Friday, December 29, 2006

A Small Start

I have been asking the School Board for quite a while now to start talking about the next operating levy soon, and to use this dialog as an opportunity to educate the community about the core issues of school funding.

In the ThisWeek Hilliard newspaper, an article was published this week that contained one sentence of great importance:
Treasurer Brian Wilson said the school board will have to go back to the ballot absolutely no later than May of 2008.

That's a start. I wish it had been the headline of the story, rather than buried 17 paragraphs in. But it's a start. There was however, a significant factual error in this article:

In May the taxpayers of the community voted to approve a 3.95-mill bond issue and operating levy.

Actually what was passed was a 1.95 mil Bond Levy to finance the construction of the new high school and elementary school, plus a 2 mil Permanent Improvement Levy to fund the cost of various repairs and upgrades to our existing buildings. There was no Operating Levy on the ballot for this election.

That's yet to come -- no later than May 2008 says the Treasurer. And it will need to collect more than $75 million in three years, not nearly thirty like the bond levy.

So if my property taxes went up $400/yr to raise $75 million in 28 years as a result of the bond and permanent improvement levies we just passed, how much will they go up to collect at least $75 million in three years? The answer depends on how much the State of Ohio kicks in, but the best case is that the State will send around $25 million in additional funding. That still leaves our community on the hook for $50 million.

So best case: if it takes $400/yr to raise $75 million in 28 years, then I think my share of a $50 million operating levy is something on the order of $2,500 per year.

The construction costs of the buildings are a small portion of the total cost of running a school system. The real costs are the personnel and operating expenses.

My calculations may be faulty. I encourage the School Board to give us the correct number sooner, not later.

Wednesday, December 27, 2006

Fixed Costs, Variable Costs

In reports about school finances, one will often see a statistic called some like "Spending per Pupil." This number is reported on the Fact & Figures page of the Hilliard school district's website, and is currently $9,381.

I for one like to point out that when a new house is built, which brings one or more new kids to the school district, the homeowner pays on average around $3,500 in school tax (and it's the same whether the house is in Hilliard, Columbus, Dublin, or a township). Therefore, one can say that every new house causes the school district to fall behind another $6,000.

In truth, this is a simplistic way of looking at things. The cost of running the school district comes down to two key components: a) paying the salaries and benefits of the teachers, administrators and staff; and, b) paying off the notes sold to finance construction of the school buildings. Those costs don't really change when one new student is added. A classroom can go from 25 to 26 kids with little in the way of additional costs. Same number of buildings, and same number of teachers and staff.

But eventually, you do hit a tipping point. The class sizes get too large and the schools get too crowded. That's the way things are at the high school level right now. So in one giant step, the costs of running the district increases as a new building gets built and staffed.

We're going to see that jump in FY2010 when the new high school is fully opened. Before that, the new Washington Elementary School will also have opened. These buildings are not replacements for existing schools - they are additional facilities. The Treasurer has estimated that the incremental salary costs for the new elementary school will be $750,000 per year, and for the high school, $4 million per year. That works out to about $250 additional per year for each existing household and business.

Why is this number so much less than the increases I project elsewhere in this blog? Don't forget that our district already has a payroll of $120 million, which goes up around 3% per year, or $3.6 million, adding another $200/yr or so to each of our tax bills. Health insurance and retirement fund costs are expected to increase 10% per year. The rest is for utilities, property maintenance, supplies and all the rest of the stuff it takes to run the school system.

Remember that we have already agreed to pay the building construction levy, which added $211/yr to my tax bill, and also passed a permanent improvement levy that added another $200/yr to my taxes.

We also pay $1 million/yr to the County Auditor to serve as our tax collection agent, and $500,000 for 'County Board of Education Fees.'

Did you know that we also pay nearly $1 million/yr to Columbus City Schools as a 'ransom' payment under the Win-Win agreement? More on that in another post...

The Next Levy - Part 2

Here is another financial forecast created by the Treasurer for the Ohio Department of Education. It contains numbers through FY11, and the picture doesn't get any better. For FY11, Mr. Wilson has projected revenue of $146 million against expenses of $184 million, for a shortfall of $38 million. And this is after a $28 million deficit in FY10.

The way school levies work, approximately the same amount of money is collected each year, even when expenses are expected to rise over the life of the levy. In the first years, more revenue is collected than spent, building up a surplus account. In the latter years, expenses grow to exceed the revenue, but the surplus account is tapped to cover the shortfall (go here for a better explanation).

So this forecast says we'll start the draw-down of the surplus account in FY08, and completely drain it during FY09. The accumulated deficit by the end of FY11 is projected to be over $75 million and increasing at a rate of $37+ million per year. In other words, with no new revenue, the accumulated deficit at the end of FY12 would be in excess of $110 million, and around $150 million by the end of FY13.

It seems that the School Board will need to put a levy on the ballot that becomes effective in FY09 and raises $150 million in the following five years. That sounds like $30 million per year, or an average of at least $1,500 per year for each residential and business parcel in the District - on top of your current property taxes!

Or the Board could put a levy on the ballot effective in FY08 that generates the $150 million over 6 years at a rate of $25 million per year ($1,250 per year per parcel, but starting a year sooner).

Of course, these calculations assume that the State of Ohio continues to freeze our funding at current levels and that there is no net increase in business property tax revenue.

A better scenario is that the State continues to kick in its third even as we grow, and that the municipalities keep residential growth to a minimum while bringing in lots of new businesses that pay their full share of school funding (through property taxes or alternate arrangements). Maybe that would contribute a third to the new funding needs as well.

Gee, that would make the burden on us homeowners something more like $400-500 additional per year.

That makes me feel better....

Tuesday, December 26, 2006

Sacred Cows

I've attended many of the meetings which take place in our community when a school levy is scheduled to be placed on the ballot. Inevitably, someone from the public makes the claim that the School Board and the Administration is wasting money, and that we should be able to get by on much less. In every case I've observed, the individual makes that observation from ignorance - having not spent any time whatsoever trying to understand either the sources or uses of funds in our school system.

Because if they did, they would understand that there are a few key factors that drive everything:
  • New houses generate more cost for the district than they do revenue, by a factor of three;
  • In the Hilliard community, the funding has - in the past - come equally from three sources: a) residential property taxes; b) commercial property taxes; and, c) the State of Ohio. However, the burden is shifting steadily to homeowners, and it only gets worse as more houses are built.
  • A school system is a professional services organization. It's easy to see the all the beautiful buildings and imagine that this is where our money goes. But of the $137 million operating budget for FY2007, $120 million of that - 88% - will be used for salaries and benefits of the teachers, administration and staff (see Treasurer's Report to the Board 5/19/06)

The first two are addressed extensively in the companion website. But what about this issue of salaries?

Looking ahead on the Treasurer's report, in FY2010 the total operating expenditures are forecasted to increase $32 million to $169 million, or 23%. The salaries and benefits component will increase $30 million to $150 million. In other words, 94% of the total budget increase will be due to salaries and benefits.

The average teacher salary in Ohio is $47,791. The payscale in Hilliard ranges from $35,107 for a teacher with a Bachelor's degree and no experience to $82,695 for an individual with a Master's degree + 15 hours of study and 23 years of experience. The average teacher's salary in Hilliard is $52,932 for a workyear of 183 days of 7 hours (which includes a 30 min lunch). Teachers are also given 15 sick days per year (which can be accumulated to increase retirement benefits).

Our teachers enjoy excellent benefits as well. For a fulltime member of the teacher's union (the Hilliard Education Association), the District pays essentially all of the medical and dental insurance costs for members as long as annual premium increases are within the agreed upon amounts (see HEA Master Agreement). Teachers also have a choice of three kinds of retirement plans and can retire with 30 years service (young 50's) and receive 66% of their final average salary for the rest of the lives, plus health insurance coverage.

By comparison, in private industry, employees typically work 240 days per year (10 weeks more!), and will have 5 sick days. Increasingly, the only retirement benefits a worker in private industry will enjoy are their own money that they sock away in IRAs and 401(k) plans. Defined benefit pensions are all but gone in private industry, and most workers are on their own for health coverage after they retire.

The purpose of this article is not to criticize the compensation of our teachers. Indeed, one of my children is now a teacher, and I hope we can afford such programs when she is ready to retire. I have had the opportunity to host high school teachers from both Japan and Germany, and was intrigued to learn that teachers there are paid on the same order as engineers. That seems appropriate given that we entrust them with the education and safety of our kids.

Rather, I wish to remind the folks in our community that schools are a 'people business' and if we want a great school system, we'll need to be willing to continue to pay effective teachers enough to keep them from bailing out to other careers.

But teachers, if you want those of us in the community to be willing to pay such salaries and benefits, you need to understand that underperforming teachers need to be fired to make room for new stars. If the coach can cut the starting quarterback from the football team if he keeps fumbling, the administration needs to be able to terminate a teacher who can't teach effectively.

I once complained to a lawyer friend of mine that he and his colleagues were responsible for driving up the cost of health insurance. He rebuttal was interesting -- that if the American Medical Association did a better job of de-licensing bad doctors, there wouldn't be all that malpractice.

It's the same with the teacher's union -- don't hide bad teachers under your protective umbrella. Use some of your union dues to help failing teachers find a new career. Make it your responsibility to keep the quality of your membership high!

The current contract with the Hilliard teacher's union expires December 31, 2007. It comes at a time when our district may be facing gut-wrenching financial challenges. I hope the parties on both sides of the table find a solution that we all can live with.

High School Site Selection

In 2002, the Hilliard Board of Education made the decision to build a third high school on the 'Grener Property', which is 100+ acres of farmland between Cosgray and Leppert Rds, north of Darby High School and east of Homestead Park.

The Board applied for annexation into the City of Hilliard, primarily to gain access to the municipal water/sewer system. But before the first spade of earth was turned, there was suddenly very vocal objections raised to building the high school on that site (including from the newly elected Mayor Don Schonhardt, who had been President of the Hilliard City Council when the annexation was approved). The basis for the opposition was supposedly the amount of traffic it would generate in an area already housing one high school.

The Mayor proposed building instead on a tract of land on Davis Rd owned by developer Dan O'Brien, ignoring the fact that this tract sat in a development moratorium zone. This process proceeded all the way to the preparation of contract drafts for O'Brien, but for some reason, fell to the wayside prior to the construction levy being placed on the ballot.

Instead, the Board announced that it had decided to acquire property near the corner of Walker and Roberts Rds. While this land had been in the hands of the Emmelhainz family for many years, most of the land between the new high school site and the current Hilliard city limits is owned by Homewood Homes. To bring water to the new school, the lines would almost certainly have to be run through the Homewood property.

At about the same time, Mayor Schonhardt revealed his own development maps for the land between Alton-Darby and Walker Rds, showing plans for potentially thousands of homes on the property owned by O'Brien, Homewood and other interested sellers. The Mayor's plans are in conflict with the Big Darby Accord maps for the same area.

So what's going to happen with the Grener property? Never fear, the Mayor has plans for that property too. Which will generate more traffic, a high school or a few hundred houses?

Does this seem all on the up-and-up to you?

Executive Sessions

The public meetings our of Board of Education are quite informative and often entertaining, as the Board makes it a point to give time for the kids at the host school to show their stuff. Every member of our community should make it a point to attend a meeting every once in a while, and not just the ones involving your own kids. The Board publishes minutes of past meetings, and the agenda of future meetings along with the meeting schedules on the district website.

When the official part of the meeting gets started, you'll notice that the Board proceeds through its agenda with little discussion, taking votes on a variety of matters, strictly according to the script/agenda. A little time is offered at the beginning of the meeting for public comments, but the speakers are reasonably limited to 3 minutes each, and the Board members are not required to respond in any way.

At the end of the meeting, the Board, the Superintendent and the Treasurer often adjourn to Executive Session. This part of the meeting is closed to the public, and no minutes (if taken) are disclosed.

State law allows school boards to enter into these closed sessions for specific reasons only (source):

  • consider matters involving personnel;
  • consider the purchase or sale of property;
  • consult with an attorney;
  • prepare for, conduct or review negotiations with employees;
  • consider matters required to be kept confidential by federal law or state statutes;
  • consider specialized details of security arrangements; or
  • conferences called by a member of the Ohio Auditor's Office or an appointed certified public accountant for the purpose of an audit.

The public minutes do reflect the purpose of the closed session and its duration. Here are some recent examples:

  • 11/27/06: "to discuss personnel and land acquisition" - 7:32pm to 10:55pm (3hrs 23mins)
  • 11/15/06: "to discuss personnel and land acquisition" - 7:59pm to 10:45pm (2hrs 46 mins)
  • 10/23/06: "to discuss the appointment, employment, discipline, promotion, demotion or compensation of any employee... , and the purchase ... or sale of property..." - 7:55pm to 9:40pm (1hr 45 mins)
  • 10/5/06: "to discuss the appointment, employment, discipline, promotion, demotion or compensation of any employee... , and the purchase ... or sale of property..." - 6:13pm - 10:08pm (3hrs 55 mins)
  • 8/28/06: "to discuss the appointment, employment, discipline, promotion, demotion or compensation of any employee... , and the purchase ... or sale of property..." 8:02pm - 9:15pm (1hr 13mins)
  • 8/14/06: "to discuss the appointment, employment, discipline, promotion, demotion or compensation of any employee... , and the purchase ... or sale of property..." 8:19pm - 10:30pm (2hrs 11mins)
  • 7/10/06: "to discuss the appointment, employment, discipline, promotion, demotion or compensation of any employee... , and the purchase ... or sale of property..." 7:37pm - 8:41pm (1hr 4 mins)
  • 6/23/06 (held outside the district): "to discuss the appointment, employment, discipline, promotion, demotion or compensation of any employee... , and the purchase ... or sale of property..." 3:30pm - 5:35pm (2hrs 5mins)
  • 6/22/06 (held outside the district): "to discuss the appointment, employment, discipline, promotion, demotion or compensation of any employee... , and the purchase ... or sale of property..." 9:19pm - 9:45pm (16 mins)
  • 5/8/06: "to discuss the appointment, employment, discipline, promotion, demotion or compensation of any employee... , and the purchase ... or sale of property..." 7:46pm - 9:06pm (1hr 20mins)
  • 2/12/07: "to discuss the appointment, employment, discipline, promotion, demotion or compensation of any employee... , and the purchase ... or sale of property..." 7:37pm - 9:39pm (2hrs 2 mins)
  • 2/26/07: "to discuss personnel and land acquisition." 8:22pm - 11:00pm (2hrs 38mins)
  • 3/12/07: "to discuss the appointment, employment, dismissal, discipline, promotion, demotion or compensation of an employee or the investigation of charges or complaints against an employee, official, licensee or student, unless the employee, official, licensee or student requests a public hearing; and the purchase of property for public purposes or the sale of property at competitive bidding." 8:47pm-11:07pm (2hr 20mins)

I haven't done the math, but it looks like the Board spends about as much time in Executive Session as it does in its public session.

I am concerned that Executive Session is being used to discuss matters outside the scope provided by law, and that the public is being deprived of important information about how our Board reaches its decisions. I understand that they receive briefing books from the Superintendent and Treasurer prior to each meeting, but those should serve only to give them background, not substitute for a public discussion of the agenda items. The Ohio School Board Association give clear guidance about Executive Session, but our Board does not seem to comply.

Note that several members of the Madison-Plains Board of Education were recently removed from office upon petition to the Ohio District Court claiming that, among other things, the Board members were holding lengthy Executive Sessions and short public sessions (see article).

What do you think?

The Next Levy

I believe that many people in our community have the impression that when they voted for the Bond Levy to build another elementary school and a new high school, that levy also included the funding required to operate those schools.

It does not!

That levy provided for the funding to pay off the bonds that will be sold to raise money to build the the schools. This is essentially the mortgage payment.

Another operating levy will soon be placed before us to provide funding to operating both the new and existing schools. While the exact magnitude of that levy is yet to be determined, note that Treasurer Brian Wilson alerted the Board of Education on May 22, 2006 that he projects that the funding shortfall in 2010 will be $20 million per year (click here to see a copy of his report).

Where is that money going to come from?

Not the State of Ohio. School funding is a mess in Ohio, but our legislators are predominately from urban and rural areas where the tax base is very poor. Any solution our new Governor comes up with to fix school funding is very unlikely to result in more money for districts like Hilliard, which are among the wealthiest in the state.

How about new businesses in the community? It would be nice, and the City of Hilliard is working hard on recruiting new businesses. But at the same time, existing businesses continue to move out and downsize, and it is difficult to get ahead. There has also been a significant change in the tax system in that business personal property (e.g. inventory) tax is being phased out. This has the effect of shifting more of the tax burden to homeowners and individuals.

What does that leave? The same as always: the existing homeowners and businesses.

So what's my share of this $20 million/year shortfall? As of 2002, the Franklin County Auditor reported that there were 10,799 residential and agricultural parcels in the school district. Let's be generous and say that there will be 20,000 residential, agricultural and business parcels by 2010.

If nothing else changes about the mechanism of school funding, the next levy will need to add $1,000 per year to our current property tax bill.

How's that sound to you? Don't you think the School Board should be talking to us about this?


The Wrong Side of the Tracks?

We like to think that discrimination no longer exists in America, but it may actually be getting worse.

Many of us have forgotten that in 1977, Federal District Court Judge Robert Duncan ruled in the case of Penick v. The Columbus Board of Education that Columbus schools were indeed inappropriately segregated, and as a result, ordered that a busing program be implemented to rebalance the racial mix of the Columbus schools. That ruling resulted in a 'white flight' to the suburbs, including Hilliard. Today, the Columbus schools are Blacker and poorer than ever before.

It may be illegal to discriminate based on race, creed, color, and so on, but our society absolutely condones discrimination based on economic status. To live in a neighborhood of expensive houses, you need to be wealthy. Municipalities enact zoning regulations which ensure that low-priced houses are kept out of the neighborhoods of luxury homes.

Things are even more complex in our community, where the school district serves people who live in many municipalities, including the Cities of Hilliard, Columbus and Dublin, as well as several townships. Within the boundaries of Columbus, many high density and multifamily communities have been built, a number of which are occupied by minority and immigrant families with children.

As a result, the various schools in our district have varying minority and low-income populations. In particular, there are twice as many minority students at Darby High School than at Davidson. At the elementary levels, the population of minority students is significantly higher at Horizon, Beacon and Norwich than at other schools such as Brown, Britton and Ridgewood.

A redistricting effort is underway right now, and I am thankful to be a part of it. There has been a discussion as to the degree that ethnic balance have priority over logistics (i.e. is it okay to bus kids past one school to another to achieve this balance)?

What do you think?

Go here to read the second part of this discussion.

Big Darby Accord

What is the Big Darby Accord? How does it affect the schools? Should our community support it?

The Big Darby Accord is an agreement being negotiated among ten political entities that have an interest in the way development takes place along the Big Darby River, which is the western boundary of the Hilliard City School District. For a more complete discussion of the Accord, please go to the Save Hilliard Schools website

Our School District officials are not clear on their stance regarding the Accord. In fact, the placement of the new high school at the corner of Roberts and Walker Rds required that the land use component of the Accord plans had to be changed -- a deal brokered by Mayor Schonhardt, I believe, to take care of his developer friends. I have long believed that the School District gets manipulated into making decisions which benefit residential developers more than they do the community.

Mayor Schonhardt has been at odds with the Accord from the beginning. In April 2006, I warned the community that the Mayor was withdrawing from the Accord process. That prompted a response from Butch Seidel saying that Hilliard remains committed to the Accord. Nonetheless, the City of Hilliard remains a holdout. The Mayor says it is a bad deal for Hilliard unless some changes are made. But among the changes he wants to make is an increase in the development density in Brown Twp.

To the Mayor's credit, he is also expressing concern that if Columbus provides water without annexation, we could get a building boom within the Hilliard School District which bypasses the provisions of the Win-Win Agreement.

The large landowners in Brown Twp oppose the Big Darby Accord. They believe it interferes with their ability to sell their land to developers. The Brown Township Trustees and many of the homeowners in Brown Twp support the Accord.

What are your feelings?