Monday, March 20, 2017

School District Economics - One more time

Each year, the Ohio Department of Education publishes a spreadsheet of enrollment and financial data gathered from every public school district in the state. The latest version has just come out.

I pulled a subset of central Ohio suburban school districts from this spreadsheet to gather comparative numbers. Those districts are: Dublin, Grandview Heights, Hilliard, New Albany, South Western, Upper Arlington, Westerville, Worthington, and Olentangy.

Given the frequency of this conversation in our community, let's get this number on the table right away - the property tax rates (all taken from sample properties within the suburban city limits):

Effective Property Tax Rate:
Hilliard: 97.93 mills
New Albany: 96.07
Westerville: 95.42*
Dublin: 90.74
Worthington: 83.20
South Western: 82.31
Olentangy (Powell): 79.99
Grandview Heights: 77.90*
Upper Arlington: 75.04*

So yes, Hilliard has the highest property tax rates of this set.  But note that in three of these communities - Westerville, Grandview Heights, and Upper Arlington - the local Fire/EMS services are funded from sources other than property taxes.

What about just the school property tax:
Hilliard: $1,942 per $100,000 of market value
New Albany: $1,891
Olentangy: $1,850
Westerville: $1,812**
Dublin: $1,778
Worthington: $1,543**
Upper Arlington: $1,500**
South Western: $1,433**
Grandview Heights: $1,429**

Hilliard tops the list again. In this case, note that five of the six lowest** on this list don't participate in a Joint Vocational School district like Tolles, whose tax collection I've included in the list above.

How about spending?
Grandview Heights: $15,818/student
Upper Arlington: $14,957
Worthington: $12,863
Dublin: $12,620
New Albany: $11,900
Hilliard: $11,338
Westerville: $10,741
South Western: $10,274
Olentangy: $10,102

Whoa -- what's going on here?  Why does Hilliard have the highest property tax rates, while being 6th on this list of spending? How does Grandview Heights and Upper Arlington have the lowest school tax rates, yet spend significantly more per student than the rest of us?

The answer is in this equation:

.......Revenue = Tax Rate x Total Property Value

In particular, the Total Property Value per Student. Here's how that list stacks up:

Upper Arlington: $297,696
Grandview Heights: $284,657
Dublin: $204,201
New Albany: $192,329
Worthington: $187,984
Olentangy: $182,277
Hilliard: $154,930
Westerville: $154,829
South Western: $103,924

On this list, we're near the bottom. And that's not good. What should we do?

From the spending side of the equation, the operating costs of a school district are 85% compensation and benefits. That's what we should expect - our "product" is delivered by teachers and staff in the classroom. Our cost is a function of how many folks we employ and how much we pay them.

Here's the average classroom teacher salaries:
Upper Arlington: $78,954  (66%)
Hilliard: $73,858 (68%)
Grandview Heights: $73,128 (57%)
New Albany: $72,477 (73%)
Dublin: $72,088 (46%)
Worthington: $71,183 (54%)
Olentangy: $65,959 (52%)
Westerville: $63,422 (38%)
South Western: $62,229 (53%)

Again, we're near the top of the list. But it's not because our teacher pay scale is higher than the others. Every district has a pay scale which increases compensation based on years of service and degree obtained. While each is unique as a result of years of negotiations with the individual teachers' unions, all fall within a small range of each other.

The difference in average salary from district to district is mostly because of the seniority of the teachers. Fast-growing districts like Olentangy hire large batches of new, young teachers each year, bringing down their average. That was Hilliard 15-20 years ago.

Districts with stable or declining enrollment tend to have higher average salaries, as their teachers move up on the seniority steps and few new teachers are being hired. That's the case for UA and Grandview. The number in parentheses in the average salary list is the percentage of their faculty with 10+ years of experience. Note the strong correlation between average salary and this number.

And when districts have a big spurt of hiring, there tends to be a "bulge" in the pay distribution, with a cadre of teachers moving up and up until they retire and are replaced with a batch of new teachers. We saw a little of that a few years ago when changes to the State Teacher Retirement System (STRS) rules gave many of our more senior teachers reason to retire then rather than wait.

Those STRS rule changes will also cause current teachers to stay on the job longer, which will in turn cause the average tenure of teachers to increase across the state. In our case, many are in that "bulge" of teachers we recruited 15-20 years ago.

On the revenue side, it's back to that Assessed Valuation per Student.  We need to drive that number higher as fast as we can.

One way is to increase the average value of a parcel. If all that's getting built in our community is apartments, condos and houses, then they need to be priced pretty high - on the order of $350,000 for a single family home, because those housing units also bring more students.

Apartment developments that attract families with kids aren't helpful as they drive down the Assessed Value per Student, essentially causing the rest of us to subsidize that housing with our higher property taxes.

The better solution is to recruit much more commercial development to our community, and restrict new residential development until that happens. We certainly shouldn't be annexing more land to build more houses.

And that new commercial development has to generate property tax revenue for the school district and the township, not just income tax revenue for the City.

TIFs and abatements which redirect school and township property tax millage to the City are not helpful. This is the reason many of us fought so hard for Issue 9 - which prohibits the use of TIFs on residential development. It doesn't prohibit residential development, but requires that all the school tax generated by a new development actually goes to the school district.

I look forward to your comments and questions.

Tuesday, July 15, 2014

Follow me on Facebook

Going forward, I'll be posting new content on Facebook. Please "Like" my new page, and let your friends and neighbors know about it.

All the 450+ articles posted here will remain, as well as the collection of materials which can be accessed from the links to the right.

I'm looking forward to continuing our dialog.

Monday, May 26, 2014

Property Valuations, HB920 and the Adversarial Process

Over the years, I've had a few conversations with a commercial property owner here in Hilliard about property valuations. He has appealed the valuation of those properties in hope of reducing his property tax bill, the bulk of which represents revenue for the school district.

He is angry that the school district has opposed these revaluations, saying he doesn't understand why the school district spends his own tax dollars to oppose his tax reduction request.

Part of this has to do with the technicalities of a provision in Ohio law often called "HB920," after the 1970s legislation which causes the dollar amount of property taxes collected to remain constant on the set of parcels in existence when the levy was passed. The original purpose of this legislation was to prevent rising valuations from automatically raising taxes, which at the time were particularly burdensome for folks in poor urban neighborhoods that were being regentrified, such as The Flats in Cleveland.

So if that original set of parcels were given a market value of $1 billion by the County Auditor, and a property tax of 1 mills were passed, the amount of money generated by that levy would be:
Tax = ($1 billion * 35%) * (1/1000) = $350,000
In other words, property collectively worth $1 billion would generate $350,000 in property taxes if a 1 mill levy is passed. The 35% is the fraction of a property's value which is considered taxable.

Let's say that 10 years later, those same parcels would have risen in value to $1.25 billion, as determined by the County Auditor. HB920 would still restrict the total tax collected to $350,000. This is implemented by way of a "Reduction Factor" applied to the tax calculation.

In this case, the reduction factor would be 0.800000, applies as follows:
Tax = ($1.25 billion * 35%) * (1/1000) * 0.8 = $350,000
All this works in the other direction as well - when property values decline. Let's say that instead of going up 25%, property values went down 25%, to $750 million:
Tax = ($750 million * 35%) * (1/1000) * 1.333333 = $350,000
This same calculation is applied to every parcel in the school district. But over time, individual properties do not necessarily change in valuation as the same rate as the whole district. Some may have greater increases, and some may have decreases. All get the same reduction factor applied, and in the end the total amount of tax collected remains the same.

Here's the subtlety built into this:  when one property owner is successful in getting their valuation reduced, the consequence is that everyone else has their property taxes increased in order to keep the total amount collected constant. As the value of one property is decreased, the overall Reduction Factor applied to everyone has to be increased to compensate.

So who represents the "everyone else" when a property owner files an appeal for a reduction in valuation?

In most cases, it's the school district. As with so much of our legal process, the various sides in a case present their arguments to an impartial "court," who listens to the arguments and renders an opinion. Whether the case is a capital murder or a property revaluation, the theory is that justice is best reached when opposing parties argue vigorously, and an impartial judge makes the final call.

That's what's going on here. Nothing evil or unfair - just the wheels of justice turning as designed.

But someone has convinced some of our lawmakers that this approach needs some tweaking. Language has been inserted into House Bill 483, the midterm budget bill, modifying section 5715.19 to prohibit parties such as school districts from opposing reappraisals unless the reappraisal was requested by the property owner.

In other words, if the County Auditor changes the valuation (remember all the arguments about the valuation of Nationwide Arena?), the school district has no right to argue in opposition.

Who then represents the interests of the property owners who will have their taxes raised as a consequence?  No one.

Contact your state legislator if you think this isn't fair. For those of us in the Hilliard School District, this is:

Friday, May 23, 2014

Their Education; Their Choice; Our Money

The final issue of the year of Bradley student newspaper, The Reporter, includes an editorial titled "Our Education, Our Choice."

First off, The Reporter is a well written and well edited student newspaper. I support and applaud the effort of our students to engage in political discourse. The School Board heard from students when changes were made to the Honors/AP class grade weighting, and it led directly to changes in the policy. We're hearing from them these days in regard to potential changes to the German programming.

The most dangerous threat to democracy is apathy. I've said it many times on this blog. Democracy is designed around discourse and debate. Not everyone will get their way all the time. To reach a majority, compromises must often be made.

So I'm glad that there is a student voice being heard about changes in course offerings. But they are also naive in regard to the economic reality.

Our school district offers an incredibly rich catalog of course at the high school level. Last year, students were scheduled in 209 uniquely number courses in our high schools. The Program of Studies for 2014-15 looks like a college course catalog.

When I went to high school some 40 years ago, our course options numbered about 30.

I'm not saying that offering 200+ courses each year is inappropriate. I'm just pointing out that it's not free. Every one of those courses must be taught by a licensed teacher, who gets a decent paycheck and great benefits. There has to be a place for the class to meet in a school building (except for the online courses). Those buildings are pretty nice in our district, and our community pays a boatload of taxes to repay the bonds (ie mortgages) on those buildings and to keep them maintained.

The range of what school districts spend, on a per-student basis, ranges widely in our state, from $21,776.student in Orange City Schools in Cuyahoga County to $6,000/student in Washington Court House. This is a consequence of both the differences in teacher compensation, and the number of teachers per student. And the number of teachers/student is heavily influenced by the variety of courses offered. You can be sure that the course catalog in Washington Court House pales compared to Orange. Or Hilliard.

I'm glad we have such a rich course catalog. But it's expensive. If we want to keep it so, then it has to be supported by regular tax levies to generate the revenue to pay the ever-escalating cost of faculty, staff and administrators.

The students don't bear these costs - the property owners of the community foot the bill. They're the ones who get to decide how much we spend to run our schools. They do so  by electing their neighbors to serve on the School Board, and more directly by voting whether or not to increase their property tax burden when we put an operating levy on the ballot.

A desirable school district is good for everyone. It makes our community a great place to raise kids, and it makes it a place where one can have confidence that the homes we buy retain their value.

Many kids want more. Nothing should be cut - only new things should be added. Meanwhile the voters tell us that it already costs plenty to run our school district, and they're not eager to increase the rate of spending. In fact, they'd like to see it slow down.

Economic discussions are about choice, when you can have some, but not all of what you desire. This editorial in the student newspaper doesn't acknowledge that because the students don't understand or participate in the cost side of the debate. Sadly, few voters do either. A parent showed up at a recent Board meeting to angrily tell us that he would campaign aggressively against us in the next election should the German program be terminated. He's free to make that threat.

I wish I had asked him that if we do not make any changes to the German program, would he be equally energetic in his support of the next levy...

Tuesday, April 29, 2014

Entscheidungen ├╝ber Deutschunterricht

These are the comments I made at the April 28, 2014 meeting of the School Board.

I am of Germanic heritage. 

My children both took several years of German at Darby and received college credit for much of it.

I was a chaperone for a group of Hilliard students who spent 3 weeks traveling across German-speaking Europe.

I like German cars and German beer and have purchased a fair amount of both.

Ich habe Deutsch gelernt

Nonetheless, the resources of our community are not infinite, and we must constantly evaluate and adjust how we allocate resources to prepare our children for their future.

Depending on what list one consults, German is barely in the top ten list of first languages, although it is a few places ahead of French. Bengali, Hindi, Portuguese, Russian and Japanese are all more widely spoken as a first language.

I traveled to Germany often for business. For the past 70 years, nearly all children in the former West Germany have studied English and are competent in English, and since the German Reunification almost 25 years ago, so have the children of the eastern states. It is not difficult to do business in English in Germany, although admittedly disrespectful.

While Europe and Germany will continue to be important trading partners for America, there is no question of the growing importance of Asia and the Middle East in our future. It may be time to begin reallocating our education resources relating to citizenship of the world toward those regions

Education is a people business – teachers instructing students. That means changes to programming and methods affect people. Tough decisions sometimes have to be made, and they will affect the lives of people we respect and care about.

That means we need to make these decisions in an empathetic and compassionate, but unambiguous way. No one should be left guessing.

If possible, we should allow there to be sufficient time for affected individuals to respond and adapt. If we can provide resources to facilitate the transition, that would be appropriate.

This too is a teaching moment for our students.

Friday, April 25, 2014

April 28, 2014 School Board Meeting

Here are the supplemental materials for the April 28, 2014 School Board meeting, to be held at 7pm at Scioto Darby Elementary.  Note that the Administration is posting this stuff on the district website as well.

I've added a new link to the list on the right - Curriculum.  It contains the Course of Study documents which have been presented to the Board over the past year or so. This is our curriculum - not the Common Core. You'll of course see references to some elements of the Common Core, because it's a pretty good set of standards and it makes sense to use many of them. But we add, delete and change curriculum elements as we see fit - locally.

That's why I don't understand the criticism of the Common Core, at least here in Ohio. Each local school district determines its own curriculum standards and instructional approaches to deliver that curriculum. If you want to have a conversation with me about the Common Core and Hilliard City Schools, please read these documents first.

Wednesday, April 23, 2014

Five Year Forecast

Here is the Five Year Forecast that will be presented at the next regular meeting to the School Board by Treasurer Brian Wilson.

click to enlarge
The changes are slight from the last forecast, approved October 2013, and shows a small increase in the projected FY18 end of year cash balance. It shows us in good shape to be able to wait until 2015 before asking the voters for another levy, my estimate around 5 to 5.5 mills. We could even wait another year, but that would demand a levy in excess of 8 mills to fund.

It might be worth reviewing the article I wrote in 2011 about the four big Budget Knobs, those being: 1) our cash reserve balance; 2) our spending rate growth, 3) when we want the next levy to be on the ballot, and 4) how large we should plan for that levy to be.

One of the unfortunate side effects of losing the old domain is any of the links in the blog which refer to that domain are now broken. I'll experiment with fixing that when I have a chance. Sorry for the aggravation.