A major component of the cost reduction in FY13 is the transition from maintaining custodians on staff to being outsourced under contract. In the Building Operations (6701) department, the budget shows a $3.9 million reduction in Salaries and 108 custodial positions cut. However, there is no corresponding reduction in the Employee Benefits. If we apply the historical Employee Benefits percent (21.1%) then there should be an additional $475k reduction in this line item – is this additional potential savings real or is this simply another budget allocation error?
Also, since the custodians are being contracted for, I would expect an increase in the Custodial Support (6716) department which oversees the outsourced custodial services. In fact there is a $247k or 3.6% increase (seems low) in the Purchased Property Services to cover the cost of the new contracted custodial staff. What is surprising is that the five Custodial Service Inspectors who were on staff in FY12 and oversee the contracted custodians have also been cut. It is not clear if these positions have been transferred to another department or if the budget is simply in error.
Now for a bit of financial clarity regarding the decisions made. First, let’s assume the budget numbers are accurate as presented. If that is the case, then if the entire custodial fuction was outsourced, there would be an additional reduction in cost of $3.5 million in Salaries and Employee Benefits and an increase of $300-400k in Purchased Property Services for a net savings of $3.1 million. So the decision to keep the remaining custodial staff on board has at least a $3.1 million price tag.
Is it worth the $3.1 million cost? Superintendent Davis and the Board seem to think so.
As a further note, since the terminated custodial staff is covered by the pension plan that is underfunded, does the elimination of the current positions reduce the future pension liability (and the related underfunding)? If so, what additional cost savings would there be if the entire custodial function were outsourced (and any other functions covered by the underfunded penison plan)?