Monday, May 5, 2008


Emergency medicine has developed a process called triage - the sorting of patients into three groups: 1) those which need immediate attention; 2) those who are in trouble but can wait; and, 3) those with minor complaints who can be mostly ignored until everyone else is taken care of.

Medical professionals take this attitude because you can't let the people with the little scrapes and bruises distract you from the folks who will die in minutes without your care. And often it is the patients who scream the loudest who can be ignored the longest.

What does that have to do with Hilliard City Schools?

Here's an example: Every time I go to a public meeting about our schools, someone brings up the cost of diesel fuel. It is as likely to be a district official as it is a member of the public.

Here's the facts: We have 141 school buses in our fleet which are on the road for 8,700 miles per day, according to the district's Comprehensive Annual Financial Report (page 101). If average fleet fuel usage is 7 miles-per-gallon (source, p3), then our consumption would be about 1,250 gallons per day. With 180 days in the school year, that's about 225,000 gallons. At $4.10/gallon, this would cost $922,500 per year. Certainly nothing to sneeze at.

How have we been impacted by the dramatic increase in fuel prices? In 2006, diesel fuel was about $2.49/gallon. At this price, our annual fuel costs would have been $560,000. That means that from 2006 to now, our annual fuel costs have increased roughly $360,000.

Compare that to the fact that we spend just short of $200 million per year to run our schools: Our diesel fuel costs represent only one-half of one percent of our total expenditures! The change in fuel costs from 2006 to now consumes only 0.2% of our budget.

In other words, it's not a critical problem demanding our immediate attention. Don't bother bringing it up any more - it doesn't make that much of a difference in the big picture.

The only cost number we really need to be spending any time talking about is personnel. Currently, 85% of the cost of running our district is the salaries and benefits of its employees. That being the case, then a 5% per year increase in employee costs (not counting growth), causes the total budget to increase by 4.25%. Against a $200 million annual budget, this is $8.5 million per year! This is the critical need!

So let's concentrate on the urgent questions:
  • In the near future, are there going to be any new revenue sources other than an additional property tax levy?

  • If we don't pass an additional property tax levy, what will need to be cut?

    Personnel - nothing else is significant.
  • How many people will we need to lay off for the 2009-2010 school year if the levy doesn't pass?

    I did this calculation in an earlier entry - the answer is over 200 people.
  • How big does the next levy need to be?

    It depends on how long we want to be able to wait before stacking on yet another levy. The larger the levy now, the longer we can wait. At 9.5 mills - the size of the levy our community just voted down - it's likely that we'll need another levy of about the same size in 2-3 years.
  • How did we get into this jam?

    We allowed thousands of new houses to be built in the last decade, and they don't generate enough in property taxes to educate the kids who live there. This is the big gushing wound!

    Our other two primary funding sources, local commercial property taxes and State Aid, have not grown much at all. That means the only way to raise new revenue is with an additional property tax levy.
  • How do we get out of it?

    The very best tool for getting funding aligned with growth would be Impact Fees. But we need the General Assembly to give us the authority to use them.

    Beyond that, we may need to recalibrate our expectations to our willingness to pay taxes. We may also need to radically renegotiate the employment arragement with our team of teachers, administrators and staff.

    And we may need the state and federal governments to scale back their expectations of us as well.


  1. wow - when you put it that way then I guess it is great to hear that the Board opted to cut the Camp Joy program at a whopping $23,000 - thus angering parents across the entire know the type of parents I'm talking about. The parents who actually support the schools. HUGE savings there! Public relations nightmare.

  2. Exactly.

    It seems like the decision to cut Camp Joy was made to send a message, because as you say, it doesn't have that much of a financial impact one way or the other.

    I'm just not sure what message was intended. We can read all kind of evil intent into it, but I suspect the thinking was that the $23,000 would save at least one job, maybe only a part time job. The intended message was probably one of compassion.

    But our school leadership is completely naive about public relations. Without an explaination of their thinking (or even the opportunity to observe their deliberations!), many will take it as a vindictive act.

    No way to get a levy passed.

  3. Just a point of clarification. I think the cut with Camp Joy was
    236,000, and I have no issue with that. We are in a cutback situation
    and it is what it is !

    That is why it was laughable that the HEA president asked about cutting
    extra curriculars out. That is just a bargaining ploy, it would pale toward the total budget.
    What you are going to see because there are no new revenue sources coming in the short term, is more personnel cutbacks, and it may hit
    about 150 people. It may mean cutbacks in some programs. But I have zero confidence at this point
    that the admin will cut significant
    cost out of the admin area, and I dont mean secretaries or admin, I mean directors of this that, and the other. Something that the private sector has had to do in the last year. Also some fees will increase per student per activity and fees for certain classes.
    That is also a tax increase bourne however just by those with kids in schoolwhich is unfortuanate as the cost should be bourne by everyone

    I think that if 100 positions were cut, doing some minor math, we could pass the levy and have things last for a while. Some of the elective areas will have some cutbacks, and perhaps the variety
    may be cut back slightly. But I dont expect impact fees to hit or any increase in state funding
    so with some further cuts I think the levy can pass.

    We also need to elect new board memebers and look for some admin changes. I expect the admin to inflict further pain to the electorate and still continue to hand out premium compensation.

  4. Is that $23,000 total cost or net cost for Camp Joy? I know the students (parents) pay a large portion to attend. Was the Camp Joy figure adjusted to account for the student contribution?

    Either way, I disagree that the decision was one of compassion. I'm not saying the BOE/Admin doesn't have a heart, I'm sure they do. But I'm also certain that cuts were made that were visible. A part-time job or secretary at central office is not visible. Camp Joy, class sizes, and noon-aides are all visible changes that are meant to "encourage" voters to vote in favor of the levy.

    That's just my opinion. I have no basis other than comments made by administrators after the election and just my gut feel on how this district "campaigns".

  5. $23K or $230K, my question is still the same. Is that the net cost to the district or has the parental contribution been included?

  6. Wait! Are we saying that to pass the levy we need to scale back another 100 jobs/teachers???

    I certainly hope that is not the case. The impact of losing 100 teachers (which is about 10% of the teaching staff) would leave us with understaffed schools and a chaotic learning environment.

    We must be more realistic than that. I truly hope Anon 7:26 is not in the majority in thinking. If so, we are in trouble!

    Friends, we must provide funding to the schools. Cuts can and should be made. We can discuss the merits of changes in leadership (school or otherwise), but to think we can operate our schools without passing a levy in the next 18 months (or less) is irresponsible.

  7. The $23,000 is the district contribution. That is confirmed through the BOE. Parent contributions pay the rest. It amounts to about $50 per student. A shameful situation.

  8. Fabulous post Paul. The Q&A part should be mailed to every Hilliard resident - it's concise, it's clear and it's spot on.

  9. From the Mayor at the Britton Farms Homeowners Association when he was asked about the growth of housing:

    "The Mayor informed us that Hilliard City Schools encompasses 60 sq. miles and the City of Hilliard is 15 and that the city gets less than 2% of real estate taxes. Essentially, he was saying that if we have problems with more and more schools, like when the Darby Accord creates more housing developments, we need to take it up with the school district. He said that they are doing all they can to limit houses with children and that there is already a $1500 Impact fee. They can’t control growth in Prarie Township and Columbus that is inside the school district."

    Sounds like we are really on our own :(

  10. Nice job on the part of the Mayor to deflect the question.

    Why didn't he mention that he's eager to accept annexation requests from the developers who own the land west of Alton-Darby Rd, and already has his own plan drawn up? After all, it could be the policy of the City of Hilliard to not annex any more land at all.

    It's not like Hilliard can have dreams of unlimited expansion to the west - the water/sewer services contract between the City of Columbus and the City of Hilliard limit Hilliard annexation to a line roughly one mile west of Alton-Darby Rd. That's it.

    Nor does the Mayor explain why his version of "50% open space requirement" really means 1/2 acre of open space for each acre of development, while both the Brown Twp Comprehensive Plan and the Big Darby Accord describe "50% open space as meaning one acre open for each one acre developed. The effect of this sleight of hand would be to increase density by 33%, which could mean over 1,000 extra houses in a 2,000 acre parcel. How does that protect our schools?

    Nor does he explain why the easement agreement between Homewood Homes and and the school district has the requirement that if Homewood requests annexation into the City of Hilliard, the school district must request it as well.

    And what the heck does his comment about 'taking it up with the school district' mean?? It is the City of Hilliard which is a member of the Big Darby Accord, not the school district. It is the City of Hilliard which can influence the amount of development in the Big Darby Accord area, not the school district.

    This Mayor has been pro-developer from the time he was elected to City Council. He can claim that he's controlling the housing market within Hilliard, but gee, doesn't the general state of the real estate market have a lot more to do with it?

    Nice try Mr. Mayor. But I'm not buying it.

  11. Paul,

    I know that you like to attribute a large portion of rising costs -- and hence levy millage -- to residential development.

    Let me make you an offer: I wrote a school finance model (presented at a OSBA Capital Conference) that uses housing starts, negotiated agreements, the state funding model, staffing ratios, etc., to show that student growth is but a minor contributor to rising school costs.

    The model lets you change your Five Year assumptions to estimate future levies. In fact, it produces an actual Five-Year Financial Forecast. All very dynamic.

    Keep in mind that Olentangy and Hillard are similarly situated with high rates of growth.

    If you are interested, I would sit down with you and show how each factor affects costs and levies.

    Let me know.


  12. Jim:

    I appreciate your note.

    There's a good chance you and I are looking at two sides of the same coin. My focus has always been on the funding side, while I think yours has been spending.

    I have no disagreement with you that personnel costs drive everything. Nor do I argue that school employee compensation has been accelerating at a pace much greater than the private sector. However, to say that school staff is overcompensated or that there are too many employees is not my purpose. The people of the community will have to make their individual judgments on these issues, and elect school board members who share their views.

    My point on funding relative to growth is simply this: The school funding system in Ohio is set up so that there is a three-way partnership consisting of local non-commercial property owners (mostly residences and farms), local businesses, and the State of Ohio. However, the balance of these three has radically changed for Hilliard in the past decade, compounding the problem.

    Each district has its own mix of the three. Upper Arlington and Bexley, for example, have virtually no commercial sources of revenue. That means they must compensate for the lack of revenue from businesses with high residential property taxes. Folks who move to those communities know that, and accept it. But because they have minimal growth in students, their growth in spending is mainly to cover increasing personnel costs. That's no small thing, to be certain, but it's entirely within the political control of the school leadership.

    Other districts, like where one of my kids lives, is dominated by agricultural land. By state law, farmland is assigned a very low value for taxation. Most such areas also lack significant commercial revenue sources. In these cases, the State funding plays a bigger role. It was the failure of the General Assy to adequate fund such districts which led to the DeRolph lawsuit and the Supreme Court's ruling that a school funding system that puts too much reliance on property taxes is inherently unconstitutional.

    The problem in high growth districts like Hilliard is that the three components of the funding are not growing at the same pace. We can have long discussions about fixed costs and variable costs, or fully-loaded vs marginal costs, but all lead to the same place: When you build a new house you get, on average, one new school age kid. The fully loaded cost to educate that kid is about $10,000/yr, but the property taxes on the house the kid lives in amounts to less than $4,000/yr. Where does the other $6,000 come from?

    It doesn't come from the State. The State has frozen its total dollar allocation to Hilliard, which means that on a marginal basis, the State contributes nothing to our growth.

    Nor does it come from business. Central Ohio municipalities compete with each other for new business, and to keep the ones they have. Even if we ignore the damaging effects of tax abatements on the schools, the fact that the gross business property value in our community has not changed in a decade means that once again, on a marginal basis, there is no contribution from this sector.

    So we get a compound effect. Yes, personnel costs are rising and even accelerating at a rate higher than most in the community enjoy. But atop that we have the multiplier effect of growth. Without marginal funding growth from the State or commercial sources, the answer to the question above - 'were does the other $6,000 come from?' - is: from all the other residential property owners in the district.

    This is the reason I advocate impact fees. You can't move into our district and then vote against the levies whose magnitude is directly relative to the fact that you moved here. It's not meant to be punative, and in fact the proposal I sent to my state representatives offsets the impact fees on a new home with credits against property taxes.

    Impact Fees also makes the school district a political player in development decisions. No longer would developers and the politicians who facilitate them be given free reign to create a Malthusian Failure of the Commons.

    I would enjoy having a look at your model if you want to email a copy to

    Again, thanks for you note.


  13. Paul,

    My model ties spending and funding. Districts look at these as if they are not related. But ...

    As an example: New homes bring new students (costs and revenue) and new valuation (revenue).

    You have to look at both sides together (dynamically) to see how changes affect levies (which represent the convergence of both spending and revenue).

    The model allows districts to see what is driving the need for, and the size of, levies.

    Life in a world of scarcity is all about alternate costs. And, this is exactly what districts forget.

  14. Jim:

    Exactly. You're talking about what my business school professors called 'marginal analysis.' The point of this post, and most of what I've written in the past, is to say that marginal cost is driven almost entirely by employee compensation while almost all marginal revenue comes from residential property taxes.

    In engineering lingo, our leaders have a problem with the 'Signal-to-Noise Ratio.' They let the noise (e.g. diesel fuel costs, HB920) distract them from the 'signal.'

    Regardless of which language or tools one uses for the analysis, the conclusion is the same: worry about personnel costs and the number of new residences that get built.

    Everything else is insignificant.

    Looking forward to seeing your model - I'm a spreadsheet junkie.


  15. KJ 100 positions was an inclusive number, including teachers, aides
    significant admin, etc. All would not be full time positions cut.
    Would it have to get to 100, perhaps not. If the district and HEA had
    settled earlier, less positions would have had to be cut, as both sides have been working now for 4 months under the old contract that included
    very generous raises.

    It will be interesting to see
    what the contract offer is and if it is settled

    I prefer to make no more judgements until the contract offer that has been tenatively scheduled for a vote is one of cost containment or more of the same.

    Prediction The NW news made mention of 3% raises, no mention of step raise amounts. This will be
    the key component along with medical insurance contribution
    If the raise is too high people will vote no.

    Remember, the HEA president as noted in Feb. said that with the medical contribution, the teachers would be taking a pay cut. This
    is the kind of rhetoric that puts off many people.

    I voted for the last levy and depending on particulars will most likely vote for the next based on my commitment to education

    However, there is a much consternation and anger about
    the pay raises, admin, and
    the major benefits.

    My preference would be not to lay off anyone, but if the HEA and the board, and admin, continue down the same path, with a total lack of respect to the electorate ,then
    unfortunatly programs will be cut
    fees will go up, and some will lose their jobs. Very similar to
    what is happening in the private sector

    I doubt the new medical will entail
    premiums in the 220 a month range
    and major deductibles. I dont see the time off changing that is significant.

    The situation is tenous and to blame just the taxpayer is self serving.

    Serious adjustments have to be made, everyone cannot afford big increases in their property taxes right now.

  16. This comment has been removed by the author.

  17. For clarity purposes, I re-post my earlier comments....

    Agree, I can't afford much more myself.

    For the record, the HEA has been working without a contract. That means raises were not given in January, nor were medical premiums paid. The new contract will be retroactive, and at the time of approval pay increases and medical premiums will be adjusted back to Jan 1. Just because they are operating under the general guidelines of the old contract, does not mean raises were continued as in the old contract.

    I haven't seen the new contract, but based on the articles in the paper, neither the HEA nor the BOE are too thrilled. That tells me the final contract is a compromise of the two positions. Medical premiums of 6/8/10 by the HEA, and probably 2 or 3% raises (plus step). That's my guess anyway.

    It's hard to move all the way in one direction all at once. Meet in the middle now, and hopefully meet in the middle later. Eventually moving toward the position of slowed cost growth.

  18. Well from my take, 100 positions may be extreme. However, if the settlement is 3% and the step raise is equal or more, which it usually is, than please tell me why this is ok IF we dont have the money in the first place. By accepting this, it only gets worse. Add the 4% admin raises, and it would appear that
    the reality is we are supposed to ante up and accept this type of reckless spending . So if you have to add 600 per year in taxes to cover the levy, over the next 3 years you have to cut 1800 out of your budget.

    So that is a significant cut, when you dont get 6 % raises or 4 % raises as with the district. Remember that the district allocated with step raises 7% increases over the last 3 years.
    That is huge, and many took advantage of the step increase. PLUS the medical plan was very
    inexpensive for the district employees.

    If the raises had been reasonable
    than the consideration of layoffs
    and cuts would have been less

    Again, as noted in the NW News after the levy defeats.

    Cuts in the budgets/ 4% raises
    I will vote yes, with reservations
    I can also understand that many
    will not, and I wont be suprised and I wont ask lamely why like the HEA and the board will