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.
Respectfully,
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.

20 comments:

  1. Great information! Paul, the community owes you a great deal of gratitude for bringing visibility to the facts and information like this. Thank you!

    Supplementals are only $1.5 million (1% of the budget?), so I don't think there is much to gain by just cutting them, unless there are a bunch of other hidden costs (transportation, facilities, equipment, weight room supplementals, created positions for coaches...) that are substantial.

    Based on the survey, if the Board wants to provide the best chance for levy success, it would make substantial (at least on the surface) Administrative cuts and heavily communicated them.

    The lack of including the Audit and Accountability Committee is most distressing. The last levy campaign was entirely based on "Accountability" (I'm sure someone still has a yard sign), with the foundation being creating the committee. Additionally, in the Bradley School Board Candidate debate/Q&A, the two incumbents that were reelected both clearly stated that they would heed the advice by this committee since they were experts and provided capabilities that did not exist on the Board.

    Finally, $6.5 million of not-spent budget sounds good. Would someone please indicate this in terms of a percentage? By my uninformed, napkin calculations, it comes out to less than 2% of cuts over the last three years, while student population has been relatively stagnant.

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  2. Mark:

    Thanks very much for your comment.

    If I understand your question about the percentage correctly, the answer is that $6.5m was taken out of the $313m forecast for the two years FY09 and FY10, which is just over 2%.

    In a prior article, I noted that our spending actually increased at a compound annual rate of 3.6% per year between 2008 and 2010. During that period, enrollment decreased at a rate of nearly 1% year.

    Over the long term, from 2003 to 2010, our overall spending increased at a CAGR of 5.2% while our enrollment grew at a CAGR of 1.3%. During that same period, our spending on compensation and benefits on a per-student basis increased at a CAGR of 4.3%.

    Looking into the future, the Five Year Forecast projects spending increasing at a CAGR of 4% while enrollment grows at a CAGR of 1.6%. This would result in the per-student cost of compensation and benefits increasing at a CAGR of 2.8%.

    That seems like it raises two questions: a) it is reasonable for compensation & benefits to increase at 102.8% of the rate of student growth; and, b) what happens if the student growth isn't as projected, will the money be spent anyway?

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  3. Appreciate the link to the survey (I'm curious - can it be found somewhere on the district web site for all to read?) and have several comments.
    The survey questions, in at least some instances, seem very one sided. The "information we believe to be true" in particular bothered me - who was the "we"? They stated that the HEA is FOR the levy - has the HEA gone on record regarding that (we all know that they are ALWAYS for a levy and most of us suspect we know why but I haven't heard from them on this one, which after all, is only in the talking stage to begin with)The "prudent management" which enabled us to go 3 years (3 whole years!) between levy requests - in whose opinion was it "prudent"? Question 17 (g.) - define administrative staff - it that "administrators" as we define them around here, or is it the entire "staff"? Question 21 - was the intent of the survey to get people to change their minds? Is that what the intent of a "survey" is supposed to be?
    Once again, "cuts totaling $6M" is touted without any mention of the facts that show the budget actually goes up each year. Where is the "information that WE KNOW to be true" - the district spends more money every year even though inflation is low and student growth is stagnant? Readers here know it - did the respondents to the survey know it?
    And now the big one: while looking at the math of what the 6.9 mil levy would cost, I went to the auditors web site to look at my property taxes. Maybe I have been a bit dense before, but I took the time to break down where ALL of my property taxes go. My math indicates that about 65% goes to the HCSD. When I take that portion and then add in what the 6.9 mils will cost me, I come up with a figure of a 14% increase in that portion. I almost gagged! We are told to expect a similar levy every two years - 7% more per year going to the schools, compounded every two years, which makes it worse. What education costs are increasing at a rate of 7% given that inflation at the current time is almost non-existent? I think we know the answer, and I think the Board knows the answer.
    My question remains - will they be transparent/accountable/honest and give us the answer? Dale McVey writes a regular column for the NW News - will he use his bully pulpit to give us a real explanation of the Boards decision, or maybe point the rest of Hilliard to that survey? Why am I skeptical?

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  4. Hillirdite:

    Thanks for your thoughts.

    I know of no intent for the District to post the survey results.

    When I was shown a draft of the survey, I observed to Dr. Saperstein and Mr. McVey that these surveys have statements which are presented as questions, and it that way serve a bit like propaganda. They noted my concern, but no adjustments were made.

    The best definition of "administrators" in my opinion is that they are the employees who are not members of either of the unions. There's a pretty useful list on page 80 of the HEA Contract.

    Thanks for doing your own run at the math!

    I found an error in the logic of the chart I published in previous articles. You are quite correct that a 6.9 mill levy will increase our overall property taxes 9.2% and the school portion of our property taxes by 14.3%. If we don't have another levy on the ballot for 2 years, it will be like a 4.5% increase in our total taxes each year (6.9% of just the school tax portion).

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  5. In my humble opinion, many of the "questions" are more than a bit of propaganda. And if your conclusion, which happens to mirror mine,is that "administrative staff" means just non-union staff, then why no questions about teachers salaries? The only mention of them is that they agreed to a wage freeze - but of course they don't say a "one-year" wage freeze.
    I have two questions regarding the district not posting the survey results - first, what was their purpose for conducting it to begin with, and second, is this blog the only place with a link to it? I would like to direct friends and neighbors to it and while I also like to direct folks to this blog, there are some folks I might like to take a more neutral approach with. I can always e-mail them the PDF file but still interested in where the link you posted comes from.
    As far as my run at the math, I had not even really analyzed your charts at that point so my intent was not to dispute/correct your figures. You have proven to be a much better number cruncher than myself and you provide much more in-depth info than I am capable of, or have time to compile. My figures were a mere snapshot of the short term that really hit me between the eyes, which was why I posted.
    FYI - I attended a neighborhood Christmas gathering last night and the subject of the levy came up (can't imagine why, lol)amongst a few of us. The party host has gone on public record in the past, questioning the amount/use of taxpayer funds for the schools and many of the folks I spoke with seem to understand my view too - even including one gentleman whose wife is a teacher, although not in this district. She remained outside of the conversation (not even sure she was aware of what was being discussed by our small group)but even if any of these folks disagreed with me, it doesn't appear to have caused any hard feelings. I only mention that as a way of encouraging other folks to discuss these issues with their own neighbors - as I have said before, I don't see much benefit in speaking at Board meetings - I prefer to speak directly to the folks who will be voting.

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  6. Hillirdite: The answers to your questions, in my opinion:

    1. Why the survey? Two reasons: to get a sense of what size levy the community might accept, using 6.9 mills as the strawman because that is the max levy strategists think will pass in today's climate; and to see what people are thinking about some of the issues that have been hot buttons in the past.

    2. The PDF I've posted was created by me by scanning the hardcopy that was given to me when I met with Dr. Saperstein and Mr. McVey after the results came in (all Board members were so briefed as I understand it). I had asked for an advance copy so I could study the numbers in preparation for the meeting, but was refused. To my knowledge, there is no other copy of this survey available online.

    And I'm truly appreciative that you did some of your own calculations. I try to be very careful when I post numbers because I want readers to be able to rely on them, but I crossed two input values when I expanded the chart, and didn't catch it until I tried to figure out why your number didn't align with mine.

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  7. It is somewhat disturbing to me that you, a member of the Board, were refused an advance copy of the survey, but maybe I simply don't understand procedure - regardless, thanks for your efforts in disseminating it. I'll do my best to spread it around.
    As far as the strategists believing in that figure, I think the time has come when they might want to think about how to justify ANY levy; I haven't read anything so far that leads me to believe they have done so. When I visit other forums pertaining to levy issues in other central Ohio districts, I am struck by the fact that while they might be only a vocal minority, many people seem to have figured out where the bulk of the money goes, and it is not the "size" that matters to a lot of them. I think the strategists had better revisit their strategies and come up with a better way of selling their product.

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  8. There was no legitimate reason to refuse my request for an advance copy of the survey. In fact, it's a public document, which is the reason I made sure it was posted somewhere. I'm glad you were disturbed. So was I.

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  9. I'd like to add something on the survey. Despite Andy Teater's comment at the last meeting, the survey results are horrible for the district.

    Take a look at the for/against question when the dollar cost of the levy is stated (vs the millage): a majority is now against the levy.

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  10. I am somewhat new to this process and understanding the school budget. But, thinking as a tax payer, I would hope that you begin to see this from a reverse angle. There is only so much money you can get from your tax base. Period. You can talk about raising taxes all you want, all you are doing is forcing the cost of living in this community above the value of living here. If you earn 2% pay raise per year, but spend at a 6% growth rate per year, well, you can see where this is ending. Have we NOT learned anything from the mortgage debacle? You just cannot continue to spend more than you earn or have the ability to earn. Budget cuts combined with crating commercial real tax income is the only long term plan you can conceive. The tax payers are tapped out. Oh by the way, I heard from an employee of this prestigous school system that IPad Touch's were passed out to all Principals and Vice Principals. Where did they pass this in the budget? As a tax payer and in this economy, I am damn angry and the lack of concern for the community. All we have done over the past 20+ years is give and give and give money into this school system, somthing has to give and its NOT ME ANYMORE

    sincerly
    Hilliard Resident,

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  11. Thanks for your comment. We need more folks to express their views to the whole Board, preferably in person at a Board meeting, but by letter or email if you prefer.

    If you are new to this blog, welcome. I've been writing about school economics for four years now, with the primary motive being to educate and engage the folks in our community in the dialog. You can click here to pull up a bunch of the articles I've written on funding. I think you'll see that we share many of the same concerns.

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  12. Can anyone speak to the ipad comment? I don't know about administrators, but I do know there was a federal grant for Title schools that provided ipads for learning purposes. Evidently there are a lot of good apps.

    Not agreesing or disagreeing with the federal government. Just trying to keep the facts straight

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  13. Thats the nutty part of this whole scheme. The required spending everything you receive like it entitlement. If State or Fed's provided money for IPADS well then shame on them considering there are quite a few in this State that are living in poverty. I just shake my head in amazement on when it became OK to spend tax payers money in such outlandish ways (school, city, state and federal). Just because there were funds available, well isn't just like we tell our kids : if your friend jumps off a cliff, does that mean you have to do it as well.... Where did our morals go.... Oh Yeah, money and objects always wins over morals.

    What lessen is being taught to our children here? Throw in more money to buy your way through an education.

    You know as well as I do how to manage your personal spending. Don't write checks without the funds available. Don't buy into a 30 year mortgage you cannot afford under the assumption that you are going to make 5% more year over year.

    Those who made those choices are struggling or even already in default of their mortgage. Hilliard City Schools made that choice as well. Everyone bought into the scheme because they wanted very badly to say my kid goes to Hilliard Schools. Well shame on all of them. Its unfortunate that everyone was drinking the same Kool Aid, because long terms its going to fall apart like a house of cards.

    Raising property taxes has a negative long term affect on housing values. Home values are already decreased by at least 20%, people are walking away from their homes because they won't sell to get them out of the existing mortgage.

    Wouldn't it be devastating if every home owner in Hilliard had their taxes re-evaluated comparable to the reduced market values, you think your budget would be hurting then?

    I am not against the employees nor wish anyone to lose their job. But it really cannot get any clearer than right now. Every corporation in America has cut costs, reduced head count. Raises have been stagnant at less than 2% per year for the past 8 years. No where in the landscape of America (other than unionized entities and gov't entities) have the employees continued to receive benefits and salaries of these proportions.

    You just cannot have these 50's style benefits packages in this current environment. Those days are long gone. And the larger the gap between Corporate American and the Public Sector the madder people get.

    Yeah its tough, but you know what, times are tough. If you want the respect of your community you will acknowledge the need to cut back and get the job done with no increased taxes.

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  14. Thanks for your comment.

    The school districts in Delaware County have already been told by their County Auditor what to expect for reductions in property taxes due to the reassessment. I've heard no similar information from the Franklin County Auditor, but this is indeed an exposure for us. It easily approach $1m/year.

    A friend and mentor said to me that "we are going through the Great Repricing of America." I think he's right, and central to that is a recalibration of labor costs in many sectors of the economy.

    I believe our community needs to have a conversation about that in regard to our school district. And it needs to happen right now.

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  15. AMEN to that. Wonder who will take heed? Its either reprice or lose your job entirely. Make your choice. The truth is you cannot continue just asking for more money.

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  16. The situation created by collective bargaining agreements that give seniority control over everything else - which most of them do - is that the it's not the highest paid folks who run the unios who are at risk - it's the newest members who are on the bubble. And since the newest members make half of what the more senior members make, a layoff that is meant to eliminate $X in expense requires a disproportionate number of new members to be laid off, regardless of their job performance. The system is set up to motivate the senior members (especially those closest to retirement) to drive up wages even when it costs the jobs of the newest members.

    American politics is ruled by the few who are willing to engage in the process, while the majority prefers to sit back and complain about what they get. The same is true in regard to union leadership I suspect.

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  17. People sit back because they don't know where to start and feel as if (even if they participate) their voice is not heard. I vote regularly, but still its never enough. I wish to voice my opinion regarding this issue because this has been brewing for quite some time. I am 5th generation Hilliard resident. The uncontrolled growth, lack of planning and commerce, lack of leadership, housing cluster $%^^& has made this place a less than beautiful place to live. My taxes are at 50% of my total mortgage payment and growing. I have voted NO on every levy ballot, hoping that others would come to their senses. I am not sure why I stay other than this is my home. Most likely I will move, its just not worth the price we pay.

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  18. I hear you neighbor. A good place to start is to tell others about this blog. I also encourage you to show up at the Jan 10 Board meeting (7pm @ Hoffman Trails Elementary) and say your piece. It does make a difference.

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  19. I would ask (beg) anyone who has an opinion for the board to show up at the next meeting and voice their concerns. If one would not have the time. it only takes perhaps a half an hour of your time, otherwise a letter, email asking for restraint in the budget.

    Any busing cuts, first ones to come, can be offset by cutting supplementals, we dont need 8 coaches for men and women for track. Universities dont have that many. And certainly some private instruction at the lower grades
    for art and music at early elementary can be substituted. Also why are we paying money for
    a student council advisor in the middle schools and similar positions in elementary schools.
    I thought this was all about the unpaid extra hours ?\\

    Me thinks 7.2 million works on a 3 mill levy to offset the state cuts.

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  20. I couldn't agree more. However, the rest of Hilliard residents will be taken back by the scare tactics and most likely fold. Probably the first levy will start high, knowing it won't pass but to begin the scare tactics. Then in Nov another levy will be for less and ... well you have seen the pattern. There has to be a way to get people banned together with strong support, otherwise, people just open their wallets hoping the busing and sports won't be cut.

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