Tuesday, January 18, 2011

Levy Step 1.75 - Special Board Meeting

I appreciate very much that the other members of our School Board agreed to hold a working session to further discuss our levy options. A copy of the official meeting notice is provided at the bottom of this message.

I have prepared a set of financial scenarios (with notes to the scenarios) and sent them to the Board members in preparation for our discussion.

These scenarios are intended to help us look a couple of moves ahead - beyond just the immediate situation - and to help discover the bounds of reasonable decisions. I have long said that when a levy is being planned, several other parameters beyond just the levy size need to be considered - because they are all interrelated. For example, assuming any particular spending plan, the smaller the size of the first levy, the larger must be the second levy. The reverse is also true - the larger the first levy, the smaller the second can be.

Likewise, the larger the first levy, the longer the interval can be until the next levy; and the smaller the first levy, the shorter the interval must be.

The Board also needs to pay attention to the cash balance. It's a "hard deck" as Navy pilots like to say - we can't let the cash balance go below zero. Most would say it's prudent to leave a little margin for error. Board policy says our cash reserve should be 10% of the annual operating budget, which would make it about $18 million at our current spending rate. However, having spent a big chunk of this reserve in order to wait an extra year before putting a levy on the ballot - it would take a pretty good sized levy to get us back to 10%. Several of the scenarios I've prepared examine what it would take to keep the reserve at $5 million, or about the size of one payroll. That's not a lot of wiggle room.

And finally, a look at these scenarios makes it clear that the spending plan has to change. There is simply no combination of rational levy sizes and intervals which can support the spending plan currently dialed into the Five Year Forecast. The Board needs to dig into this soon, and examine another set of scenarios for lower rates of spending growth - lower than the 4.25% compound annual growth rate built into the current Forecast.

I realize that this special meeting has been scheduled during working hours for most of us, and there is no public participation scheduled, but I still hope folks will come to observe how their School Board makes these important decisions.

(RC 3313.16)
Notice is hereby given; there will be a SPECIAL meeting of the Board of Education of the Hilliard City School District on FRIDAY, JANUARY 21, 2011 at 3:00 P.M. located at the Hilliard City School District Administration Building, 5323 Cemetery Road, Hilliard, Ohio.  The meeting will be held in regular session to discuss the potential operating levy and any other business that may be lawfully considered.
The meeting is called by Brian W. Wilson, Treasurer/CFO of the Hilliard City School District Board of Education, at the direction of the President of said Board.
January 17, 2011
Brian W. Wilson, Treasurer/CFO
Hilliard City School District
Board of Education


  1. The Board should work out a contract that is affordable under Scenario D10. Anything extra from the voters or state should go into our cash reserves.

    Paul, I appreciate your work so much. I think we still end up with the 'marketable' amount of 6.9 mills on the ballot. But this clearly illustrates that no realistic levy pattern can cover our projected spending.

  2. Thanks for the feedback Thomas - that's exactly what we need.

    I think you're saying that D11 makes sense, which is the one that assumes that our State funding will be $3m less than currently forecasted, and so limits our expense growth to 2.0% CAGR so that another levy of 6.9 mills in two years will be sufficient, while keeping our cash reserves at least $5m.

    To achieve this, we would have to take $37m out of our FY12-15 spending plan. That's a significant amount, and will require a LOT of discussion in our community and with our employees.

  3. Paul, sounds redundant but thank you so very much for all of your hard work and COMMUNICATION
    You have fulfilled your promises and have brought to light issues WITHOUT DISRUPTION in a professional manner.

    Interesting this is at 3pm on a Friday. I suppose it was tough to get everyone together on short notice.

    I am convinced (unfortunalty) that the majority of the board wants business as usual and wants an open flowing checkbook from the community.
    They seem fixated on a one time pay freeze, that still will include steps, versus the long term
    contractual spending that was not sustainable.
    The other issue they refuse to acknowledge is
    getting giddy that the employees pay a very small amount toward their health coverage. Understandable that 3 of the 4 rely on luxurious
    health care benefits for their families due to their employment or spouses employment through taxpayer funded public health care.

    Our Supplemental contracts are out of control, and we are paying for university type numbers for each sport. EX 8 coaches for boys and girls track at the High School level. ? Student Leadership Council stipends ? What happenend to all the outcry over how much unpaid extra work is DONATED.

    The Saperstein poll sp was interesting and skewed a bit. So based on my comments last board meeting that perhaps the board does not realize that people are afraid to come to board meetings and speak openly and one board member seemed offended and the other 3 seemed shocked.
    I did my own poll since last Mondays meeting

    Question? Would you be concerned about speaking at a school related meeting ( Board Meeting,
    Special Meeting, Coffee with Board, Levy meeting
    as it might have an effect on your children that you have in school in a negative manner by school personnel?

    #of Questions

    Would not answer: 5
    Did Not Know/Not Sure 7
    Not afraid to speak up 14
    Afraid to speak up 36

    Some of these people I know well but the vast majority really are everyday people going about their business. ALL had or have children in the district. Interesting.

    I also detect some deep set frustration by some board members toward the community and I am not sure they want to hear what is really going on out there.

    Lastly, I remain committed to my comments at the board meeting. I can support a levy amount, hopefully slightly less than 6.9 mills, because guess what like many I cannot afford it right now.

    However, Because we get this its about the kids rhetoric all the time, until the board and the district come out in favor of keeping negotiations out of the classroom, and insuring all students are treated properly during negotiations, I remain steadfast in then opposing any levy.

    If its about the kids, so be it and I support that. But it is about treating kids as widgets
    at contract time.

  4. Paul,

    I appreciate what you're doing and like the others, thank you for your communications.

    I have another scenario. It involves a 3.9mil levy in May, 0% growth rate. That results in not needing to go back to the ballot until at least 2016, and probably longer. It leaves the end of each year with a cash balance of ~$9 million or higher.

    Before any teachers reading jump up and down and cry foul, understand that maintaining current levels of spending on teachers as a whole is not the same as a pay freeze.

    Each year teachers retire and are replaced by "cheaper" teachers with less experience. That money amounts to over $1m a year by my calculations. That can easily be spread amongst the teaching pool to give annual cost of living increases of around 2%. Given that current cost of living increases for social security are 0%, 2% is a good deal. (Or maybe 1% for steps, 1% for cost of living.)

    Either way, we can still provide a fantastic education to the kids in the district as well as ensure that future kids aren't left high and dry by irresponsible spending today.

    And we can be fair to the teachers as well.

    Sounds like a win-win for everyone!

  5. I dont know, Paul. Since 2003, enrollment has only grown by about 1,000 kids. But expenses have grown by $50M. When we talk about the CAGR of future expenses, we must consider the CAGR in the past.

    Based on enrollment and inflation, even the modest increases you propose in D11 are unjustifiable in my opinion.

    We have have an district that is currently "Excellent" while spending $160M. I dont understand why holding expenses at $160 for a few years is going to cause some great decline in our quality.

    As I have said before, I oppose a levy of any size. We should negotiate the contract based on the most conservative revenue assumptions.

  6. Thomas:

    Thanks for the clarification.

    How should we deal with the fact that we're already spending more money that we take in - to the tune of about $5m this fiscal year? Is it your recommendation that we reduce our spending from $162m/yr to $154m/yr (the projected FY12 revenue without a levy)?

    Not arguing with you - just trying to understand your position.

  7. Anon:

    Interesting proposal, and obviously requires a deeper analysis of the profile of our employee team to know whether the numbers actually work out as you suggest.

    Let's say that a teacher making $90,000 retires and is replaced by a teacher making $40,000. Ignoring benefits for the moment, that saves the district $50,000. This would allow us to give an step increases averaging $2,000 to twenty-five teachers, and not spend anything extra.

    However, we have more than 600 teachers who get step increases. So it would take the retirement of 24 teachers to free up enough cost to pay for the steps.

    That's plausible, but might require a little nudging. Certainly worth some discussion.

  8. Paul,

    Using your numbers, and adding those to my thoughts on step increases (none after year 10), I believe that $2000 per teacher is insanely high for simply showing up every year. (Now, if we go to merit based pay, we can talk about that.)

    So, let's say $1000, which is 2% for a teacher making $50k, or about 1/2 the current 4.15%. Now we only need 12 retirements for your 600. Now, let's assume it will actually be under 500 if we stop steps after year 10; this makes up for the additional benefits that the district kicks in.

    So 12 retirements a year at the top end pays for the district's step increases. Another 12 retirements gives us about $500 per teacher in cost of living increases at a time when the senior tax payers of this community are getting 0% cost of living increases from social security.

    And we've not increased overall expenses anywhere.

    Bottom line: these things need to be discussed by the board in considerable detail on Friday. I'll be there, and public participation or not, if the rest of the board continues to be fiscally negligent, this tax payer, i.e., their boss, will make his views known.

  9. I really like Anon's scenario. I vote yes for a 3.9 mill levy now to cover the current budget gap. And I get a promise for 0% expense growth for 5 years.

    I find it a bit annoying that we need a levy to cover our deficit spending. But I could agree to this.

  10. I am focusing on Scenario D9 / D11. This is the only scenario where we don't run out of cash with a 'realistic' levy pattern.

    But is expecting 6.9 mills in May 2011 and May 2013 realistic? That sounds more like a best case scenario for the district.

    I think it will take at least two tries to pass 6.9 mills this year. A 4.9 mill levy in November may be more realistic.

    And many voters won't be aware that the district will still need more in 2013. If so, a levy in 2013 could really be a longshot.

    So going back to D9/11, limiting expense CAGR to 2-3% may still be insufficient.

  11. Thomas:

    I think the challenge this time around is that we still have a community that, for the most part, doesn't understand the first thing about school economics. The situation is becoming quickly dire, yet most folks - both taxpayers and employees alike - think everything is pretty much hunky-dory.

    And so the question is whether the community is prepared to go through the withdrawal (from lavish spending) process cold turkey, or whether it's going to need to be a step-down program.

    I don't see our community successfully pulling this off cold-turkey. It will just cause the kind of ugly conflict one always sees when trying to confront addicts, which in our case includes both parents addicted to top-notch facilities and services, and employees addicted to top-notch compensation and benefits.

    Some will say it's time for a intervention, however ugly it gets. But our community would never be the same afterward...

  12. Paul, and the readers of this blog,

    Somehow I get the distinct impression the teachers and all those who benefit in the school system have a sense of entitlement. From where does this notion stem?

    Personally, I have not had a raise in salary for over a decade. As a matter of fact, my salary has DECREASED by over 25% over the last decade. While some may argue that is unusual, I will argue that based on my experience and professional networking with others in the technical field in central Ohio, it is not all that unusual, and may be the norm, especially for individuals in my age bracket; (60 is right around the corner).

    So, let’s have a look at all the school and teacher related expenses, and figure out how we can get along with LESS than we did 10 years ago (per school attendance capita), as a direct reflection of the economics in play in the community.

    I really do not “get” this sense of entitlement. As one blogger put the situation, step increases for simply showing up each year. If there were a method by which teachers could have a performance review year ear, and raises or salary detainment occur as the state of the business goes, then it may have a different complexion. The school system, and the tax collection have to be a reflection of that which is occurring in the community. Entitlement to never ending raises without accountability simply make no sense.

  13. When I found out today that my daughter's 2nd grade teacher makes nearly $80,000 a year, there is no way I will ever vote in favor of any levy. Honestly. $80,000 a year to teach 2nd grade? That's crazy!!! She doesn't even work a full year, has great benefits, and does daycare during the summer. Utter BS and I'm not going to support ANY increase in what I already pay.


  14. While it is reasonable to have an opinion as to what teacher compensation looks like, I'd caution you not to think that teaching 2nd grade requires any less talent and skill than teaching high school chemistry. I spend an afternoon each week in one of our 3rd grade classrooms as a volunteer aide, and get to see firsthand the challenges these teachers face trying to motivate and control a roomful of kids with widely varying abilities and attention spans, all the while trying to inject the proscribed body of knowledge into their heads, at the pace the government deems to be 'normal.'

    I wish we could find a way to do three things: a) fairly evaluate teachers so that we can know objectively which ones are effective and which ones are not; b) remove ineffective teachers from the schools; and, c) let compensation questions be driven by market forces.

    I truly believe such a system would benefit the teachers, and more importantly, benefit our kids. It should be as tough to achieve Professional Educator status as it is to achieve the Professional Engineer certification in that field.

    It's tough to get into engineering school; it's harder to stay there and maintain a high GPA; and harder still to pass the PE certification. There's a similar level of difficulty required to excel in Accounting and become a CPA.

    Because of this winnowing process, there aren't so many PEs or CPAs, and market forces - not union power - drive up their compensation.

    As a friend and mentor says, the problem with the current teacher compensation system is that some teachers are paid too little, and some are paid too much, and there's not much we can do to fix either problem. I hope this is a problem that is solved before our education system implodes.

  15. Paul,

    If you haven't listened to this story, I think it would interest you. It is about the value of a good teacher and is from NPR's Planet Money.

    Keep up the good work!


  16. Kirk:

    Thanks for the link. Indeed an interesting story from NPR. The last couple of minutes spoke to the practical difficulties of finding a fair and equitable teacher evaluation system. I'm confident that it can be done, but it won't be easy.