Sunday, June 20, 2010


The opening presentation of this year's annual Board Retreat was that of the Board's Audit & Accountability Committee.

The Board established the Audit & Accountability Committee in the Fall of 2008, during the period leading up to the vote on the 6.9 mill Permanent Operating Levy, which was passed in November 2008. The members of the Committee were named in February 2009, and they have been working very intently on their assigned mission, meeting much more often than is specified in their charter.

The Committee's latest report touched on five areas:

1. Assessment of the 2009 State Auditor's Report and Management Letters
2. Benchmarking Analysis of Costs – Update
3. 2010 Five-Year Forecast – Review and Recommendation
4. Strategic Performance Objectives and Measures
5. Compensation Expense

Three times in their report, the Committee said that the past rate of operating expense growth in our school district is "not sustainable" going forward:

Page 2: In conclusion, while the Audit and Accountability Committee commends the District for reducing costs per student for 2009, the past expense growth rate significantly above CPI rates is not sustainable.

Page 3: The rate of growth in costs is simply not sustainable nor supported by current economic factors.

Page 5: As we indicated in our previous report and again in this report, the current rate of expense increases is unsustainable.

They closed their report with this statement:

In summary, compensation expense is the driving force of education costs in all districts. In HCSD compensation currently comprises over 87% of total District expenses. While it is important that the Administration continually watch all costs, compensation expense for Administrators, teachers and support staff is the only expenditure that "moves the needle". As the District works through the difficult economic circumstances and the strategic matters raised in this report, we recommend that all employees of the District participate in the development of solutions. Equitably sharing the duty of implementing solutions, financial and otherwise, will be important to community acceptance.

This is a wise and accurate summary, in my opinion. There is no single cause for the fiscal challenge in which we find ourselves, nor is there an easy solution. While it is indeed true that compensation costs make up most of the budget, and that our costs have been going up at a rate much greater than is typical in our current economy, there are other significant factors at play as well.

The most significant of those 'other factors' is the fiscal maelstrom in which the government of the State of Ohio finds itself. Ohio is not alone. The cover story of Time Magazine this week (Vol 175, No. 25) is titled "The Broken States of America." The writers examine the growing number of states that, if they were private sector industries, would be inclined to declare bankruptcy in order to shed the obligations accumulated from a generation-long spending spree. Those obligations cannot be met without implementing incredibly severe cuts in current and future spending, and raising taxes to a point that could choke off our fragile economy.

Because so much of the State's revenues come from personal and commercial income taxes, when the global economy took a dive, the revenues of the State of Ohio fell dramatically as well. Regardless of the pro-education promises Gov. Strickland made as a candidate, there just isn't enough money coming in for the State to honor all those expectations. The State must cover the ever-growing cost of Medicaid, as well as run the corrections system, which are also primary consumers of State funding. The result has been a manipulation of the public school funding formula such that districts perceived to be 'wealthy,' as is ours, have been left to fend on their own.

In plain English, that means that 100% of the incremental costs of running our school district are being fully borne by the property owners of our community – homeowners and businesses alike.

There are those who argue that the solution is obvious: radical reductions in the rate in which salaries and benefits are rising. The A & A Committee report says it clearly – only the compensation cost component of our budget is large enough such that a change in the rate of growth will make a real difference. I have certainly saying this for a very long time as well.

But we must acknowledge that there are other viewpoints. As one of the School Board's representatives to the A&A Committee, along with Dave Lundregan, I observed their discussions on this point, which are summarized in this statement on page 2:

"The District and community must remain cognizant, however, of the effect on the quality of education provided to students in taking any measures to reduce the growth in costs."

In other words, this isn't a dialog concerning only cost management. We are proud of what is accomplished in our schools, sometimes with national recognition, as was just recently the case with our being named one of 174 "Best Communities for Music Education" in the country. As we go about solving the fiscal problems that face us, few want that to come at the expense of the quality of our schools.

One of the key tactics Gov. Strickland has used to reduce expenditures at the State level has been to lay off one in twelve State workers, in addition to reductions in work hours and mandatory furloughs. This is hardly what one would expect from a Democratic governor, but like our schools district, it is just about the only real choice he has.

And so that brings us to the economics of our school district. As I have written here many times, there are only three knobs that we can turn to adjust our finances:

1. How much more do we want to increase our local property taxes?

As you can see from the following chart, we taxpayers have voted to raise our property taxes at a rate just over 7% per year - since 1975.

click to enlarge

However, as time has passed, the interval between levy requests has shortened. While through most of the 1970s and 1980s, levy requests were seven years apart, we have passed new Permanent Operating Levies in 2000 (4.3 mills effective), 2004 (8.1 mills effective), 2008 (6.9 mills effective) and will have another one on the ballot in 2011. The size is yet to be determined.

2. How much do we want to pay our teachers, staff and administrators?

I have written much about teacher compensation – this article might be a good place to start. According to the CUPP Report generated by the Ohio Dept of Education, our classroom teachers in 2009 had an average salary of $64,703, which ranked 29th highest in the State among 614 districts.

Is that too much, too little, or about right? There will be no unanimity in the answer by any camp – neither teachers, staff, administrators nor the voters. Nonetheless, it will be negotiated this Fall, in secrecy, to a definite answer which will be expressed in new union contracts for teachers and staff, and individual employment contracts for administrators.

If you want to have any influence over this answer, you need to speak up now – right now – before negotiations commence. After negotiations end and the contracts are ratified by the unions, the only decision point remaining will be whether or not the School Board accepts the contracts.

3. To what degree will we accept cuts in programming, services, and staff?After the union contracts have been negotiated and signed, and the vote taken on next levy, the only knob remaining is how many people we employ.

As pointed out by the A&A Committee, the only class of expenditures we have that will 'move the needle' is personnel costs. There is simply no way of enacting millions of dollars in spending reductions without layoffs. And because the union contracts specify that employees are laid off starting with those with the least seniority – and therefore the lowest pay rates – it can require a large number of them to be laid off to reach a cost reduction target.

For example, my analysis suggests that to reduce spending by $1 million/yr, at least 30 employees would need to be laid off (15 FTE). To reduce spending by $10 million/yr would require on the order of 200 to be terminated.

At those levels, painful choices will have to be made. Which extracurricular programs and elective offerings will have to be eliminated? What services will be discontinued? How many more kids will we have in each classroom?

Reaching an acceptable balance of these three factors is quite frankly the most important task our community must undertake in the next few months.

In most ways, our schools define our community. The perceived quality of the schools is why we have chosen to live here, and is a significant factor in the preservation of our property values. Simultaneously, the compensation level we agree to for our school employees is the primary determinant of our property taxes, and every increase makes it harder for people to afford to live here.

I suspect that for things to work out, the school employees will have to accept less than they might like, and the voters will need to accept that they might need to pay more than is comfortable.

We can reach a reasonable agreement if the people of the community engage in the dialog, and the conversation remains respectful and empathetic.

Do you think we can do that without work stoppages, threats of strikes, name calling (on both sides), punitive program cut lists, and all those things which draw our children into the fray?

If it's really "all about the kids," let's show them how the people of one of the best school districts in the country figures out these tough problems. Wouldn't that be a wonderful gift to them – to show them how a community successfully deals with these situations, versus the 'scorched Earth' outcome we see in so many other places.

After all, we're going to leave them plenty of tough problems to solve when they grow up…

Wednesday, June 9, 2010

A Tale of Two Districts

The Columbus Dispatch published an article in its June 2, 2010 edition, reporting on the signing of new collective bargaining agreements between the Boards of Education and the teachers' unions of Dublin City Schools and Gahanna Jefferson City Schools. Those agreements are quite different, and I thought some investigation was merited to see if we could understand why such differences exist.

Update: on June 11, 2010, the Dispatch reported that the union representing the support staff of Dublin City School (the "Dublin Support Association") radified substantially the same deal as the teachers' union.

The new deal between the Gahanna Jefferson School Board and the Gahanna Jefferson Education Association (the formal name of the teachers' union) is – according to the Dispatch – a one year extension of the current agreement with no increase in base pay. In their contract for the prior three years, the G-J teachers received 3% base pay increases each year.

However, as Dispatch reporter Charlie Boss correctly points out, the G-J teachers will continue to receive their "step increase," which is an additional raise given for years of service – in those years for which a step increase is specified. In the case of the G-J teachers, step increases for a teacher with a Masters degree are paid in years 0-15, then 17, 19, 21 and 27. The size of the step starts at 5.25% for brand new teacher with a Bachelor's degree, and diminishes to less than 3% (of a larger salary) for teachers with higher degrees and more seniority. The G-J Treasurer indicates in his assumptions for their last published Five Year Forecast that overall, step increases would average 1.66%. That suggests that half or more of their teachers have many years of experience, and are in the sparse part of the step grid.

So by agreeing to freeze their base pay at 2010 levels, the G-J teachers will average a 1.66% increase for the 2010-2011 school year, with their most junior teachers receiving around 5% and the most senior teachers generally receiving no increase at all. Because this is a one year extension, the G-J School Board and the GJEA will be negotiating another contract next year. 

One year agreements are usually signed when one or both of the parties feel the deal shortchanged them, and want the opportunity to get back to the bargaining table sooner, hoping economic and political conditions will favor them more next time.

Contrast this to the contract just negotiated between the Dublin School Board and the Dublin Educator's Association. In their case, a new three-year agreement was negotiated, with base pay increases of 1% this year, 1.25% next year, and 1.5% in the final year. Their prior agreement was a two-year contract, with a 3% increase in the second year. As is the case with the G-J salary schedule, the step increase schedule for the Dublin teachers is non-linear, with the newest teachers receiving 5.2% increases and more senior teachers getting smaller percentage increases.

So why is there a one year deal with no base pay increase for the Gahanna-Jefferson teachers, and a three year deal with growing base pay increases for the Dublin teachers?

I have spent a good deal of time trying to correlate a number of school district statistics to teacher compensation, and have come to believe that the single greatest influence over teacher compensation from district to district is simply the wealth of the community. In other words, the higher the income of the people of the school district, the more they pay their teachers. Let's look at some comparative numbers:

The average classroom teacher salary in Gahanna-Jefferson was $67,493 in 2009, according to the CUPP Report published by the Ohio Department of Education (ODOE), while in Dublin, it was $66,885, a difference of less than 1% (for Hilliard, the average classroom teacher salary was $64,703). The statewide average classroom teacher salary was $55,581, and it ranged from $30,810 in Bettsville (Seneca County) to $78,624 at Orange City Schools (Cuyahoga County).

In those same school districts, the average community income is: Dublin = $90,715; G-J = $75,060; Hilliard = $66,602; Orange = $240,582 (!!); Bettsville = $38,445.

One might think that teacher experience plays a part in compensation, and that it should be relatively consistent across districts. Here is a chart that shows the fraction of teachers with 10+ years of experience plotted against the average classroom teacher salary, for each district. The slope of the red line is an indicator of how well these two statistics are correlated, and the near-horizontal nature of this line suggests that there isn't much correlation between these two statistics at all.

(note: the yellow triangles in these charts indicate values for Hilliard City Schools)

(click to enlarge)

How about compensation vs some measure of workload? One of the most used measures of workload is the student/teacher ratio. The notion is that the more kids there are in the classroom, the greater the burden on the teacher, and therefore, the more the teacher should be paid. As this chart shows, there does seem to be some positive correlation between these two statistics, in that the higher the average number of kids per teacher, the more the teachers get paid.

(click to enlarge)

Then there is the most controversial of all measures – student performance vs teacher compensation. Again, the CUPP data shows that there is a positive correlation between classroom teacher salaries and student performance, as measured by the Performance Index on the State Report Card.

(click to enlarge)

But we have to be very careful not to draw cause-and-effect conclusions from these correlations. In other words, it would be inappropriate to say that test scores would go up simply by paying teachers more. Or conversely, that when the Performance Index is low, it is because the teachers aren't paid enough. Note that this correlation shows that some of the highest paid teachers are in the lowest performing districts. There are a huge number of other factors that need to be examined. 

In all the pairs of statistics I studied, two produced strong correlations. The first is the Performance Index vs Students in Poverty, and the correlation is strongly negative. In other words, the more kids that are living in poverty in a school district, the lower the Performance Index. In fact, no district with more than 5% its kids living in poverty has a Performance Index of 100 or greater. By the way, while most of the high-poverty districts are the big urban systems, a number of them are in the rural Appalachian areas of the state.

(click to enlarge)

The other strong correlation is the average income of the people of a community versus the average income of the community's teachers. In this case, the correlation is definitely positive, meaning that as community income increases, the compensation of the teachers increases as well. In the case of Dublin, the average teacher salary of $66,805 is 74% of the average community income of $90,715, while for G-J, the average teacher salary of $67,494 is 90% of the average community income of $75,060 (in Hilliard, the teachers average $64,703, which is 97% of the average community income of $66,602).

(click to enlarge)

So might it be that the Dublin teachers got the apparent better deal of these two negotiations simply because of the greater income of Dublin residents? I think so. 

If we compare Hilliard Schools and our neighboring school district, Jonathan Alder, we note that JA is rated as "Excellent with Distinction," the same as us, with a Performance Index of 100.9 compared to our 101.5. However, their average classroom teacher pay is $49,646 vs our $64,703, making our average pay 30% higher than JA's. I believe it is significant that the average community income for JA is $55,277, which means the average income in Hilliard is also 20% higher.

So here we have two neighboring districts with virtually identical performance, yet the teachers have significantly different pay. I believe the reason for the difference is simply the relative wealth of the communities, and how that has – over many years of negotiations and levies – allowed the Hilliard teachers to bargain for better deals than have the Jonathan Alder teachers.

How are we to make sense of all this? Smart people all across our country have tried to discover an algorithm that can be used to nail down what it should cost to run our schools, which is substantially the same as asking how we should determine how many teachers, administrators, and staff a school district needs to employ, and how much those folks should be compensated. Governor Strickland claims to have the answer in his so-called Evidence Based Model, but it has never been fully funded, and therefore never tested, so we don't really know if it works or not.

Meanwhile local School Boards and Unions continue to struggle year after year with how to answer these fundamental questions.

I certainly don't know the answer to these questions either, and therefore suggest to you that whatever other rationale one might like to apply, the most truthful answer is that teachers and staff members get paid what they can negotiate. Their union leadership will work hard to drive a good bargain on behalf of their members, and the school board will do the same on behalf of the people of the community. 

As with any negotiation, the outcome will depend on the relative strength, empathy, resources, skill and resolve of the folks on each side of the bargaining table. The union negotiators are good at what they do, and know how to bring the power of their membership to bear on the process.

How are the people of the Hilliard School community going to participate in the upcoming union negotiations?

Speaking for myself, as only one School Board Member, I'd very much like to hear what you think should be the goals of this negotiation. The leadership of the teachers' union is asking the very same question of its members right now.