With Overtime-Pay Hikes on the Horizon, Community Colleges Face ‘Very Difficult Decisions’
Four years ago, Pratt Community College, in rural Kansas, had to make some tough decisions. That’s the last time the federal government raised the threshold for determining which workers earn overtime pay. Previously, only employees earning less than $23,660, or about $11 an hour, were eligible.
For its dozens of newly eligible employees, the college had two choices: raise their salary to at least $35,668, or $17.10 an hour — above the local cost of living for a single adult — or come up with mechanisms for awarding overtime pay, in which employees earn 1.5 times their usual hourly wage for time worked in excess of 40 hours per week. Either way, Pratt would take a financial hit of hundreds of thousands of dollars.
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Four years ago, Pratt Community College, in rural Kansas, had to make some tough calls. That’s the last time the federal government raised the threshold for determining which workers earn overtime pay. Previously, only employees earning less than $23,660, or about $11 an hour, were eligible.
For its dozens of newly eligible employees, the college had two choices: raise their salary to at least $35,668, a rate of $17.10 an hour, or come up with mechanisms for awarding overtime pay, in which employees earn 1.5 times their usual hourly wage for time worked in excess of 40 hours per week. Either way, Pratt anticipated a financial hit of hundreds of thousands of dollars.
So the college had to reduce student services, like academic support and advising, to pay for the additional cost, said its president, Michael Calvert.
With the help of Covid-relief funding, Pratt restored some of those resources. But the U.S. Department of Labor has proposed raising the overtime threshold again, to $55,068, or $26.47 an hour. Calvert said he once again expects to face a grim conundrum: increase revenue — in other words, hike tuition — or cut student services.
If the Labor Department’s proposed changes are approved as written, colleges would have to decide how to manage workers making between $35,568 and $55,068 a year. Either they’d get a raise — as much as a $20,000 bump — or they’d be converted to an hourly wage, in which the college tracks and pays overtime. Faculty and instructional staff would be exempt.
Supporters of the update say it will offer a much-needed boost to lower-wage workers in higher ed and elsewhere, and better reflect the current salary market.
As of 2020, 23 percent of campus employees covered by the Fair Labor Standards Act — who typically work as support staff or in roles that require technical or manual labor — were paid under $15 per hour. Among service and maintenance workers, 40 percent were paid below $15 per hour. Union formation and strikes have surged in higher ed and nationally in the past few years.
Meanwhile, higher-ed leaders say community colleges will face disproportionate impacts. Calvert isn’t opposed to paying employees more, but “the impacts go further than putting more money in some person’s pocket,” he said.
Community colleges are chronically underfunded, receiving less than half the funding per student of their four-year counterparts. Since they rely heavily on the local tax base and are expected to keep tuition affordable, they have few mechanisms for increasing revenue. What’s more, many community colleges are located in rural areas with relatively low costs of living, like Pratt — leading more employees to fall under the new salary threshold.
“Colleges will be faced with very difficult decisions to make about their finances,” said David Baime, the senior vice president for government relations at the American Association of Community Colleges.
‘A Significant Burden’
If the salary shifts come to fruition, community-college leaders fear that any way you slice it — whether it’s tuition hikes, layoffs, or cuts to services — student success could take a hit.
Baime said some people in higher ed see the rules as an “unfunded mandate,” forcing colleges to comply without giving them a means to do so.
Heather Morgan, executive director of the Kansas Association of Community College Trustees, called the proposed changes “very detrimental.” In Kansas, she said, most community colleges receive about 47 percent of their funding from local property taxes, around one-third from state support, and the rest from tuition.
“It seems unrealistic that state government would be able to just up the amount of money that they’re paying us to comply with this, or that local taxpayers are going to be excited to increase budgets for this, and so therefore, it falls back to students,” Morgan said.
Morgan said she isn’t sure how Kansas will handle it. “We do want to be the most accessible and affordable option,” Morgan said, “but as our costs increase, through no fault of our own, frankly, we have limited options.”
If institutions don’t raise workers’ pay to at least $55,068, or whatever the final threshold is, officials would have to take the time to potentially reclassify dozens of them to an hourly wage. Most colleges have hour-tracking systems in place already, Morgan said, but there will be an administrative burden in scaling those up.
Community Colleges for Iowa, an advocacy group, estimated that the changes would cost the state’s two-year institutions about $6 million, with the most pressure placed on small and rural campuses. In addition to the nearly 500 people statewide who’d be eligible for overtime under the new threshold, to maintain pay progression, colleges would also have to raise the salaries of another 500 to 1,000 people, the group wrote.
Rappahannock Community College, in Virginia, said the increase would affect 26 employees — 20 percent of its total headcount — and would cost the college over $158,000. Almost half of those positions are funded by grants, which aren’t able to cover rises in pay.
“This is a significant burden on a small college with an already-tight budget,” Rappahannock officials wrote in their public comment. “Students will suffer with insufficient equipment and supplies.”
About 10 percent of Pratt Community College’s roughly 150 employees are under the current overtime threshold. Calvert isn’t yet sure how many workers would qualify under the proposed increase.
It’s kind of a vicious circle. … You push one and it forces something else.
In a rural area like Pratt, with a small population, taxes that support the city and county governments, two school districts, the hospital, and the community college fall on a small number of people who each have to pay more. Calvert isn’t optimistic that local taxpayers will want to shovel out more dough.
“We’re very cognizant of the burden we place on our especially local taxpayers,” Calvert said. Fifty-five percent of the college’s revenue draws from the local tax base.
Calvert said colleges do have one trick up their sleeve. The law exempts roles with “instructional components,” he said. During past threshold increases, he’s reworked job descriptions to fall under that umbrella. For example, athletic coaches wouldn’t typically be thought of as faculty, but Pratt uses the instructional nature of those roles to classify them as exempt — a move which saved him an estimated $150,000 during the 2019 increase. He reduced what would’ve been a $250,000 hit on his $15-million budget to $95,000 by reclassifying some roles and moving others to an hourly wage.
But if student services get cut, that has consequences, he said. Without services, student success goes down, which has a ripple effect on the local work force and economy.
“It’s kind of a vicious circle. … You push one and it forces something else,” Calvert said.
A Less Costly Option
Higher-ed leaders who spoke with The Chronicle didn’t give predictions on whether the rule will be finalized as written. The public-comment period on the proposed changes wrapped up last month, and the Labor Department expects to put the rules into effect 60 days after they’re finalized.
Though many community colleges would undeniably be hit with some sort of financial strain, William A. Herbert, the executive director of a labor-management research center at Hunter College, part of the City University of New York system, said there may be a less costly option.
The Fair Labor Standards Act provides an alternative by allowing public colleges to “pay” for overtime hours with compensatory time: essentially, time off for however many overtime hours were worked. Herbert said colleges can negotiate with their unions and individual employees to come to that agreement, which could be mutually beneficial.
“The cost factor that would be of concern would be diminished substantially because it would then mean not … having to pay additional compensation, but it would be just giving people more time off, which is something that a lot of people these days are looking for,” Herbert said.
As higher ed grapples with how to navigate the proposed changes, many colleges and higher-ed experts seem to agree the $20,000 increase is too big of a jump to implement all at once. Rather, organizations like the American Association of Community Colleges are advocating for what Baime called “reasonable, periodic increases” that are more gradual and spread out, like doing one every five to nine years.
For now, Baime said he hopes the sector’s concerns will be reflected in the final policy. Otherwise, he’s not sure how community colleges will absorb the increase.
“The proposed changes are of an extent that they will ultimately result in a reduction of student services, an increase in tuition, or both,” the AACC wrote in its public comment. “There is simply no other way for institutions to acquire the additional resources that would be required by the change.”