February 2015

Districts still struggle to meet oil and gas boom’s HR challenges

Still booming. That’s the current state of the Texas oil and gas industry in the Permian Basin in West Texas and the Eagle Ford Shale that runs across South Texas. As noted in HR Exchange in 2012, the boom has brought a host of challenges for school districts and for HR administrators looking to attract and retain employees.
 
The school districts most affected by the boom aren’t out of the woods. “It’s just an ongoing challenge, and I don’t think they’re ahead of it yet,” said John Thomas, the executive director of the Region 18 Education Service Center (ESC) in Midland. “[Districts are] doing everything they can, but I don’t think they’ve caught up to the boom.”
 
Districts have raised salaries and offered stipends and bonuses. But the average teacher salary in oil and gas regions is $49,467, compared to $83,049 in other industries. Teacher recruiting is especially problematic with a dwindling pool of applicants, and teaching and support positions go unfilled for extended periods. The staffing challenges are partly the result of the pay disparity, but also due to the rapidly increasing cost of living fueled by high housing costs.
 
None of that is good news for the affected districts, but they are persevering, using every tool available to them to make sure the buses run on time and students continue to get an education.

Understanding the impact

Thomas conducted a survey of superintendents in Region 18 prior to the 2013‒14 school year to 
Thomas
Thomas
assess the impact of the oil and gas industry on school districts:
  • Seventy-two percent reported a teacher shortage
  • Sixty-seven percent reported unfilled teaching positions during the school year
  • Ninety-four percent reported a local housing shortage
  • Seventy-two percent reported teacher attrition due to high housing costs
  • Ninety-four percent reported being unable to hire teachers or other employees due to high housing costs
Thomas doesn’t think those issues have lessened since the beginning of the oil boom because of the student growth districts in his region have experienced. “Schools have had to hire additional staff. It’s just an ongoing challenge,” Thomas said.
 
Texas school finance laws have further complicated matters for oil and gas producing districts. They typically have more students, need more teachers, and often have to add facilities. What they don’t have is a cash windfall.

Rolling in dough?

Winn
Winn
Karnes City produces more crude oil than any other city in the state, so residents might think the district is flush with cash. That’s a common misunderstanding that districts have had to take pains to correct in their communities. “A lot of revenue is coming in, but we’re very different from the county and the city because of the structure of the school finance system,” said Karnes City ISD Superintendent Jeanette Winn.
 
Karnes City ISD is located in ESC Region 3 (Victoria) and has always been a property poor district. But thanks to the boom, property values have gone from $219 million in 2009 to an eye-popping $6.5 billion in 2014. The district doesn’t keep much of the new revenue because it’s now a Chapter 41 district, subject to the state’s recapture rules.
 
The district sent $26 million in property tax revenue back to the state this year and estimates that it will have to send $50 million back next year, huge amounts when you consider the district’s $10 million operating budget. Recapture effectively brings the district back down to its property poor status, which doesn’t leave much to pay for salary increases or district-subsidized housing options for employees.

Housing headaches

The lack of affordable housing has been a huge issue—maybe the largest challenge—for districts in Texas’ oil and gas regions. In many cases, districts and communities have stepped in to help employees find affordable options.
Seals
Seals
 
Cotulla ISD is in ESC Region 20 (San Antonio). It has approached the housing problem in a variety of ways. The district opened an RV park on district land and rented spots to employees who park there. When rising rents forced some staff members out of a local mobile home park, the district opened one that accommodates 10 to 12 staff members that have a mobile home. In addition to renting a spot, employees pay for their own utilities.
 
Recently, the district purchased an existing, 28-unit apartment complex that it plans to refurbish and rent to employees. The demand for housing is so high that five of the units are already occupied by district employees. “We realize that some of our employees are living here under circumstances that are difficult,” said Cotulla ISD Superintendent Jack Seals, noting that the housing shortage has forced many to live with family or commute long distances.
 
The housing shortage in Midland is much the same. The problem was so bad at the start of the boom that prospective teachers often returned their newly signed contracts to the district because they couldn’t find affordable housing.
 
Two foundations stepped in to help the district keep employees by offering assistance with living expenses. In 2013, the Scharbauer Foundation, a community nonprofit dedicated to the development and improvement of Midland, donated $3.6 million to the Midland ISD Education Foundation to be used to provide rental assistance for up to 300 teachers in 2013-14 and 250 teachers this school year.
 
Later that year, the Henry Foundation gave $1 million to the Midland ISD Education Foundation to help with rental and living expenses for support staff, especially custodians, bus drivers, and food service workers.
 
Winn said that the lack of affordable housing in Karnes City is definitely an issue but the district hasn’t been able to address it other than by offering pay increases. “We can’t afford to buy anything around here,” Winn said. Some property owners have been generous enough to offer reduced rental rates for teachers.

Higher salaries still fall short

Districts have increased pay but can’t keep up with their oil and gas industry neighbors.
 
Cotulla ISD has consistently struggled to attract and retain support staff, especially maintenance people, custodians, food service workers, and bus drivers. The district chose not to change base pay for those jobs but to offer employees a $2 per hour stipend to try and combat constant attrition. “We didn’t want to change the existing pay scales because every boom is followed by a bust,” Seals said.
 
The attrition is not confined to auxiliary employees. Some Karnes City ISD teachers have left to take higher-paying oil field jobs. Others were fortunate enough to own land and have earned enough from oil royalties to feel comfortable retiring. And they aren’t easy to replace. Karnes City ISD saw 40 percent fewer teacher applicants this year than last.
 
WarrenWarren
Community help has been critical in Midland ISD’s efforts to make salaries as competitive as possible. The district has raised salaries for all positions but was able to do something unique for its teachers with community help. Three community foundations (the Scharbauer Foundation, the Abell-Hanger Foundation, and the Henry Foundation) plus five oil and gas producers (Concho Resources, Pioneer Natural Resources, Apache, Chevron, and Warren-Cat) came together and donated $6.25 million to the district for teacher bonuses on top of district salary increases.
 
The district was able to provide 325 new teachers with $10,000 signing bonuses divided over a three-year period. It also gave the 1,200 teachers that it wanted to retain $2,500 re-signing bonuses. “This community has really stepped up…there’s a lot of pride in our schools,” said Midland ISD Superintendent Ryder Warren.

Staffing struggles

Being fully staffed is a thing of the past for most of the districts contacted.
 
Since 2010, Midland ISD has added nearly 5,000 new students, increasing the need for teachers and support personnel. Like Karnes City ISD, Midland ISD is now a Chapter 41 district and sent $33 million back to the state this year. “Equity is a very big issue for us. We feel we have a lot of issues that other districts don’t have,” Warren said. “Right now we have 200 vacancies for support staff, so to say we have a skeleton crew supporting the district is putting it mildly. We could use that money for staffing.”
 
Midland ISD’s attrition rate was at 25 percent when Warren arrived four years ago. It’s down to 21 percent now. Warren attributes that to the community support the district has received. “I would not want to think what we would look like without it,” Warren said. “We are still struggling.”
 
Karnes City ISD has trouble filling both auxiliary and teaching positions. “We tend to blame the teacher shortage on the Eagle Ford Shale, but we’ve also talked about the budget cuts the state put upon school districts several years ago,” Winn said. “All the layoffs probably affected the number of people going into teaching. That has exacerbated the situation we were already in.”
 
Smaller districts often don’t have dedicated HR staff, but the challenges recruiting, hiring, and
JohnsonJohnson
retaining employees has changed that. Prior to 2013, Forsan ISD Superintendent Randy Johnson was one of two administrators of the 708-student district. Mounting requirements and difficulty finding staff led to the hiring of Hanna Carter, who oversees personnel and has curriculum and instruction duties.
 
Forsan ISD (ESC Region 18) used to be flooded with applicants for any elementary position that came open, but no more, hence the need for an HR administrator. “The recruitment of teachers has become a more detailed, lengthy, and time-consuming process,” Johnson said.
 
“The shortage of teachers and manual trades staff dramatically reduced our applicants and forced us to leave positions open for an extended period,” Johnson said. The district is now fully staffed after filling a custodial position that had been open for more than a year.

Bracing for the bust?

Gas prices have dropped precipitously in recent months, leading oil and gas producers to cut staff and making for some nervous moments for district leaders.
 
Seals believes the additional teacher housing Cotulla ISD is building will be needed, boom or bust. “With every decision, there are plusses and minuses short- and long-term,” Seals said. “You just have to take action with the data that you have. We can speculate that it’s going to be tough, but at the same time, we still have teacher vacancies that we’ve been unable to fill all year.”
 
Winn confessed that she cringes a little each time the price goes down. “We’re all excited as consumers to see the prices fall, but we have some construction projects supported by bonds that were made possible by our higher property values,” Winn said.
 
The district was able to pass a $45 million bond to build a new elementary, a new high school, and add junior high classrooms. “We do believe there’s still a need even if the industry slows. Our enrollment won’t take a drastic downturn because it didn’t take a drastic upturn,” Winn said.
 
A lengthy downturn combined with Chapter 41 rules could result in Karnes City ISD paying more to the state than it has coming in. Winn is confident the district has enough in reserve to survive a deficit budget. “What I’m hearing from most of the oil company representatives is that they really expect any slowdown to be temporary. Eventually, prices will go back up and drilling will resume,” Winn said.
 
The boom spurred Midland ISD to reinvest in its schools, something that’s been lacking for the last couple of decades. The district passed a bond resolution to build three new elementary schools and improve the 23 it has. It’s also working on a bond issue to prepare its secondary schools for growth.
 
A bust cycle would bring more challenges, but Warren sees the new building the district is doing as an investment that will pay off long term, regardless of the district’s oil and gas fortunes. “We don’t lose a lot of kids during the bust cycles. The population might flat-line for a while, but we’ve always continued to grow,” Warren said.
 
“I think everything districts have done to gear up will probably put them in better shape over the next few years,” Thomas said. “They still need to hire teachers. With housing, it might be six to 18 months before districts feel like they’ve caught up.”
 
Thomas praised districts in his region for their efforts to secure the best staff and face housing shortages amidst the boom. He believes any slowdown will be temporary. “The slowdown may help them catch their breath, but they’ll move forward knowing it’s going to pick up again sooner or later,” Thomas said.