Friday, December 17, 2010

Coming Soon - The Levy Decision

NOTICE: If you read the article titled "More Millage Math" prior to January 8, 2011, the calculations I had performed showing the effective percentages increases of various levy amounts were incorrect. An updated chart has been posted, and the numbers in that article have been corrected, as shown by strikethroughs. I apologize for my error.

The following is the text of a message I sent on Saturday, Dec 11 to the other members of the School Board, the Superintendent and the Treasurer. I paraphrased this message in my comments at the Dec 13 Board Meeting as well, as reported in the Hilliard Northwest News:
Fellow Board Members, Dale, Brian:
I see that we very appropriately have a discussion of the next levy on the agenda for Monday's meeting. I believe this discussion should begin with a presentation by the Administration which details at a minimum:
  • The recommend levy size
  • The planned interval until the next levy will placed on the ballot
  • The cash reserve goal (current policy sets this goal at 10%)
  • What adjustments will be made to spending to achieve the parameters above, in particular:
    • Projected compensation growth rates (since this is approaching 90% of our budget
    • Changes to programming and services
It is not appropriate, in my opinion, to make a decision of this magnitude simply on opinions as to what we think the 'market will bear.' Before we ask the people of our community to increase their annual investment in our school district by millions of dollars, we need to look carefully at the numbers and be sure we understand them. As I recommended at the last meeting, I believe it would be beneficial to do so with the help and counsel of the Audit & Accountability Committee, even if that means we need to schedule a special meeting.
I have attached another set of scenarios which may help us understand the dynamics of levy sizes, levy intervals and expense growth. I'm happy to explain any of these if you have questions.
Paul Lambert
While all the Board members made comments at the meeting, there was no discussion that led to determination of any of the parameters I listed above.

I used the phrase 'what we think the market will bear' in my message because, lacking any evidence to the contrary, I believe this will be the factor the Board uses to determine the levy amount. The Superintendent commissioned a community survey to be performed by Saperstein Associates over the Thanksgiving weekend. Central to this survey was to gauge public sentiment on a hypothetical 6.9 mill levy. As you can read for yourself from the results of this survey, fewer than half of the respondents were supportive of a levy of this size.

Then again, fewer than half of the respondents were opposed to a levy of this size either.

So now the Board needs to figure out whether to put 6.9 mills or more on the ballot and prepare for a very tough campaign, or to reduce the levy millage in hope that this would make passage more likely. This is the reason I believe this will be a 'what the market will bear' decision rather than one based on analysis of the financials.

Of course, reducing the levy millage has consequences. One might be to increase the frequency of levies. The prevailing thinking is that a 6.9 mill levy now would have to be followed by another levy in two years. Is the community willing to just make that an annual levy cycle?  I'm sure that's a non-starter.

The preferable solution is to reduce projected spending. There are couple of ways to accomplish that. One is reduce programming and services; the other is to keep all the programming and services but reduce the unit cost (eg cost per participant).

This survey says there isn't much interest in reducing the major programming (Question 17). In spite of the overall levy sentiment being 50-50, the clear majority of respondents (60%+) opposed reductions to gifted services, tutoring for struggling kids, sports, or performing arts.

That leaves us with lowering the unit cost of programming.

Because nearly 90% of our budget is spent for salaries and benefits, reducing the cost of programming means reducing the number of people assigned to a program and/or reducing the future compensation of those people (see current supplemental salaries by program). That doesn't necessarily mean pay cuts, but it would likely mean reducing the size of raises, both base pay and steps (see article on the structure of teacher pay).

Once again, I suggested that we engage the Audit & Accountability Committee to help us think through the numbers. As their charter says, "the purpose and intent of the committee is to assist the Board in a financial advisory role..."  I don't know when that role is more important than when the Board is making levy decisions.  Nor do I know of another group of citizens who understands the economics of our District better than this Committee. However, the majority of the Board does not share my belief that the A&A Committee should be engaged.

And I wish I knew of a way to involve the unions in this level of strategic planning without putting us into negotiations mode. It just seems kinda nuts to tackle this situation without the benefit of the wisdom of the couple of thousand people who are at the 'tip of the spear.'

At this point, I am not prepared to vote in favor of putting a levy of any amount on the ballot. I simply do not understand the implications for programming and services associated with any levy amount, least of all the 6.9 mills that is being used as the trial balloon. A levy of 6.9 mills in 2011 followed by another 6.9 mills in 2013 will not fund the expenses projected in the Five Year Forecast.

So what has to change in the Forecast assumptions?  I haven't a clue. Seems like we should figure that out before we decide on the size of the levy, not after.