, 2020 3:00 PM
Why was there a need for a salary reduction plan at FSU?
Like all residential USM institutions, Frostburg State University is facing a budget challenge this year. We have taken several important steps already to address the budget challenge, including reducing our operating budget, returning 36 vacant positions back to the State, repositioning staff as a cost-saving measure, taking $500,000 from our cash reserve fund, and cancelling a number of ongoing or anticipated staff searches for this year.
We still faced an estimated $1.433 million deficit that we address through the temporary salary reduction plan and layoffs. This is not the first time FSU has asked faculty and staff to reduce their compensation. The most recent time was in 2010.
When did FSU begin negotiations with the bargaining units for AFSCME and FOP?
FSU began salary reduction negotiations in September after we were advised by USM to include salary reductions as a means to reduce our budget deficit. Up to that point, we were not in a position to negotiate with our bargaining units given that salary reduction option had not been authorized by the Board of Regents.
Beginning in late May, we had discussions regarding the budget with faculty and staff leadership. Given our commitment to transparency, we shared the likely budget shortfall through several virtual meetings with faculty and staff leadership. Throughout the summer, we communicated that we were working with a moving target regarding the budget because of enrollment uncertainty as well as state government decisions on appropriation cuts. The possibility of salary reductions was discussed as part of our budget process as the summer progressed.
What was the thinking from FSU regarding the salary reduction plan?
We decided against including furloughs because of some legal/HR concerns that are explained more fully in a question and response below. As an alternative, we did decide to offer administrative holidays in our later proposals and ultimately implemented 3 administrative holidays for faculty and non-represented staff taking a salary reduction.
We calculated that we needed to reduce the salary budget of full-time employees by approximately 3.2%. The middle column in the table below shows the relative reduction by employee group if we based it on the overall salary budget. The rightmost column shows how the distribution of our last offer to AFSCME would have impacted each group. Because we were excluding employees making $40,000 or less and we were asking employees with higher salaries to assume more of the salary reduction burden, the percentages shifted to faculty and non-union staff. Our last proposal, which we felt was reasonable, reduced the impact on employees represented by the bargaining unit by half from 32% to 16%. That resulted in faculty assuming a larger proportion from 44% to 51% (which includes a reduction in winter and summer intersession pay) and non-represented staff assuming an increase from 24% to 33%. This plan was rejected by AFSCME.
|
Employee Group |
Proportion of Total Salary Budget |
Proportion of Salary Reduction Proposed by FSU |
|
Union Represented Staff (AFSCME & FOP) |
32% |
16% |
|
Faculty |
44% |
51% |
|
“Non-represented” Staff |
24% |
33% |
What was offered by FSU to AFSCME?
There were five proposals presented to AFSCME. This is a summarized version of those five proposals:
|
Salary Range |
Initial |
Rev. 1 |
Rev. 2 |
Rev. 3 |
Rev. 4 |
|
Date |
9/14/2020 |
10/1/2020 |
10/5/2020 |
10/13/2020 |
10/15/2020 |
|
$220,001 - 300,000 |
10.00% |
10.00% |
10.00% |
10.00% |
10.00% |
|
$200,001 - 220,000 |
7.30% |
7.40% |
7.35% |
7.40% |
7.40% |
|
$170,001 - 200,000 |
6.80% |
6.90% |
6.85% |
6.90% |
6.90% |
|
$150,001 - 170,000 |
6.30% |
6.40% |
6.35% |
6.40% |
6.40% |
|
$130,001 - 150,000 |
5.80% |
5.90% |
5.85% |
5.90% |
5.90% |
|
$110,001 - 130,000 |
5.30% |
5.40% |
5.35% |
5.40% |
5.40% |
|
$100,000 - 110,000 |
4.80% |
4.90% |
4.85% |
4.90% |
4.90% |
|
$90,001 - 99,999 |
4.30% |
4.40% |
4.35% |
4.40% |
4.40% |
|
$80,001 - 90,000 |
3.80% |
3.90% |
3.85% |
3.90% |
3.90% |
|
$70,001 - 80,000 |
3.30% |
3.40% |
3.35% |
3.40% |
3.40% |
|
$60,001 - 70,000 |
2.80% |
2.90% |
2.85% |
2.90% |
2.90% |
|
$50,001 - 60,000 |
2.25% |
2.40% |
2.30% |
2.40% |
2.40% |
|
$40,001 - 50,000 |
1.50% |
1.70% |
1.60% |
1.70% |
1.70% |
|
$0 - 40,000 |
1.15% |
0.00% |
0.60% |
0.00% |
0.00% |
|
Admin Holidays |
0 |
0 |
2 |
2* |
3* |
*To be added to Dec. Holiday Schedule
Why was the decision made to implement layoffs?
Following our Collective Bargaining Agreements with AFSCME and FOP, we held meetings to find solutions that would enable us to realize the $1.433 million in savings we needed. We reached an agreement with FOP. We were unable to reach an agreement with AFSCME and we then followed the collective bargaining agreement and process. We issued layoff letters so that we could realize the 16% we were asking of AFSCME in our last proposal. Those layoffs do not take effect for 90 days from the date of those letters.
Why not use the “Fund Balance” to avoid any salary reductions?
FSU’s cash fund balance serves as our savings account. If the pandemic had not occurred, we would have had a fund balance of approximately $24 million at the end of June 2021. Our starting balance in July 2019 was $22 million and we would have added $1 million in each fiscal year 2020 and 2021. Instead, we did not add any in 2021 and took $2 million out in large part because of expenses during the spring and summer of 2020 when we continued to pay all employees and had no revenues coming in (e.g., we refunded residence hall revenue, food service revenue, student fees and had no summer camp revenue). We already plan to take another $500,000 from our fund balance this fiscal year to support our fiscal challenges. Therefore, on July 1, 2021 we are already looking at a fund balance of approximately $19.5 million instead of $24 million (a 19% reduction). We decided it was not fiscally prudent to take out another $1.433 million, which would have reduced our reserve by almost 25% over what it would have been without the pandemic. The reason for that decision is that the future is uncertain; we have already been told by the state to assume the reduction this year is a permanent one and that we should plan for an additional reduction in appropriations in the upcoming 2022 fiscal year.
Some have asked us to take just $240,000 from the fund balance. That is not an acceptable solution in that we are committed to be equitable across all employee classifications. We personally would not favor one group of employees over the others during this time. What we need is $1.433 million to balance our budget.
Can you explain more regarding the decision not to do furloughs?
We had extensive discussions with the Maryland Office of the Attorney General and USM Human Resources staff. There are several different legal and practical concerns with respect to furloughs and salary reductions.
The Fair Labor Standards Act (FLSA) requires that non-exempt employees be paid for hours worked in a pay period in the payroll for that period, or as soon as practicable for hours which are variable. This means that, for non-exempt employees in particular, if a furlough day were taken in a pay period, the University would need to reduce wages by the value of one day’s earnings to ensure that the payroll for all pay periods would meet FLSA requirements. Furloughs would also mean that for those exempt employees on the lower end of the FLSA-minimum salary range ($684 per week), the loss of a salary due to a furlough day would render them non-exempt, with significant impact on bargaining unit eligibility and leave.
The FLSA requires that the University must pay FLSA-exempt employees, which includes University exempt staff, faculty and some members of the law enforcement team, on a salary basis, without adjustments to compensation based on increases or decreases to workload or hours. For governmental employers instituting a furlough plan, with a reduction in hours tied to a compensation reduction, the employer would be required to treat exempt staff as non-exempt and pay them on an hourly basis for all hours worked, including time and a half for overtime, in any week with a furlough. Furthermore, if an exempt employee ends up working more than forty hours in a workweek with a furlough, that employee would be entitled to overtime. In addition to the challenges associated with tracking and recording this time, it could potentially eliminate the cost-saving associated with the furlough plan.
The University’s use of a salary reduction allows the loss of earnings to be spread over many pay periods, instead of concentrating the loss in a few pay periods as would be required with furloughs. Moreover, the University could not provide a salary reduction that corresponds to additional time off for exempt employees and faculty without violating FLSA requirements that those employees must be paid on a salaried basis.
We offered three days of administrative leave to partially mitigate the impact of salary reductions.
Are these salary reductions permanent?
The answer is no. These salary reductions are designed to help us balance this fiscal year’s budget. In addition, we are committed that, to the extent that additional revenues become available (such as through additional federal relief) our first action will be to reconsider layoffs and restore salary reductions equitably across the three groups of employees.