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...

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