Tuesday, January 30, 2007

More on Funding vs Performance

The school funding controversy in Ohio was taken to a higher level in 1991 by the DeRolf lawsuit, which originated in Perry County. The claim is that some school systems fail to live up to the standards required in the Ohio Constitution, and that it is the duty of the state government to fix the situation. I happen to agree with both of those claims. However, it has been presumed that these problems can be fixed by sending poor-performing districts more money.

In his excellent correlation analysis, Blue Bexley reported two important relationships: a) more funding does not necessarily cause a school system to perform better; and, b) the more the funding is captured from local sources, the better the performance of a school system. He was surprised by this outcome, as would most people who believe the proposed school funding amendment will fix all that is wrong with our public schools in Ohio.

Here are some facts about Perry County school systems (data from the Ohio Department of Education website):
  • Northern Local School District spends $7,780 per student for its 2,300 students, and received an Excellent rating on the state report card;
  • Southern Local School District spends $9,566 per student for its 1,100 students, but is on Academic Watch.

Why is it that Southern Local can spend nearly $2,000 (23%) more per student than Northern Local, yet be performing so much worse? Clearly, we don't have enough data to answer that question, but the indication is that money alone isn't the solution.

Here's some data about Franklin County schools:

  • Dublin City Schools: $11,539 per student, Excellent rating
  • Columbus City Schools: $11,918 per student, Academic Emergency
  • Hilliard City Schools: $9,806 per student. Perfect score overall

Again, there does not seem to be a correlation between money spent and performance. More money will not solve the problem.

Sunday, January 28, 2007

Food Stamps

What constitutes an adequate K-12 education? How is it funded?

Those are the key questions of our education debate in Ohio these days. However, there is another buried assumption that I think merits discussion as well:

Should there even be such as thing as public schools - that is, school systems which are funded by taxes, managed by elected officials, and which have near exclusive rights to provide service to assigned geographic areas?

My answer to that question would be "NO!"

I have long been a proponent of a voucher system as envisioned many years ago by Milton Friedman. It works this way:
  • Government, at the appropriate level (local, state, national), collects taxes from its citizens and issues every single child in America an education voucher.
  • The child can take that voucher to any accredited K-12 school, and have it pay 100% of the basic tuition.
  • Schools are therefore funded entirely by what they receive in the way of vouchers, which can be redeemed for cash from the government.

In today's public school system, taxes are collected and paid directly to the taxpayers' local school district. The only way a student can make use of that funding is to go to the local public school. To a great degree, the public school has a government license to be the exclusive service provider to their school district (I acknowlege that there have long been private schools, and that there are some experiements with so-called 'charter schools', but these serve a minority of all students).

If this kind of system works so well, why don't we use it for food distribution? Instead of taking your own cash and going to the supermarket of your choice, everyone would be issued food coupons that could be used only at the government-operated commissary in your local community. You could choose not to use the coupons, and go to a private supermarket and pay cash, but you would be paying for the food coupons anyway. It would be hard for most to pay cash for food at the private supermarket when it seems free at the public commissary.

That is, of course, not what we do. Consumers take their cash and go to the supermarket of their own choice. Supermarkets compete with each other by offering choices in terms of variety, quality, convenience and price. And for those people in our society who cannot afford adequate food, we give them vouchers - called food stamps - which they can spend anywhere they like. The government sticks to the task of making sure everyone can buy food, and the food industry takes care of putting food on the shelves.

Why not the same thing with schools? In fact, rather than giving vouchers to everyone, let's give vouchers only to those who need the financial assistance. Everyone else would have to get out their checkbooks and write a tuition check every semester. I bet that would make folks more attentive to how much value they get for their education dollars. And it would make the education community be more responsive to their customers.

Well run school systems, if privitized, might thrive in this environment and even grow to operate schools across many communities. One would guess that the economies of scale might give larger school systems the opportunity to offer a wider variety of programs for the tuition dollar. But there might also be single-building schools that thrive because they avoid all the overhead of a larger system.

Badly run schools would presumably fail to attract students, and cease to exist. Perhaps someone else would buy the building(s) and start a new school. If the new operators perform well, they might succeed where their predecessor failed.

Because the performance of a school system is largely defined by the performance of its teachers, school administrators would be encouraged to pay really good teachers a premium salary to keep them from jumping ship. Similarly, ineffective teachers would be fired to make room for a new star. A school system which competes for students could not afford poor-performing teachers (or administrators for that matter).

Why is it that for college, we let kids and their parents have free choice where to attend school, but not for K-12? Do we suddenly become smarter consumers of educational services when our kids graduate from high school?

Yes, there are a lot of details to be worked out before we could convert wholesale to a voucher system (which I think I would prefer to call a "Free to Choose" school system in honor of Professor Friedman). But it can be done, and I believe the benefits make it worth the pain.

Or we can get rid of supermarkets. Seems like we should pick the same model for both.

Saturday, January 27, 2007

More Money = Better Education?

The author of the Blue Bexley blog has just posted an interesting analysis of the relationship between school funding and student performance. He writes that he was surprised by the outcome, and the results are leading him to suspect that more money doesn't make for better schools. In fact, his analysis suggests that the opposite may be true. What his analysis does suggest however is that the more a school system is funded by local sources, the better the performance of the school system.

I suspect that it is true that any school system needs a certain amount of money to deliver a quality education, and that for the first increments past that minimum, more money makes a difference. But then you hit a point where more money doesn't make a difference because the performance of the school is limited by the effectiveness of the leadership and most importantly, the degree to which parents are involved with their kids.

You can't get more inspired leadership from the superintendent by giving him/her a big raise. You can't overcome the effects of a poor teacher by buying better books or constructing nicer buildings.

And no amount of money is a substitute for parental involvement.

Friday, January 26, 2007

Proposed State Amendment, Part 2

Continuing from an earlier post...

An Akron attorney who goes by "Pho" has been parsing the proposed new amendment, and doing a little analysis. Here is a pretty good discussion he has put together on what I think is the major flaw in this amendment proposal -- how it gets funded. The truth is that no one knows.

Thursday, January 25, 2007

Key Indicators

Hilliard City Schools has published its 2006 Comprehensive Annual Financial Report , a 125 page document detailing many interesting facts about the financial operations of our school system. An abridged (or "Popular") version is also available, which distills many of the details of larger report to a few tables and charts. I commend the district officials for publishing such comprehensive information and making it readily available on the web.

Unfortunately, neither report helps much to educate the public about school funding. These reports, especially the 'Popular' version, should zero in on the key indicators and give guidance as to how those numbers tell the story of the financial future of the district.

What do I mean by a 'key indicator'? Simply put, it's the handful of numbers that you must understand and monitor to effectively manage an enterprise. In healthcare, they call these things the 'vital signs.' When a patient is rolled into the emergency room, the first things the staff wants to know are blood pressure, heart rate, and breathing rate. Why? Because if those things are out of whack, they have to be corrected quickly or the patient dies. Certainly the doctors will get other measurements (blood sugar level, blood oxygen level, electolytes, etc) as treatment progresses. The vital signs give the doctors an indication of what they have to pay attention to first. If the patient isn't breathing, you have to deal with that before worrying about anything else.

The comprehensive report the school district puts out is like going to the hospital to see an ill relative, asking the doctor what's going on, and having the doctor hand you your relative's charts and saying 'it's all in there, figure it out for yourself.' That doesn't help. The chart has too much detail, and it's hard to understand unless you have the proper training and experience.

The 'popular' report is like having the doctor say 'your relative has a couple of problems, but some good things going for him.' That's not enough detail, and gives no guidance as to what you should do next. Does anything need to be changed? Are there any warning signs that need to be monitored to avoid future problems? Is there anything really wrong right now that requires radical action?

Here's what I think are the strategic indicators, or the 'vital signs':

  1. In the past 10 years, the population of our school district has increased from 58,000 to 76,000 (30%), and the number of students has risen from 10,700 to 14,900 (38%) in the same timeframe. Observation: the school population is increasing faster than the general population -- more families are moving in and they have school age kids.
  2. In 1997, we spent $64 million to run the district (ignoring capital outlays), while in 2006 we spent $113 million, an increase of $49 million or 77%. Observation: The cost to run our district increased at twice the rate as the growth of students.
  3. The total number of employees in the school district has increased from 946 in 1997 to 1,801 in 2006 (90%). The average teacher salary has increased from $38,924 to $56,139 (44%) in that same period. Observation: The number of employees has grown at 2.4 times the rate of students, at ever increasing salaries.
  4. The property values for residences are growing at five times the rate of commercial and industrial property. Observation: More of the funding burden is moving to homeowners.
My conclusion is that the growth in employees is out of whack with the growth in students, and since employees represent 88% of the cost of running the district, that's where we need to focus our attention first.
Maybe we shouldn't be surprised that the district leadership thinks the problem is funding, not expenses...

Thursday, January 18, 2007

Hilliard City Council Candidate

It was announced this week in the Hilliard Northwest News that one of the candidates for Hilliard City Council this November will be a gentleman named Dan Nichter. If you live in the City of Hilliard proper (and not in a township, as I do), you will have the opportunity to consider Mr. Nichter on the ballot. In your deliberation, I encourage you to read this article published by the Darby Creek Association in 2002.

I'll be quite interested to see if Mayor Schonhardt supports Mr. Nichter's candidacy. The tract of land referenced in this article is owned by Homewood Homes. It fills the entire gap between the current Hilliard City limits and the site of the third high school.

None of this is a coincidence in my opinion.

Wednesday, January 17, 2007

Proposed State Amendment

I have not yet spent much time analyzing the proposed amendment to the Ohio Constitution which was brought forward by a 'consortium of education advocates' in January 2007. But it scares me. In short, this proposal claims to reduce the dependence on local property taxes, shift the funding burden to the State of Ohio, and simultaneously provide more funding to the school systems.

Those things all sound good until we remember that every form of tax collected in this state is paid by the same people -- the residents and businesses of Ohio. So if the property taxes WE PAY goes down, the state income taxes WE PAY will go up. Maybe the state sales tax WE PAY will go up as well.

For the people of the Hilliard community, the best possible outcome of this change will be for our total tax burden to stay the same. But that's not likely.

Even though one-third of our funding comes from the State of Ohio, the way the state gets that money in the first place is through OUR income taxes. According to reports distributed by State Representative Larry Wolpert, we in the Hilliard school district get back 59 cents in state funding for every $1 in personal income tax paid to the state. In other words, a large chunk of our tax money is already going to other school districts (Hamilton Local Schools gets $2.30 from the state for every $1 they pay in). The only control we have over how much is collected, and how much we get back, is through the legislative process. In that setting, we of the suburban communities get outvoted by urban and rural districts, who both struggle to fund their schools from a weak tax base. We are seeing the effect of that now, with our state funding holding flat while our district continues to grow.

Please understand that school funding in Ohio is a classic "Robin Hood" taxation system. The districts in weak communities are subsidized by the people in more affluent communities, and Hilliard is seen to be one of the latter. In principle, I have no problem such funding systems. I willingly pay my state income tax, knowing that a good-sized chunk of that money will end up in a district that needs it.

The other two-thirds of our school funding comes from our local community. We get to decide how much money we want to spend on our school system through the tax levies that are placed on the ballot as needed. I like that. It means that to get more money, the officials of the school district need to make the case to the voters in our community that the additional tax is warranted.

The people backing this amendment want to change that. They would like the bulk of the school funding to come through state channels, doled out by state-level officials and not a matter for local control. The minimum amount the local district would be required to collect through property taxes would be set to 20 mills (about half the current rate in Hilliard). However, districts would be free to put additional levies before their local voters to provide funding in excess of the state minimum. I think that means the state will tax us more, give us less, but yet give us the opportunity to tax ourselves even more to keep our district funding the same.

Our own school officials are in support of this new amendment proposal. Superintendent Dale McVey is is currently the Chairman of the Alliance for School Funding (see his Oct 2006 State of the Schools address), which advocates reducing the reliance on local property taxes levies for funding schools -- a position right in line with this amendment proposal.

This new plan needs lots of analysis and discussion (see what the Columbus Dispatch has to say). We need to understand how it differs from the current system. Note that the main problem with the current system is that the state doesn't fund it adequately, not that the formula is wrong. What will cause the state to fund this system any better?

Tuesday, January 16, 2007

Letter to the Editor

The following was submitted to the Hilliard Northwest News for publication Jan 17, 2007:

To the Editor, Hilliard Edition:

We have a perfect storm brewing in our school community, with several significant events occurring simultaneously.

First: After a few failed attempts, in May 2006 we finally passed the capital funds levy necessary to construct a new elementary school and the third high school. However, we have yet to be presented with the operating levy required to staff and maintain those facilities. The staff costs for the new high school alone will add $4 million to the annual operating budget.

Second: Our new Governor has promised to deal with the statewide school funding crisis, but we need to be realistic. Hilliard is considered one of the more wealthy districts in the state, and we should not expect that any solution the state devises will result in more funding coming our way. The likelihood is that it will be less - the per-student funding has already gone down. For example, the way the State Legislature has dealt with the perceived Phantom Revenue problem is to allow districts to enact local levies to reverse the effects of HB920, which protects homeowners from having their property taxes increased due to reappraisal. The state does not provide more funding, it has just given us a way to tax ourselves more at the local level.

Third: On December 31, 2007, the contract with the teacher's union will expire. We can expect the rising cost of healthcare to play a significant part in this negotiation.

Fourth: In 2008, Treasurer Brian Wilson forecasts that we will be spending more money than we collect, and consequently will consume all of our operating cash reserve by 2009. By 2011, we will have an accumulated cash deficit of $75 million, climbing at the rate of nearly $40 million per year. Of course, a school district cannot by law operate with this kind of deficit. So we will be faced with a choice of increasing our property taxes by a staggering amount ($1,000 or more per year on average I believe), or severely reducing the programming and services offered in our schools. The likely solution will be a combination of both.

I don't think our community sees this coming, or understands the magnitude of the problem. In my opinion, the #1 task of the school board this year is to prepare the community for this next levy, and that effort needs to start right now. In the meantime, for more information, see www.savehilliardschools.org

Sunday, January 7, 2007

Mayor vs Developers?

In the January 4, 2007 edition of ThisWeek - Hilliard is an article titled "Mayor's focus is 'managed growth'". Mayor Don Schonhardt reported that the City of Hilliard saw 70% of new development in 2006 coming from commercial property, and 30% from residential. The Mayor claims that this is the result of his explicit management of development policy, and that he intends to manage to this weighting going forward.

We'll see. I hope so. We need this kind of development split to keep our schools affordable.

He and Development Director David Meeks have done a good job recruiting new business into Hilliard. We've taken some hits over the past years, and needed to replace those losses. Dana Corporation shut down its manufacturing operating on Cemetery Rd, Gates-McDonald moved its operation from Mill Run to downtown Columbus, and CompuServe suffered through the death of Worldcom. The new developments of the past few years will hopefully replace those, and then some.

What I'm not so sure of is whether the 30% residential component of this growth was limited more by the Mayor's actions, or by the collapse of housing demand. Two of the local powerhouse homebuilders, M/I Homes and Dominion, reporting significant downturns in 2006. It would be easy to capitalize on this situation by taking credit for the outcome. One is tempted to ask what the Mayor's position would have been had housing demand stayed red hot. I suspect there would be houses on the Grener property already, for example.

To some extent, it is less important whether or not this 70% commercial vs 30% residential development split was deliberate than it is whether the Mayor will indeed manage to these numbers going forward. All we can do is watch the percentages, and see if they keep coming out 70/30.

But we have to watch!

What is the Win-Win?

In his continued campaign to shape the Big Darby Accord, Mayor Schonhardt recently said that the new ‘water without annexation’ policy, being contemplated by the City of Columbus as part of the Accord, allows an end-run around the Win-Win Agreement. He is right. But what is this Win-Win Agreement?

The story starts with the lawsuit of Penick v. Columbus Board of Education, which claimed in the 1970s that the Columbus City Schools were intentially segregated by race. Judge Robert Duncan agreed, and ordered a system-wide busing program to better integrate the schools.

Of course, with the wide selection of suburban school systems available in Franklin County, those who so wished could escape Judge Duncan's order by simply moving to a suburb. Available housing in the suburbs was quickly snapped up, and a demand for new housing was instantly created. It was a windfall for the developers.

There was one interesting wrinkle. It had long been the policy of the City of Columbus to use its exclusive control over the metro water/sewer system as the muscle behind its own growth policy. Specifically, if a developer wanted water/sewer service, the land had to be annexed into the City of Columbus (the exceptions were expansion zones granted to the suburbs in their water/sewer agreements with Columbus). Not a problem, said the developers. As long as the school district boundaries remained the same and the new development would remain in the suburban school district, this was fine. The suburban building boom was on.

Columbus City Schools cried 'foul' as this exodus became apparent. They appealed to the State Board of Education, who has the power to set school district boundaries, saying that not only was this 'white flight' making the Columbus schools poorer and blacker, it was economically inefficient because it caused the suburban districts to furiously build schools while at the same time Columbus Schools was closing buildings (notably, Central High School, now the home of COSI). Columbus Schools asked the State Board of Education to revert to the pre-1955 policy of moving school boundaries with municipal boundaries.

After years of bitter argument, including a truce period brokered by the Ohio General Assembly, an agreement was reached in 1986 which came to be called the Win-Win Agreement.

There is a lot of fine print in this agreement, but I think it can be distilled to a simple concept: In exchange for paying a ransom to Columbus City Schools, a suburban district can keep its already-developed neighborhoods. No one with a home within the boundaries of the City of Columbus but a suburban school district would have to worry about being shifted to the Columbus City Schools. For Hilliard City Schools, that ransom payment is now nearly $1 million per year.

But the Win-Win Agreement also specifies that if an undeveloped area is annexed into the City of Columbus, it is also automatically absorbed into Columbus City Schools. For example, the mammoth development north of Hayden Rd between Avery Rd and Cosgray Rd is all now in Columbus City Schools. But so is a little strip of 16 homes adjacent to Alton-Darby Elementary School, and several other pockets of homes in the midst of the Hilliard School District.

Under the terms of the suburban water agreements, all the land south of Roberts and west of Alton-Darby Rd would need to be annexed into Columbus if developed, and according to the terms of the Win-Win Agreement, it would therefore be shifted from Hilliard City Schools to Columbus City Schools. If Columbus implements the Water-Without-Annexation Policy, this same area could be developed without annexation by Columbus, which keeps the Win-Win Agreement out of the picture, giving the developers thousands of acres on which to build homes in the Hilliard City Schools, which is preferred by prospective homebuyers. Mayor Schonhardt is saying no, you have to go ahead and transfer this land into the Columbus City Schools just as though it were annexed by Columbus. I support the Mayor is this demand.

At some point, we need to ask ourselves whether continued participation in the Win-Win agreement is worth it. The New Albany (Plain Local) School District has concluded that Win-Win has a net positive effect for them. Their analysis is that the $600,000 they pay in ransom is more than offset by the $19 million they collect in property taxes from the territory which is in the City of Columbus, but the New Albany School District.

It seems to me that they leave an important factor out of this analysis: how many kids are in this area? Using round numbers, if they net $18 million/yr in revenue, and it costs $10,000/yr per student, then breakeven is 1,800 kids. Any more than that, and they would be better off ending their participation in the Win-Win and letting those kids attend Columbus City Schools.

We need to do this analysis in our community as well. In fact, I've asked for it before, but am usually met with blank stares.

But what if we found out that indeed the amount of tax revenue that Hilliard City Schools collects from Win-Win territory is not enough to cover the cost of educating the kids from that territory, plus pay the $1 million ransom? Is it as simple as declining to renew the agreement, and letting the kids go to their new schools?

In Hilliard, as with New Albany, these Win-Win developments are strongly tied to the suburban community. People built houses there so their kids could attend the suburban schools. Most of the developments east of I-270 and south of Schirtzinger Rd are in Columbus, for example. That includes River Place, Stonewyck Manor, Scioto Trace, The Glen, and Golfview Woods. So is most everything on Rome-Hilliard Rd south of Roberts Rd.

I don't think we can disconnect these neighborhoods from Hilliard City Schools without tearing our community apart. But we can keep it from getting worse. On this point, I stand with Mayor Schonhardt. If the City of Columbus provides water/sewer to a new development that previously would have been annexed into Columbus, the school boundary needs to be moved as though it were annexed.

For more background on the Win-Win Agreement, please go here