Sunday, November 14, 2010

The Political Language of School Finance

In the Columbus Dispatch story published following our November 10 School Board meeting, the closing line was this:

"The district also shaved $6.5 million in expenses through staff reductions, department budget cuts and efficiency improvements since 2008."

I believe this quote merits further explanation to make sure the folks of our community understand what it means.

It does not mean that spending decreased over this period. In fact, it went up every year. The actual numbers for Total Spending over the past three years are this, as reported in the latest Five Year Forecast:

FY08: $146.4 million
FY09: $149.6 million (+2.2%)
FY10: $157.2 million (+5.1%)
Three year Total: $453.2 million

So what does the use of the word "shaved" as in this Dispatch story mean?  

It is an indication of how much actual spending was below an earlier forecast. Specifically, the Five Year Forecast published in December 2008, after the passage of our last operating levy, depicted the following:

FY08: $146.4 million (actual)
FY09: $152.2 million
FY10: $161.0 million
Three year Total: $459.6 million

Therefore $6.4 million less was spent during 2008-2010 than had been forecasted in Decmber 2008. This is where the "shaved $6.5 million in expenses" comes from (please excuse the rounding differences).
So one way to talk about "savings" or "cuts" - the way reflected in the quote reported by The Dispatch - is to compare what was actually spent vs what we had thought we were going to spend, given the assumptions made at that time. From that perspective, spending was indeed around $6.5 million less for this period than what we had planned.

However, in absolute terms, our spending increased at a rate of 3.6% per year even after all of those programming cuts and staff reductions had been made.

Looking forward, the latest Five Year Forecast shows annual spending increasing from $157m in FY2010 to $191m in FY15, a compound annual growth rate of 4.0%. During that period, Compensation & Benefits costs are projected to increase 4.45% per year.

I leave it to you to decide whether there has in fact been a "savings" when spending grows, but at a rate less than forecast. The objective of this article is to point out that the word "savings" is ambiguous, so don't assume that what you read or hear reported is the same thing you are thinking. Ask follow-up questions until you fully understand what is being said.

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