Thursday, October 8, 2009

Rabbits & Hats

At tonight's annual State of the Schools address, Superintendent Dale McVey made the announcement that there would be no levy on the ballot in 2010, and that the District would take the steps necessary to allow our current level of local property taxes to carry the Hilliard City Schools to 2011.

He said that this was necessary because the information he has access to suggests that the public is not inclined to support a levy in 2010 because of the current level of economic distress in America. More on this at the end of this article.

He didn't say whether the next levy would be on the ballot in the Spring of 2011 or the Fall of 2011, but he definitely said there would be no levy in 2010.

By the way, it was interesting that he made this declaration, because to my knowledge the School Board has not made any formal statement to that effect. Is the Superintendent overstepping his authority with this statement, or has this been discussed out of public view, in violation of the Sunshine Laws?

There is a new Five Year Forecast being developed as this is written, due to be presented to the School Board at their Monday, Oct 12 meeting. I am extremely interested to see what has been changed from the last Five Year Forecast (May 2009) that gives the Superintendent confidence that no levy would be needed in 2010. According to that forecast, this fiscal year will end on June 30, 2010 with a cash balance of $11.9 million, and the following year will end on June 30, 2011 with a cash balance of $3.8 million.

Note that the May forecast was developed prior to the finalization of the Biennial Budget for the State of Ohio. Since then we have found that because of the dire condition of the State's budget, the State's funding to Hilliard City Schools will drop 1% ($370,000) in FY10 and 2% ($730,000) in FY11. In other words, all other things being equal, you can reduce the projected June 30, 2011 cash balance by another $1.1 million, down to about $2.7 million.

We should be reminded that in August 14, 2006, our School Board adopted policy DBDA which begins by stating: "The Board believes that maintaining a cash reserve balance of 10% of operating expenses is necessary in the interest of sound fiscal management." Our current operating expenses are on the order of $160 million per year, meaning our cash reserve – according to the Board's own policy – should be approximately $16 million.

Why did the Board make this policy in the first place, and why is 10% the magic number?

It's not of course. You have to think about cash like the gas in your car. Your car might be the one of the highest performing vehicles on the planet, like a nice million dollar Bugatti Veyron, but when it runs out of gas, your top speed is zero.

So saying you want to keep a 10% cash reserve is like saying you're going to stop for gas whenever the gauge reads about an eighth of a tank. I took a cross country motorcycle trip in 2007, and forgot to gas up during our stop in Roswell NM. That's not usually a big deal around central Ohio – there's always a gas station within a few miles. But we were in the desert on sparsely traveled roads where gas stations might be 100 miles apart. We just made it to a little hole in the wall, ironically in the middle of a huge oil field.

If the School District intentionally draws its cash reserve down to a few percent, it's like heading off into the unknown with the gas gauge near Empty. All it takes is one surprise, and you're in trouble.

So I'm real interested to see what kind of rabbit our school leadership pulls out of the hat to pass by all the gas stations in 2010.

And it bears commenting that we are just over three weeks away from a School Board election. Is any part of this a political maneuver to bolster the chances of re-election for the incumbent members? Nothing makes a voter happier than a candidate saying "no new taxes" – even when there is little chance of it coming true.

Our school leadership recently commissioned Saperstein Associates to conduct a public opinion survey of our community, which included questions about the willingness to support a levy in 2010. I know this because I was 'randomly selected' to participate in this survey, just like I am 'randomly selected' seemingly every time a survey has been done in the last few years. And once again, I am trying to get a copy of the survey report – if possible before the "Meet the Candidates" event next Tuesday.

Carrie Bartunek, the community relations coordinator, says the survey report has not yet been delivered by Saperstein to the Superintendent. But isn't it curious that the Superintendent would state that he made his "no levy in 2010" decision on the basis of public opinion?


  1. Paul, thanks for this important update. Certainly the credit will be sought after by holding a levy another year. It is still at a 3 year interval however which is nothing to brag about, and barring an unexpected huge plus size recovery at the state level the projected deficit at year 3,4, and should be interesting. It will be interesting if the 5 year plan which is certainly on the agenda
    for Monday will be included on the schools website per policy. Probably will show up Monday.

    The Dispatch had an interesting
    follow up editorial this morning regarding health benefit cost and how that compares to the majority of the communities. HEA single members will pay 50.00 per month the last year of the contract for very premium coverage. This amount needs to increase along with deductibles. This is compounded by the increased contribution of 2.5% to the
    STRS pension. Again, this is a huge benefit with the shortfall to a pension plan being covered by citizens who are seeing contributions eliminated, pensions eliminated.

    I am curious how each of the HEA endorsed candidates will give us their take on what the next contract should contain in the reduction from the usual 7% pay increases.

    The other protection in the next contract "for the kids" should be new guidelines on college information that is needed to be accessed and signed off on when
    there is a contract dispute.
    The idea of a student not getting proper support for the very expensive college costs that they face because of "working to the contract" needs to be addressed

    It is shameful that this district allowed this to happen in the past and the way to address it
    (if the kids are the most important)
    is to include it specific contract language.

    Good luck to the Educate Hilliard endorsed candidates as they address the public in the next two meet the candidates nights.

  2. "Is any part of this a political maneuver to bolster the chances of re-election for the incumbent members? "

    Bingo. Issue good news ahead of the election to bolster the chances of incumbents being re-elected. Geez, I really smell some inside baseball here Paul. I think we need to get at least two of you voted in to stop what really looks like there is some form of behind-the-scenes communicating that may skirt sunshine laws. I'd really like to see you guys be able to do something about that.

  3. GS:

    Thanks for the note. By the way, I have now have a copy of the new Five Year Forecast and understand how the Board and Admin intend to survive 2010 without a levy.

    When one does the analysis, it's easy to understand that skipping a levy in 2010 means an even bigger levy will be required in 2011.

    So their little maneuver could appear to put us in the position of being the 'raising taxes' candidates, while the incumbents can be portrayed as 'fiscally responsible.'

    It's a game of course: there is undoubtedly a levy in our near-term future. The only question is how large and how soon.

    The real question isn't about levies, it's about spending. And spending is 90% about salaries and benefits. The size and frequency of our levies will be determined by the size and frequency of raises we give our teachers, staff and administrators.

    That's the dialog we need to have, not these political games.

  4. Sent in my ballott today, you got my vote. Good luck! I want Hilliard to remain a top school for my 3 boys.

  5. Our team of three XYs say Thank You!

  6. Last evenings School Board meet the candidates night was poorly attended with at least 1/4 of the crowd school employees, admin, and the 3 other board members. Perhaps a total of 40 people ?

    It was sad that so few chose to
    show up.

    Hopefully Don, Jason and Paul can make some inroads with the electorate on the street.

    The other 4 candidates seemed focused on not being too worried about the lastest news from the
    5 year forecast. My thoughts is that they feel they can pass a levy at any amount to fund the schools. Discussion about
    reducing the amount of growth in the budget seemed not to be of a concern. I would expect Mr Teater,
    Courtney and MS Whiting and Botsko
    will continue the same spending growth with the employees contracts. They seemed to see it as a non issue.

    3 of those 4 candidates have top notch medical benefits having
    family connections to union, and
    state benefits. Obviously, the
    economic turndown has not affected any of them as they enjoy premium benefits just to get started with.

    The open checkbook will continue
    unless the endorsed candidates
    of Educate Hilliard can break through with a victory.

    Also after the meeting the feedback from the candidates is that there is really nothing they can do to stop the union members from not producing the appropriate signatures, paperwork, if they choose to work to the contract.
    Apparently they are worried too much about the union reaction.
    So, hopefully no other students
    lose scholarship, college recs etc
    in the next bargaining contract
    if they again choose to work for the contract.

    It is blatantly clear who is running the district, the community has zero input to key decisions that affect their children.

    At least they could tell us now that we are looking at multiple and frequent double digit tax levies to pay for a budget that cannot be sustained by keeping the same level of pay and benefit increases

  7. Are there any poll numbers that show how you 3 are faring? I did see on the democrat party is only endorsing Courtney.

  8. In a Dispatch article, Superintendent McVey bragged how the school district is the "largest employer in the city of Hilliard" with 1,800 staff members. These are the most motivated and likely voters; it'd be interesting to see how small (by comparison) the footprint of the Southwest City school employees is in their district. If government gets big enough it becomes self-perpetuating; one can't expect Michigan to vote down a law favorable to auto makers.

  9. JWC: Our local races are too small for anyone to bother taking polls. I'm not aware of the process the Democratic Party used to choose which candidates to endorse. It's not like Courtney is the only Democrat on the ballot.

    Eire: While the school district is the largest employer, not all employees live in the school district and can vote in the election. But the ones who do represent a bloc that cannot be ignored. That's the reason we're pounding the pavement, trying to get our message out. Our experience is that when people understand that our mission isn't to blow up the school district, but rather to secure the long-term financial stability of our district, they're on board with us.

    So please help us spread the word!

  10. In your opinion, what should your cash reserve be?

    My district's board meetings are poorly attended, too. The community deserves bad board members if they don't demand accountability.

    Remediation has gained traction in my district as a real issue. What's up with Hilliard's current stats?

  11. Cash Reserve: The number the Board set into policy is 10%, and that's a good start. As I said, there is no magic number. You have to generate some revenue vs expense scenarios, one pessimistic, one realistic, and one optimistic, and see what the year to year cash reserve would be in each one. Then you have to apply some judgement as to risk and consequences. Finally, you have to take reaction time into account: how long does it take to lower expenses significantly or to raise new revenue?

    We know that the lead time to raise new revenue is months at a minimum. The Board has to detect the need, determine the levy amount, draft the ballot language and submit it by the deadline, wait for the outcome of the election, and then wait more for the first tax collection.

    How quickly can expenses be cut? More quickly than raising new revenue, but that doesn't mean it's easy or painless. With nearly 90% of the spending being salaries and benefits, any meaningful cut in spending would have to involve layoffs, which would also impact programming and services.

    So it's okay to hold off on a levy and let the cash balance drain down if the Board tells the people of the district two things: a) what is being put at risk - that is, what programs and services will be cut if there is a surprise; and, b) when it is that they do plan on putting a levy on the ballot, and how large they envision it to be.

    There is a simple mathmatical relationship: given any spending growth rate, the shorter the interval between levies, the smaller the required millage; and conversely, the longer the interval, the larger the millage.

    So when this Board says they'll delay the next levy to 2011, they are also implying that it will be a whopper - my calculations suggest on the order of 10 mills - unless we lower the rate of expense growth, which primarily means lowering the rate of employee cost growth. That's the reason the next teachers' union contract is so critical.

    And why the community needs to put people on the Board this election who understand all this, and will take appropriate action.


  12. I cast my absentee ballot votes for the "3 Amigos" today. Good Luck to all of you!

  13. Let's just face facts; there is, as at every level of government, rampant corruption in the HCSD, and it's repulsive to anyone who actually believes in the free market.

    Good luck guys!

  14. The rabbit as it turns out is this (from the Five Year Forecast):

    Restricted grants-in-aid in FY10 represents $2.3 million in federal stimulus funding and $2.8 million in federal stimulus funding for FY11. This forecast assumes that the State does not receive additional stimulus dollars in FY12 and FY13.

    It is a good thing to let the taxpayers keep their money for an extra year. But we can't surprise them with a 10 mill levy in 2011...