Tuesday, March 18, 2008

A Tale of Two Districts

An anonymous commenter on a previous post suggested comparing the financials of the Lakota Local School District in Butler county with those of our own school system. Lakota is about ten miles outside the I-275 outerbelt of Cincinnati, and like us, a community on the boundary of exurban development and agricultural land.

Some very interesting statistics have emerged from that comparison which I believe merit discussion as a separate post. So here goes (go here for an explanation of terms):

From the Five Year Forecasts
2007 Data
Enrollment: Hilliard 15,029 ; Lakota: 17,782
Total Revenue/student: Hilliard $9,571; Lakota: $8,513
Total Expenses/student: Hilliard $9,193; Lakota: $7,569
Salaries & Benefits as % of Expenses: Hilliard: 88%; Lakota: 75%

So one observation is that our school district spends a much larger fraction of its budget (13% more)- and a good deal more per student - on Salaries and Benefits.

From www.SchoolMatters.com
2005 Data

Operating Expenditures (per student)

Administrative: $941
Building Ops: $1,610
Staff Support: $391
Pupil Support: $1,061
Instructional: $6,231
Total: $10,234

Debt Payments: $3,774

State Report Card: 28/30, 100.2, Continuous Improvement, AYP not met

Administrative: $1,006 (107% of Hilliard)
Building Ops: $1,783 (111%)
Staff Support: $380 (97%)
Pupil Support: $828 (78%)
Instructional: $4,521 (73%)
Total: $8,518 (83%)

Debt Payments: $654 (17%)

State Report Card: 29/30, 102.5, Excellent, AYP not met

and some other Districts I thought might be interesting:

Administrative: $1,049 (111%)
Building Ops: $1,935 (120%)
Staff Support: $583 (149%)
Pupil Support: $1,533 (144%)
Instructional: $6,344 (102%)
Total: $11,444 (112%)

Debt Payments: $1,436 (38%)

State Report Card: 29/30, 103.7, Excellent, AYP not met

Administrative: $841 (89%)
Building Ops: $1,798 (112%)
Staff Support: $173 (44%)
Pupil Support: $789 (74%)
Instructional: $4,906 (79%)
Total: $8,507 (83%)

Debt Payments: $2,139 (57%)

State Report Card: 29/30, 102.8, Excellent, AYP not met

Dawson-Bryan (Lawrence Cty, one of the poorest districts in the state)
Administrative: $922 (98%)
Building Ops: $1,931 (120%)
Staff Support: $149 (38%)
Pupil Support: $1,372 (129%)
Instructional: $5,522 (89%)
Total: $9,896 (97%)

Debt Payments: $137 (4%)

State Report Card: 23/30, 94.0, Effective, AYP not met

Some observations from these data:

  • Lakota spent $1,716 less per student on Total Operating Expenses than Hilliard, and almost all of that was in lower Instructional spending.

  • Dublin spent $1,210 more per student for operating expenses, but it was primarily for Staff Support and Pupil Support. Their instructional expenses were identical to ours.

  • Olentangy spent $1,793 less for operating expenses than we did, and were lower in every category except Building Operations, which was $188 higher.

  • Dawson-Bryan, which is almost completely funded by the State of Ohio, spent about the same in total for Operating Expenses as us, but only 89% of their expenses were Instructional. They had much higher Building Operations and Pupil Support expenses than us.

  • The most signficant difference across all the districts compared was how much was spent for debt payments. In 2005, Hilliard spent $3,774 per student, while Lakota spent only $654. Dublin was $1,436, Olentangy $2,139 and Dawson-Bryan $137.

One could spend hours on these comparative data of course. Some will argue that our expenses are high because of the large immigrant population in our schools. That's a difficult conclusion to support with these data, mostly because there is not sufficient detail breaking costs down by immigrant and non-immigrant populations.

For example, I believe our new neighbors from Africa are lumped into the category "African-American," meaning there are kids in that category from families who have been in America for hundreds of years as well as kids who just got off the plane from Africa last week. Same kind of story for each grouping: The category 'White' includes descendents of the Mayflower and Eastern European kids who are first generation in America.

I did find some interesting comparisons in the salary schedules however:

For a teacher with only a Bachelor's degree and no experience:
Lakota: $36,036
Hilliard: $35,107 (-2.6%%)

Master's degree and 10 years of service:
Lakota: $52,433
Hilliard: $59,050 (+12.6%)

Master's + 15 and 23 yrs of service (top of the Hilliard pay grid)
Lakota: $71,172
Hilliard: $82,695 (+16.2%)

PhD and 25 yrs of service (top of the Lakota pay grid)
Lakota: $77,478
Hilliard: $82,695 (+6.7%)

... in other words, a Hilliard teacher with a Masters+15 and 23 yrs makes 6.7% more than a Lakota teacher with a PhD and 25 years of service. And if I've read their contract correctly (see Article XV), the Lakota teachers pay 10% of their health insurance premiums. However, their health insurance is provided through the Butler County Health Plan, which is a self-funded insurance program for all school employees in the county.

That seems like a pretty good idea - my employer did this at one point and saved a ton of money. Our company still carried a 'stop-loss' policy with a multi-million dollar deductible, but up to that point, healthcare providers were paid directly by the company. The program was administered by one of the insurance companies (for a fee), so to an employee it felt the same as being covered by a big insurance company. The difference was that it was the company's money at risk, not the insurance companies. If Butler County pull together a self-insured system, it sure seems like we could here in central Ohio - especially after this 30% premium increase we got this year.

But here's the catch - you must have a significant cash reserve to start so you can prove to the state labor regulators that you have enough money to pay claims. After the startup, the withholding from the employees should offset the claims, but you need that seed money. Unfortunately our Board has run our cash balance down to about zilch, and with the failure of the levy, cutbacks have to be made to balance the books.

So this isn't an option for us right now, but it could be right after we pass the levy and get a slug of cash in the bank. But we would have to start getting ready now, including putting any needed provisions in the employee contracts.

This has been a fruitful exercise. Thanks whoever you are for the suggestion.


  1. Interesting indeed, Paul. As a teacher, I'd like to see you compare Hilliard's salaries with Dublin's, since you included Dublin in the other cost comparisons here. Dublin teachers currently pay 15% of their monthly healthcare premium. Yet based on the 2006 salary schedule I found online (which is at least one year out of date) I would still earn $2,000 more per year--even AFTER paying the 15% healthcare premium portion--than I currently earn in Hilliard. The 2006 Dublin salary is actually 7.8% higher than my 2008 Hilliard salary. If you compare us with suburban districts in central Ohio, you will see that Hilliard salaries are middle of the pack.

  2. I didn't see the entire contract online for Dublin either, but here's the URL for the district's employment webpage, where I found the link for the 2006 Certified Salary Schedule:

    And you're definitely right the differing step structures make comparisons challenging, to say the least. Some districts--sometimes those in the "less desirable" locations--start higher in order to attract teachers to those areas, for example.

    I have no idea why Hilliard doesn't pay past the M+15 level--good question. I wish they did because I would benefit from it!

  3. Fair request, although I'm having trouble finding the Dublin contract online (the DEA website has password protection).

    However, I did find the contract
    for the Olentangy Education Association. Interestingly, it posted on the district's website... I continue to be impressed with the way Olentangy communicates with its community.

    So here's some of the Olentangy numbers, and the percentage the Hilliard salaries are greater:

    Bach/0 yrs: $34,117 (+2.9%)
    Mast/10 yrs: $55,082 (+7.2%)
    Mast+15/23 yrs: $74,781 (+10.6%)
    PhD/25 yrs: $88,397 (-6.5%)

    All these contracts have slight structural differences. In this case, the OEA contract has all the steps 'filled-in' to 20 years, meaning the Olentangy teachers get step increases in years 16-19 when Hilliard teachers do not. Plus the Olentangy teachers have one more step at 25 years.

    At the top of the Hilliard grid, which is Masters+15 and 23 years, the Hilliard teacher gets paid 10.6% more than the Olentangy teacher with the same education and service.

    But the Olentangy grid has two additional educational levels, Masters+30, and Masters+45. So an Olentangy teacher can top out at $88,397 with a Masters+45 and 25 years of service.

    Why doesn't the Hilliard grid go past Masters+15?

    The Olentangy teachers pay 10% of their health insurance for single coverage, and 20% for family coverage.

    If the OEA member selects the HMO option, the district will pay the same as the regular insurance option, and the teacher pays everything above that. However, since HMO coverage is generally cheaper than regular insurance, a teacher who selects HMO coverage probably pays a less.

    I'll go see what else is out there.


  4. Dublin:

    I think I found the same pay grid as you - on the District's website:

    The percentages are the amount the Hilliard salaries are greater - so a negative percentage means the comparison district has the higher salary

    Bach/0 yrs: $36,037 (-2.6%)
    Mast/10 yrs: $60,254 (-2.0%)
    Mast+15/23 yrs: $78,921 (+4.8%)
    PhD/25 yrs: $82,525 (0.2%)

    No idea on their health insurance arrangements.

  5. Sounds like some pretty good compensation for Hilliard given the past and current health care cost to the staff. With time off benefits
    compared to private sector, I would say that there is a good compensation

    So perhaps given the financial situation of the district, raises
    for the admin and staff could be reduced for the next 3 to 4 years while we ride out the contribution from the state.

  6. I'm not too surprised, since Southwest Ohio is politically more conservative (not more Republican; there's a difference) than Hilliard and so there's a greater ethos of fiscal responsibility. You can see that in the lower debt payments and smarter decisions with regard to health care. Be interesting to see if a similar school near Cleveland would be even more bloated than we are.

  7. Hi Paul,

    Thank you so much for following-up and comparing the two districts. I see so many similarities between Lakota and Hilliard and I was surprised to learn their cost per student was so much lower than Hilliard yet their scores consistently remain so high. My family still lives in the Lakota district and the school district seems to be one that teachers want to work in (a friend was thrilled to get a job at Lakota a few years ago).

    I wonder if the Board or Administration ever tries to learn "best practices" from other districts. I'm sure there are great lessons and I'm in favor of stealing shamelessly!

    You mentioned our immigrant population. I can say, only from observation, that Lakota has experienced a similar influx...my guess is primarily Latino and African but again, it's only a personal observation.

    Ah, to solve all of the problems...

    Again, thank you for helping me understand all of this!


  8. You've done some really interesting and useful analysis, Paul. Thanks for your efforts.

    By the way, I had heard you could find all district contracts at the State Employee Relations Board website, so I checked it out.

    Here is the address to the spot on their site with every contract: http://www.serb.state.oh.us/sections/research/WEB%20CONTRACTS/WEB%20CONTRACT%20LIST.pdf (Sorry, I didn't know how to make it a link here.) NOTE: It is an Excel spreadsheet called the WORKING WEB CONTRACT LIST.xls

    As relates to the comparisons you have done, the following observations occur to me.

    Even if Olentangy, for example, finally pays more after 20 or 25 years, Hilliard has still paid MUCH more over the lifetime of that one teacher (and what if the teacher doesn't ever get to his/her 25th year?) If you multiply that pay differential times 500 or 1000 teachers, then you are talking about some huge numbers ($$$ millions), year after year, after year....

    Additionally, I've heard of numerous districts (UA, Worthington, Westerville, Hilliard?...)paying large retirement incentives to entice teachers with 20 or more years of experience to retire, because the district can't afford them any more. This necessarily has everything to do with the base and step increases in the contracts, doesn't it?

    How does it make any sense to raise their pay so fast that districts can no longer afford the experienced teachers that we all want to have in the schools?

    Just food for thought.

  9. KH:

    I know many companies give incentives to folks who retire early, but it's never been clear to me that it's a good thing - on either a financial or performance basis.

    A number of years ago, Ohio Bell allowed many of their oldest employees to retire early. I was working for one of the largest purchasers of telecom services in the country (CompuServe), and we certainly noticed two things: a) their response time to problems got worse; and, b) the younger people who were left didn't know as much about how to do the installation and repair work we required of them as the old-timers did, and so it took them longer. In the end, I'm not sure whatever financial savings they might have gained offset the productivity losses. As customers, we certainly weren't happy about it.

    But maybe that's not a good comparison because teaching is so different than being a telecommunications worker. But if that's the case, why do the teachers with the most years get paid the most? I'd assume it's because their experience allows them to be better teachers. If that's not true, then the pay schedules should begin to reduce salaries as teachers get older.

    On the financial side, let's say the district wants to get a teacher making $70,000/yr to retire five years early so it can replace that teacher with a newer one who makes $35,000/yr. In those five years, the district will save 5 x $35,000 or $175,000, plus the employer share of taxes like FICA.

    Well, not quite. The district will have to offer something like adding those five years to the teacher's service. This is significant, as it adds 11% (2.2% per year) to the teachers annual pension, which would be about $7,700 additional per year. I imagine that the State Teachers' Retirement System would require the district to deposit a lump some equal to the Present Value of $7,700/yr over the retiring teacher's remaining life expectency. Let's say that's 20 years, and the discount rate is 5%. The Present Value works out to be just short of $100,000.

    And what about the cost of healthcare for the teacher who retires early? Few will be old enough for Medicare/Medicaid, and will need to be carried on someone's policy (the district or STRS) until they are. Those extra five years won't be cheap, and could easily eat up the remaining $75,000 they presumable saved.

    My analysis is made without any facts and may therefore be way off. But it illustrates the kind of thinking that should be done before early retirement programs are offered.