Thursday, October 28, 2010

Fordham Institute: Unraveling Constant School Spending Growth

I encourage you to read this excellent article from the Fordham Institute. It succinctly summarizes the key economic issues affecting Ohio's public education system. Our community needs to be talking about this in the next couple of months, before the Board decides - in January - if an operating levy will be on the May ballot, and how large it will be.

We are rapidly running out of road down which to kick the can....


  1. Two items immediately stuck out in this article to me (see below). This whole issue is like watching a slow-moving train wreck.

    "According to the Ohio Department of Education, there were 181,020 public school employees working in Ohio’s public education system in 1991, when the DeRolph case was first filed, compared with 245,354 such public school employees on payrolls last school year. This increase of 35 percent over two decades came as enrollment dropped 1.4 percent."

    "School funding is in trouble not because of insufficient revenue from the state but because school spending continues to outstrip revenue growth."

  2. I couldn't agree more with your train wreck analogy. And being a physics geek, I can't resist elaborating:

    In physics, momentum is the product of mass and velocity. A rifle bullet can do a lot of damage because a good deal of momentum is carried by a relatively light bullet (7g) traveling at over 750 m/sec. The momentum is 5,250 g-m/sec.

    Freight trains travel at much lower speeds - usually 75 feet per second (~50mph) or less. But when they wreck, an enormous amount of damage can be done because they can have a mass of 9 BILLION grams or more. The product of mass times velocity is a very large number in this case!

    A school district like ours like such a freight train. It's hard to speed up, slow down, or change direction because of the great mass of the system. And just like a freight train, if you do it clumsily, something is going to break.

    Bear with me for one more analogy - I think our train is running well, and is right on track. The trouble is that we're just now laying down new track ahead of the speeding train, and there's a real danger that we'll reach the end of the track and crash into the oblivion beyond.

    There are one way to prevent that - reduce the speed of the train to the speed of the track laying effort ahead, or less.

    That's were we are. A nice shiny high speed train about to run out of track. And our ability to lay track, or even speed up our track laying effort, can in no way keep up with the potential pace of the train.

    There is no choice but to apply some brakes to the train and reduce speed. And the only way to do that is to slow the pace of compensation growth.

    There's just no other choice short of saying the heck with it and walking away...

  3. As with government in general, we don't have a revenue problem, we have a spending problem. The growth in employees is bad enough, but when you factor in the lack of any progress in test scores, and the increase in graduates needing remedial courses in college, it becomes even more alarming. We are obviously not getting our moneys worth. I certainly don't mean to be insulting to the teachers with that statement but we add to their ranks at an exorbitant rate, we add to their salaries at an exorbitant rate, and we do so regardless of the ability to fund those behaviors and regardless of any performance standards.
    I do have a different opinion regarding the "fact" that collective bargaining has the system hamstrung though. It takes two sides to bargain - school boards need to toughen up! Our board blew it big time 3 years ago when they approved a generous contract right on the heels of a No vote on a levy, practically assuring the threatened cuts that would follow. I will tip my hat to the teachers/Board on this go around as they finally seemed to get it - there is no extra money in the taxpayers pocketbook. But without trying to sound like a naysayer, that is only for a one year contract, and I am fearful of what the cost will be this time next year. It is the trend that must be broken, and unions agreeing to one-year freezes does not a trend make. Also, the state really needs to take a look at the steps - they need to indexed for inflation at a minimum. The government cannot let Social Security recipients go two years without increases and then justify 4% per year to other government "recipients". And yes, I realize that one is federal and one is state, but hopefully you get my point?
    Incidentally, my company just received our renewal notice for health benefits - a 12% increase. To be honest, we were expecting a larger increase, so sad as it might be, we were almost relieved. We immediately informed the employees that they just got raises, whether they see the money or not (we absorb the increases as a matter of policy, in the interests of keeping turnover low, and it does work!) Wonder if the school employees think that way since the contract ensures that they, too, will not bear those increased costs?

  4. Hillirdite:

    Good stuff, as usual.

    Philosophically, the steps are supposed to be compensation for the higher value a teacher has with one more year of experience. The belief (from the teaching community) is that private sector workers get periodic promotions as they gain more experience, while a teacher can go from first day to last day with the same job title. I'm not saying I agree with this line of thinking, only that this is what it is.

    Of course, this leaves out the part where private sector workers usually compete for promotions.

    It is the base pay increase which is supposed to be the COLA in this system of thinking.

    The contract with the school employees does pass 10% of the cost increase on to the employees, up to the cap (the district absorbs the other 90% to the cap, then 100%).

    The full base/step freeze for 2011 is not an isolated event - it is unquestionably Part I of a negotiating strategy that will fully play out next fall, after the May levy vote.

    I'll publish some levy scenarios soon. They'll show a variety of millage vs interval vs spending scenarios. For example, how many mills will it take to not have another levy on the ballot for 3 years, but assume revenue and spending is as per the official Five Year Forecast?

    Or how many mills will it take if we hold the growth of comp/benefits spending to 2% per year?

    Or if we want the levy to be no more than 5 mills, and not have another for 3 years, what is the maximum rate in which we can allow costs to rise?

    And we have to consider what we will to if the next Governor - whomever it is - decides to radically cut state funding to districts like ours, and we have to deal with $2-3 million less in revenue than planned.

    Treasurer Brian Wilson expressed what we all feel - there has never been a less clear economic picture of the future than we have right now. It would be very helpful to hear some public input about how to prepare for that.

  5. Paul - thanks for the clarification on the structure of any increase in health benefits premium - I learn something new every day.
    I'm not buying the supposed teachers argument regarding steps. Steps are guaranteed, promotions in the private sector are not. Nor are annual COLA raises guaranteed in the private sector, and not even in many public sector entities. You simply cannot guarantee compensation increases without knowing you will have the money, and that means 3 years down the road when the usual contracts will run out.
    I think the system may be somewhat backwards - maybe the steps should be used for COLA, meaning right now no one would get any since inflation is low, or non-existent (if one truly believes that, anyway) Other raises would be tied to the actual budget, as is done in the private sector. Just a thought...
    As far as the size of the levy, as I said before, the board needs to toughen up, and part of that would involve being upfront about where the money is going to be going, regardless of the size. If they pick a number that is based on 5% annual growth, then tell us that! And don't couch it in doublespeak - also tell us that 80% of that 5% is going directly into the salaries and benefits, not just for teachers but for admins and the rest of the staff. Inform the taxpayers what the average salary is - heck, publish the entire table of salaries, and the actual benefits costs for both the district and the individuals, instead of making people dig for it on a web site. Be very clear about where the levy money is going, then let the people decide whether or not they want to pay that increased cost. Be fair to both sides!
    As I have said before, I think teachers are worth what we pay them, and maybe even worth more. But I feel the same way about my own employees. What people will pay my company determines, to a large degree, on what I can pay them. Why should public education be any different?

  6. Hillerdite is a wise man. Interested in your scenarios Paul.

    I am of the belief is we hold to flat spending from say 2010 we can hold off on a levy until May or August of 2012. But I am open to a small levy in November of 2011. Also what is the scenario for a new bond issue to cover infrastructure costs That also has to be taken into perspective.