House Bill 3 Employee Compensation Questions & Answers

June 12, 2019 • Amy Campbell

House Bill 3 Employee Compensation Questions & Answers

Editor’s Note: Additional information regarding the use of stipends to meet the required compensation increase was added on August 1, 2019.

House Bill 3 (HB 3) has prompted countless questions from all over the state since it passed in the 86th Texas Legislature. We've done our best to address the most common areas of confusion, from calculating increases to defining a full-time employee and much more in our frequently asked questions listed below. 

Funding

Q: How do we know what 30 percent of new revenue is?

A: There are multiple state-generated estimates and other templates making the rounds across the state, and critical pieces necessary to make accurate calculations have yet to be provided by the Texas Education Agency (TEA). But, TEA did release some additional guidance on tax rate compression late afternoon June 11 that should help districts create better estimates. It seems like a gargantuan task to generate accurate new funding estimates for 2019–2020, but districts have to do exactly that, and some need to do that very quickly to be able to adopt their budgets in time for a July 1 fiscal year start.

The latest data set provided by the state was developed for the House Public Education Committee by the Legislative Budget Board and may be a starting point for districts. However, other templates are available from various sources, and the Texas Association of School Business Officials (TASBO) also continues to release written guidance and hold webinars, so more guidance will be shared.

In the meantime, use the estimates you feel most comfortable with. But, keep in mind that an overly conservative estimate may result in you underestimating the amount required to meet the 30 percent spending threshold, and an overly generous estimate may result in you committing to spend a greater portion than needed on compensation increases.

Q: Because we don’t have updated figures from TEA and don’t expect them for several months, can we wait to adopt our compensation plan until we have more accurate funding predictions?

A: Generally, Article III, section 53, of the Texas Constitution prohibits the grant of “extra compensation, fee, or allowance to a public officer, agent, servant, or contractor, after service has been rendered, or a contract has been entered into, and performed in whole or in part.” See TASB Legal Services’  Mid-Year Pay Increases of School District Employees guidance in the TASB School Law eSource.

It’s expected districts will have significant challenges this year with a budget “settle up” once more accurate funding calculations are available. Districts that budget conservatively may later find they’ve underestimated what it takes to meet the 30 percent spending requirement. Districts that overestimate new funding may commit to pay increases they later discover are more than the 30 percent spending requirement.

Districts should attempt to finalize compensation plans before 10-month employees begin work for the instructional year as part of the regular budget and compensation plan adoption process. It may be safest for districts to include a provision in the compensation plan that salaries may be increased to comply with House Bill 3 from the 86th Legislative Session, in case salary increases are necessary after work has begun for the school year to comply with HB 3 spending requirements and to utilize additional funds available for the 2019-20 school year. Any such adjustments should be made as soon as possible.

Q: I’ve heard this money will go away and we should pay the increases as stipends. Is that true?

A: No. The increase in funding is based on an increase in the basic allotment and other sustained funding sources from the state. Unlike some past legislatively mandated pay increases, the money for these increases is not specific to this biennium and will persist beyond the next two years. As such, the increases can be added to base salaries without worry that the money is “going away” in two years.

TEA guidance states paying the required compensation increase as a stipend to avoid having to continue the increase over time is not compliant with HB 3 requirements. The following is from the June 21, 2019, HB3 in 30: Teacher Compensation webinar:

Q: Can my district utilize “one-time” stipends to avoid a recurring payroll obligation and still meet the 30 Percent requirement?

A: This provision was intended to provide permanent increases in teacher pay. Also, for chapter 21 positions, pay may not be characterized as supplemental for duty that isn’t supplemental solely in order to avoid the statutory requirements to maintain rates of pay across a contract term. Consult with your district’s attorney whether decisions comply with House Bill 3 and with the prohibition on providing gifts of public funds for contracted employees.

Paying an increase in the form of a stipend may be prone to errors—people could miss getting the stipend without HR or payroll realizing it, prorating the stipend by duty days requires extra work, and stipends can often persist when someone changes jobs, which can lead to overpayment or underpayment. If a stipend is not for an extra duty or some other “at risk” money, it’s best paid as salary.

Increasing the base teacher salary will support recruitment and retention efforts, particularly considering how much the state minimum teacher salary schedule is increasing and how many districts are adjusting their teacher pay structures accordingly. A district would have a significant challenge advertising a base salary plus a stipend in a way that would be easily understood by job seekers.

And, finally, it’s unclear whether this money paid as a stipend would be considered creditable compensation by the Teacher Retirement System (TRS). By including it in salary, a district can be certain it would be counted as creditable compensation.

Employee definitions

Q: How do we know what a “full-time employee” is?

A: HB 3 language doesn’t specify, but we think it’s safest to start with definitions that are already available. For example, Title 19 Texas Administrative Code (TAC) §153.1022(a)(1)(A) defines a classroom teacher as “an educator who teaches an average of at least four hours per day in an academic or career and technology instructional setting pursuant to Texas Education Code (TEC) section 5.001, focusing on the delivery of the Texas essential knowledge and skills and holds the relevant certificate issued by the State Board for Educator Certification (SBEC) under the provisions of TEC, Chapter 21, Subchapter B. Although non-instructional duties do not qualify as teaching, necessary functions related to the educator's instructional assignment such as instructional planning and transition between instructional periods should be applied to creditable classroom time.” By that definition, a district would be required to include teachers who work at least four hours per day in the 75 percent spending threshold.

For other staff, it’s not clear what is meant by “full-time employee.” As such, it would be safest to only include pay increases for full-time employees to measure compliance with the 75 percent/25 percent spending requirements. However, if adding up pay increases for true full-time employees doesn't meet the required spending threshold, it’s possible an argument could be made to include anyone working enough hours to be considered full-time in the position they’re in. For example, if 25 hours is considered full-time for a cafeteria worker in a district, it’s possible their pay increases could be counted toward the threshold. However, HB 3 language neither expressly allows or excludes this, so districts should consult their local counsel for more detailed guidance.

Q: How do we know what an “administrator” is?

A: The bill language doesn't specify which jobs fall in the category of administrator for purposes of including or excluding them from the 30 percent spending requirement. Many districts granting a 2.5 or 3 percent increase may meet the 25 percent spending requirement for non-administrators by looking only at the cost of increases for hourly/nonexempt staff (e.g., clerical/paraprofessional and auxiliary pay groups). If that threshold is met with hourly staff alone, the district can avoid parsing out specific jobs in their administrative/professional job group. If the threshold isn’t met with hourly staff, a district would need to capture the increased costs for jobs such as speech-language pathologist and educational diagnostician that wouldn’t be considered administrators but could be counted toward the 25 percent spending requirement.

Q: What about non-teachers paid on the teacher salary schedule? What about teachers paid on the administrative professional salary schedule?

A: Many districts have positions on their teacher pay structures that don’t meet the definition of a teacher. These might include instructional coaches, instructional technology specialists, athletic trainers who aren’t assigned to teach classes, etc. Districts have two choices for these positions: 1) keep them on the teacher pay structure and provide them with the same increases as teachers, or 2) move them to the administrative professional pay structure where you have more flexibility in how you pay.

There are pros and cons to both options. Keeping them on the teacher pay structure means granting pay increases you’re not required to give. But moving them to the administrative professional structure and not granting increases can create educator career pathway problems. Districts should weigh these considerations before making pay plan decisions.

Conversely, districts often have people who meet the definition of teacher but are paid on the administrative professional pay structure, such as ROTC teachers, high school band directors, and agriculture science teachers. Districts should be sure these staff get pay increases equivalent to teacher pay increases, and any increases granted can be included in the calculations to meet the 75 percent spending threshold.

Calculating increases

Q: Can we pay more than the required amount for compensation increases?

A: Yes! You can pay as much as you like as long as the compensation increase to teachers, counselors, librarians, and nurses is at least 75 percent of the 30 percent. Your district may choose (or may need) to spend more than 75 percent to bring that group to the estimated new state minimum salary schedule. The 25 percent spending threshold can be spent on any full-time, non-administrator, including teachers.

While administrators aren’t part of the 30 percent spending requirement, districts shouldn't ignore pay for them and should review pay in the educator career pathway to ensure administrators aren’t earning less money in 2019–2020 than they would as a teacher. If districts grant large increases to teachers but don’t grant increases to administrators, this is a likely result.

Q: Did the state minimum salary schedule increase as a result of HB 3 changes?

A: Yes, and TEA just released the salary schedule for 2019–2020 on Tuesday, June 11. A comparison of the 2018–2019 and 2019–2020 state minimum salary schedules is below.

Years of Experience Credited

2018-2019 Monthly Salary

2018-2019 Annual Salary (10 months)

2019-2020 Monthly Salary

2019-2020 Annual Salary (10 months)

0

2,808

28,080

3,366

33,660

1

2,869

28,690

3,439

34,390

2

2,929

29,290

3,510

35,100

3

2,989

29,890

3,583

35,830

4

3,117

31,170

3735

37,350

5

3,244

32,440

3,888

38,880

6

3,372

33,720

4,041

40,410

7

3,490

34,900

4,183

41,830

8

3,602

36,020

4,317

43,170

9

3,708

37,080

4,444

44,440

10

3,808

38,080

4,563

45,630

11

3,902

39,020

4,677

46,770

12

3,993

39,930

4,785

47,850

13

4,076

40,760

4,885

48,850

14

4,156

41,560

4,981

49,810

15

4,231

42,310

5,071

50,710

16

4,303

43,030

5,157

51,570

17

4,370

43,700

5,237

52,370

18

4,434

44,340

5,314

53,140

19

4,494

44,940

5,386

53,860

20 & Over

4,551

45,510

5,454

54,540

Many districts will need to increase teacher pay significantly to comply with the new schedule, including suburban and urban districts. Some small and rural districts will require adjustments of several thousand dollars to meet the new minimum salaries. But, remember those costs can help districts meet the spending threshold required by HB 3.

Q: Do we have to give two different percent increases to teachers—one for those with more than five years of experience and one for those with five or fewer years?

A: No. The bill language requires districts to prioritize differentiated compensation for full-time teachers with more than five years of experience, but it provides no mandate that ALL teachers with more than five years receive more money, nor does it require different general pay increases based on years of experience.

To be most strategic in implementation of required increases, a district should consider identifying which parts of the teacher pay structure should be improved and applying adjustments accordingly. Some examples of how districts can make strategic changes to teacher pay structures include:

  • Improving pay to market for teachers between 10 and 15 years to support recruitment of experienced teachers from other districts
  • Improving pay for teachers with 20 years of experience and above to address turnover and support retention
  • Reducing compression between years that have very small dollar amounts separating them

No amounts or percentages are specified in the bill, so districts can make decisions on increasing levels that best meet their needs. Whatever increases are given should prioritize differentiation for teachers with more than five years of experience and the increases should support the district’s strategic goals.

Q: Can we increase stipends to meet the spending requirements in the bill?

A: Yes. Increases to extra duty stipends for athletics, performing arts, academics, or other duties may be counted toward the 75 percent spending threshold. Districts should also consider increasing teaching area stipends, such as bilingual, special education, and secondary math and science, to help meet the spending requirements. Increasing stipends paid for these hard-to-fill assignments is a strategic way for districts to help address recruitment and retention issues. However, stipends paid in lieu of reimbursement, such as travel and cell phone stipends, should not be included when measuring compliance with the spending requirements.

Q: Do benefits increases count toward the 30 percent spending requirement?

A: It depends on what kind of benefits increase. Increases to employer contributions for health insurance coverage are specifically mentioned in the bill as an example of increases that could be included to measure compliance. But increases in TRS contributions, which districts are compelled to make and aren’t provided directly to the employee, don’t seem to meet the intent of the bill and likely shouldn’t be counted to measure compliance with the spending threshold.

Tagged: Compensation, "Pay increases", Salaries