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...

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