Friday, September 16, 2011

The 1.7 Mill Levy

Conventional wisdom concerning school levy issues is that about 40-45% of the voters will always vote against any tax increase, and 40-45% of the voters will always vote to support our schools, regardless of the levy size.

I don't know if those numbers are real, but I suspect that they're not that far off. If so, it means that any school levy election is decided by two things: a) who decides to show up from the Always-Yes and Always-No groups; and, b) the 10-20% of the voters who are undecided.

I suspect that the reason the levy issue didn't pass in May was that the Always-Yes folks didn't show up in sufficient numbers. But then, hardly anyone showed up at all - fewer voters than we have students in the District.

I wish there weren't these huge sets of Always-Yes and Always-No voters. Neither represents healthy democracy in my opinion. It's the reason Congress has become so polarized, making it difficult and frustrating to work anything out. Consequently, the legislation they develop swings from one extreme to the other, passed in one term and reversed in the next. That's got to stop before it tears our country apart.

My consistent position over the years I've been writing this blog has been that we need to first educate the community about the basics of school economics and then collectively debate and negotiate until we arrive at a compromise position which an overwhelming majority of the voters - on the order of 80% - will support on Election Day.

Instead, we allow ourselves to come to Election Day without having had that period of debate and compromise, and consequently have to live with the unpredictability of an election of voters who make decisions based on ignorance and emotion.

So my goal for these many years has been help folks understand the key elements of school economics in the hope that more folks would engage in the debate, and in doing so, provide direction to the School Board as to what they want their School District to be, and how much they're willing to invest to make it so.

We still have a way to go, but I feel progress has been made - through the efforts of many folks. Today most people understand that we spend nearly 90% of our operating budget on the salaries and benefits of our team of teachers, staff and administrators. There's nothing wrong with that. In fact, we should want most of the money spent on the people who have the most direct contact with the kids.

More of us now understand that when we have discussions about the need for more funding, it's really about how many people we want to employ, and how much they will get paid. It's not about paper clips and stadium lights. It's about people. The purpose of levies is to expand the staff and/or to pay them more.

But this time around, there's something different is going on, and it's significant: A radical decrease in State funding.

It didn't matter who was elected Governor or who controls the Statehouse, the Governor and the General Assembly were going to have to deal with a budget shortfall in the biennial budget on the order of $8 billion. That shortfall wasn't so much due to excessive spending growth as it was that the US economy tanked, reducing significantly and rapidly the personal and corporate incomes which are the primary basis of tax revenue for the State of Ohio.

Education represents one of the three primary spending categories for the State of Ohio; the other two being Medicaid and the operation of our prison system. So there was no question that the State would need to consider making cuts in these three categories to have any shot of closing this huge deficit.

That's the reason the Governor is seeking to sell some of the prisons and turn them over to private contractors. I'm not saying that it's the smart move - only that it had to be an option on the table. Likewise, some tough choices might still have to be made in regard to Medicaid.

Education took its share of cuts and more. Every school district in Ohio receives some amount of funding from the State of Ohio, inversely proportional to the affluence of the school district, as measured by its collective property values. By that standard, Hilliard City Schools comes out on the more-affluent end of the spectrum, and consequently receives a smaller portion of its funding from the State - about 34% in 2010 (according to the CUPP Report published by the Ohio Dept of Ed).

Still, we shouldn't complain - Olentangy spends only 80% of what we do per pupil (because they have lower personnel costs, because their teachers are younger), and still gets only 16% of their funding from the State. Compare that to Hamilton Local Schools which receives 66% of its funding from the State, equal to 1.5x the per-pupil State funding (in dollars) that we receive.

The Governor and General Assembly did indeed choose to balance their budget in part by cutting State funding to public school districts, taking more money from the affluent districts than it did the poor ones - and I don't disagree with this approach.

Our share of the bill is on the order of $10 million per year, calculated by comparing the amount of State funding we received in FY09 to what we are projected to receive in FY13.

I should note that I included the accelerated phase out of Personal Property Tax reimbursements in this calculation. While Personal Property Taxes are technically a local tax in that the revenue is collected from local businesses and distributed the local school district, the tax rate - indeed the very existence - of PPT is set by the state government rather than by local levy vote. That makes it a state tax in my opinion.

So what's this stuff about a 1.7 mill levy?

It's simply this - at the new valuations of all the properties in our school district, 1 mill of new taxes will collect about $2.375 million/year of revenue. Divide that into $10 million, and you get 4.2 mills.

The levy issue the School Board has put on the November ballot is 5.9 mills. That means only 1.7 mills of that money will be used to fund spending growth. The rest just replaces the State funding that has been lost.

People have asked me why - if 90% of our spending is on compensation and benefits, and the teachers and staff have accepted a salary freeze until 2013 - do we need any new funding at all?  The answer is that our current spending is already greater than our current revenue, to the tune of $3.3 million in FY11, the equivalent of 1.4 mills. So the 1.7 mills is needed to cover that and to preserve a 8% cash reserve, which is still less than our 10% goal.

If the community votes to deny this levy, then there is no choice but to reduce spending by at least $10 million per year. The 'cut list' presented is how that spending reduction would be implemented. We'll also go to a Pay-to-Participate fee schedule that I'm sure will deny opportunities to some kids in our community.

I for one would not like to see that happen. That's the reason I'll be voting in favor of this levy. I hope you will consider doing so as well.


  1. This is a tough call for me. On one hand, the teachers have frozen their salaries, the levy size isn't excessive given what the state did, and they didn't try to cram it down in an August referendum. So that's all to the good.

    On the other hand, voting for the levy feels like a vote for the status quo. The bigger picture is that education costs, from kindergarten through college, have gotten completely out of hand. It rises more than the rate of inflation year after year.

    I don't think we can "buy" our way out of this. Democracies only flourish when they're citizenry are good, and perhaps that's especially true with respect to teachers and health care professionals. The only way education is going to be affordable is if teachers selflessly accept 45-50K salaries instead of 65-70K, and thus foregoing the nice house and new car. Similar with health care. Democracy is going to flourish not when we eventually spend 50% of our income on health care and teachers, but when teachers and health care professionals feel so called by their profession that they're willing to eschew materialistic concerns, as the Mary Ingalls Wilder's teacher did and the way the old sisters in parochial schools did. America can't be great without some of its most important contributors, teachers and doctors and nurses, are likewise good. We can't buy goodness.

  2. Why does the focus always seem to be on the revenue side? Instead of advocating for passage of the levy (again), why don't you spend a little more energy analyzing the cost side of the equation? And, figure out why the District plans to spend more than it is bringing in?

    This is the message being trumpeted by taxpayers at the national, state and local levels. STOP SPENDING what you don't have and employ meaningful austerity measures. That is the sign of true leadership. Continually asking for more from the taxpayers is not the answer.

  3. Paul - I am glad to hear you say that not only are you endorsing the levy, but you are asking others to vote for it. I came to the same conclusion as you did. In my mind NOW is the perfect time to vote for the levy.
    With teachers and other staff taking a pay freeze (and with taking on a greater portion of healthcare costs, I assume it ends up being a pay CUT) it makes sense to vote for the levy since I know none of the money will be going to funding raising teacher costs.
    I highly encourage you (and anyone else who is reading and feels the same) to go to the levy website and show your support by endorsing online or signing up to be a volunteer.

  4. Paul, thank you for your updates and thoughts as usual.

    Unfortunatly, the PPT as you pointed out is being phased out quicker than first thought. However, we did know it was going to be phased out and zero planning in the past 10 years, and yes we have know for 10 years, and we continued to spend.

    The Pay to Play option can be reduced easily by
    making the proper adjustments to the supplemental contracts. I think this issues has been clouded and not included is revenue raised at admissions,
    reduction of non needed staff IE weight rooom
    24 coaches for track and field at the 3 HS. If a dumb community member can find the easy stuff one
    must know there are other programs that could be adjusted. A sports mgt program, ??? Why not incorporate the engineering program to shift costs to the universities and use their facilities. Write a proposal, someone will bite.

    And why would a choir program require 180.00 in fees unless you are going to eliminate it.
    The majority of practice is during the day !
    We have allowed a creeping in compensation for every little activity. In the private sector it is not called overtime and it is simply expected

    Given the current economic situation, with many
    out of work, facing housing challenges, fixed income etc, where does the money come from that group to pay for this increase. ? Instead of laying off 73 low seniority teachers, custodians
    why not use a sliding scale of furlough days.
    EVERYONE bears the burden and it will not affect
    the education of our children one bit, as these days can be elected during the numerous holidays,
    spring and Christmas break. I am betting you can
    save busing, a vast majority of positions. Other government entities have done this. And it is only temporary, a levy can pass next year, as
    the economy grows back. This versus permanent tax increases at a time when things are tough.
    Was this temporary adjustment ever considered ?

    We are in a position that was created some by the state, but why has the district leaderships chosen in the past to believe them, and some by our failure to save for a rainy day per board policy. Just think if we even had 5% saved away
    just on compensation over the last 10 years we most likely would have over 7 to 8 million to cover crisis time.

    At some point whether it is now or in the near future, the time is going to come to make some
    serious adjustments until our economy adjusts forward.

    Also, this comparison with Dublin, UA, Bexley
    on cost per pupil is a dog that wont hunt. The socio economic difference and personal wealth in those districts are much different than the

  5. What might be a more helpful comparison is to calculate the percentage of income paid in school taxes (using median household income, median family income or average household income). Of course, there are also many districts with higher cost-per-pupil than HCSD that have a higher percentage of economically disadvantaged children (and lower performance on the Report Card). Typically, those districts get a larger percentage of their budgets financed through state aid.

  6. When I took a look (Josh Mandel's gift to the informed taxpayer - THANK YOU)at the salaries for my childrens' teachers and other teachers I know, I was amazed. The teachers had 5K raises every year for the past 5 or 6 years! Has anyone studied the impact that a 5% reduction in each teacher's salary would have on balancing the school district budget?

  7. The email sent out today from the schools via school website on a voter registration drive which is ok, but advocating clearly for the levy to me is out of bounds. I dont believe we should be using the schools media to advocate
    for a tax levy which will impact many people in the community

  8. Anon said:

    "The teachers had 5K raises every year for the past 5 or 6 years!"

    Sorry, that is inaccurate/false statement. There is NO teacher in Hilliard, let alone the state of Ohio receiving a 5K raise 5 or 6yrs in a row. Please do the research and provide it before making inaccurate statements like this.

  9. I'm a bit tired of the argument Paul's putting forward.

    Since the district failed to rein in spending in any meaningful fashion -- sorry, but $9.6m in "concessions" is still leaving us with a $120m revenue deficit over the next 6 years, so it kinda puts the $9.6m into perspective, as nice as it was -- the game now seems to be "let's blame the state for cutting funding."

    Rick correctly points out that the district knew the bulk of this was coming.

    Paul conveniently omits that local authorities were told by the Governor's office to make cuts, not simply pass the state funding reductions onto the local taxpayers.

    Of course, after living in HCSD for more than 15 years now, it's really no surprise that the tactic is "blame someone else" rather than bite the bullet and make the cuts that are needed.

    By the way. If you take the $10m in cuts and look at the budget as a result, we are still spending more in the district than we were when HCSD first gained its "Excellent with Distinction" rating.

    Why then is this $10m now such a devastating cut that puts that rating in jeopardy?

  10. M: State law, I think wisely, puts the final decision in the hands of the voter. All the School Boards can do is create the question. Not everyone thinks like you, nor do they all think like me. There is no 'right' answer - only the outcome of the vote.

    I've put my position forward, and it's consistent with everything I've said for over 300 postings over 6 years.

    I respect that your position is clear and consistent as well.

    There's another decision to made in November as well - two seats on the school board. Since Dave Lundregan isn't running for reelection, means there will be at least one new member.

    Both matters need the appropriate attention from the voters.

  11. Rick: I sought informal advice from an Atty who specializes in suing school boards and other public bodies for violations of election and Sunshine laws. My concern was with the 'Passing Notes' that came out before the May election. His informal reply was that the district has to explicitly say 'Vote for the Levy' in order to win such a lawsuit. Walking the line perhaps, but still legal.

  12. @GoBucks

    You might be surprised. Here's the salaries for a HCSD high-school teacher for the past 5 years. I have included 2006 as a base point as well. For obvious reasons I am not saying who the teacher is. (Paul, you can contact me if you'd like the name to verify the figures.)

    2006: $47,955.00
    2007: $51,768.00
    2008: $55,883.00
    2009: $60,277.00
    2010: $66,602.00
    2011: $69,367.00

    This averages out to $4282.40 in raises per year. No, it's not %5k, but this was just the first one I looked at. I am sure if I looked hard I could find one over $5k.

    What's interesting to me though, is that you'll notice that at no point at the end of the list is there any evidence of a pay-freeze. I suspect that's timing more than anything else though with respect to effective date of step increases.

    All that said, this person received more than $21k in raises since 2006, equivalent to 44.7% of this person's 2006 salary.

    I wonder how many private sector people have seen anything even close to that.

    Remember, it's not about what they make; it's about the raises they've been receiving while the rest of the economy has gone down the drain...

  13. @Paul

    I think your response to Rick raises something that we're all skirting.

    Essentially, the district is skirting all the way up to the line, but not actually crossing it (which is debatable, but let's not go there).

    What kind of message is that sending to our kids?

    These are the people we trust to educate our children, but apparently it's OK to teach (by actions) that it's fine to lie, cheat and steal as long as you don't actually break the law?

    Food for thought.

  14. To insure I am looking at the entire package on Issue 17, I decided to attend one of the meetings
    to digest all of the information presented.

    The presentation was informative, concise, and provided an opportunity to ask questions.

    The meeting numbers were in the 35 range, but heavily attended by teachers, perhaps even from the Norwich building and other school employees.

    One of the things that I have brought up to the board is that people are intimidated trying to ask questions for fear of retribution or ridicule.
    A suggestion for the future meetings left Paul
    would be to let people ask a question and not get immediatly jumped on with answers flying from different directions. The moderator, in this case
    Mrs. McNaughton, who presented well, should be the one answering.

    Also independent everyday folks just might be in attendence trying to find out information. They need an environment at these meetings to BE ABLE TOLISTEN> TEachers talking, cell phones going off,making comments out loud about questions. This shows on the outside, that there is a lack of respect for the community. NO, you dont know better !

    If the goal is to fill the meetings with supporters, with teachers and staff in attendence, OK no big deal. But get rid of the pack mentallity about WE KNOW BETTER.

    I am curious Paul, as you may have allready
    helped with a meeting, did any tough questions from an opposing view come out, or as with this meeting it had employees asking the questions.

    Also picking fights with derogatory comments in the audience about the ST. Brendans folks might
    want to have a lid put on it.

    It is tough enough, even for me, to get up in public and ask questions or follow up questions.

    The community is not the enemy, but given the behavior I continue to not buy in that some of these employees are SO irreplaceable. They need an education themselves on not biting the hand that feeds them.

  15. The bottom line is that the school system has not done enough to control spending. When times are tough, you must cut back. I have been forced to take a significant pay cut just to keep my job. Guess what, I did not go run out and look for someone to pay my bills. I cut back in every possible area (I no longer enjoy any "extra" perks).

    How will the kids learn to resolve financial issues they will encounter in the real world ? There not always going to be able to run back to there parents to bail them out. The school district cannot continue to expect the tax payers to bail them out.

    Furthermore, is it fair to ask seniors who are on a fixed income to pay more when they have no children attending school !!!

    If educating the kids is the top priority, then do just that. No extra items of any kind (unless the parents of those kids are willing to cover the cost - 100%).

    Thank you.

  16. I have to admit that I am now terribly confused.

    I am looking at the latest 5 yr forecast (the one used by the BoE to determine the November levy amount), and I have to say that I don't see this so-called $10m per year in reductions from the State.

    Overall revenues (with property taxes essentially flat) only decline by $8m from 2011-2013, and then begin to increase.

    If we go back to 2009, the total decrease is $4m, but with an additional $7m in tax revenue.

    But I have a problem with that. The bulk of that reduction came from 2009-2010 in the reduction of the PPT.

    Which as Rick has stated multiple times, the district knew was coming for a very long time.

    In fact, we should say that more than half of the 2008 levy was used to make up that difference.

    Apparently we are counting that reduction again in order to pass a levy.

    Paul, please correct me where I am wrong. Otherwise I have to believe you are playing hard and loose with the facts, which is not something I expect of you.

    But frankly, this is just a distraction.

    Because while we are talking about reductions in funding going back to 2009, SPENDING this year is $12m higher than in 2009.

    And the district wonders why it has a hard time passing a levy...

  17. M:

    The $10m is the difference between the FY13 and FY09 total of:

    Unrestricted Grants
    Property Tax Allocation (Reimbursement)
    Tangible Personal Property tax

    In FY09, these totaled $64.3m, and in FY13 are projected to be $54.1m. That's the $10m.

    You're right about the spending going up $12m in the same period. So another way to think about this levy is that it's a question about how firmly we want to apply the brakes on spending growth.

    Some folks want to keep shoving on the gas pedal, disregarding the price of gas, and how much we have left in the tank.

    Some folks want us to back off the cruise control a few MPH and stretch our resources.

    Others want to stomp on the brakes until the ABS starts chattering, slamming everyone into the windshield.

    We'll see which camp prevails in the election.

  18. Paul made a valuable comment on the previous post: [Residential] growth is still a monster that just happens to be asleep at the moment.

    The irony is that it appears the only way to stem growth is to make the school district less attractive, by voting down this levy. Sad.

  19. @Paul

    Thank for the clarification. I still stand by what I said about the 2008 levy being responsible for collecting the bulk of the reduction in Personal Property Tax, so I think you're counting $4m a year that you shouldn't be counting.

    I'd like to add a better description to your third analogy: the driver of the car is deciding to stop and inform the passengers in the back just whose car it is before continuing any further. Sadly, because so far the passengers in the back have failed to listen to anything the driver has said, the driver is forced to apply the brakes rather suddenly in order to get their freakin' attention...


    Now, a question regarding the Increase in Property Tax Allocation for 2010/2011 -- is the increase there in those 2 years a result of the Federal "Stimulus" Funds ?

  20. SB-5 will almost surely get repealed this November (polls show overwhelming plurality for repeal) which gives additional reason for concern as far as voting for levies. At least with SB-5, there was hope that down the road this fiscal mess could be fixed.

  21. The economic premise of SB5 is that local governments would be able to essentially impose a new pay/benefits structure on the employees that would absorb most of not all of the impact of the cutbacks in state funding. So if our state funding is down $10m, then we would supposedly take $10m out of our comp/benefits budget, a reduction of 7% vs the $142m forecasted for FY13.

    So does anyone really think the teachers and staff were just going to accept 7% pay cuts without some kind of reaction?

    We might indeed need to have some gut-wrenching conversations with the teachers and staff about recalibrating our comp/benefits costs to the new funding reality. As I've said many times, taxpayers might have to spend a little more than they like, and the employees might need to accept comp/benefits that are a little less than they would like.

    We need to figure that out in an informed, respectful and empathetic dialog. I dare to say it's been much the opposite so far...

    In the end, the numbers have to balance - we can't print money like the Feds.

  22. M: Good modification ;-)

    I pulled the Dec 2008 Five Year Forecast to see what Brian was thinking then. The 2008 forecast was that state funding for FY13 would be $58.8m. In the current forecast, he's projecting $54.1m for FY13. So the difference between the two forecasts is $4.7m. In other words, the state funding is $4.7m/y worse than was projected when the last levy was passed.

    Of course, when the 2008 levy was passed, there wasn't too much concern paid to the numbers for +5 years, other than Brian had been alerting the Board that the PPT reimbursement was scheduled to start dropping off, and would disappear altogether by FY18.

    It's hard to say half the $10m/yr funding cut was baked into the 2008 levy. The mission of that levy was to fund spending growth for 2-3 years (though FY12 at the max), and there wasn't much if any thought put into what the next levy would have to look like.

  23. Oh, and the Federal Stimulus funding was recognized in the "Restricted Grants in Aid" line.

    I see what you mean about the Property Tax Allocation lines. I'll have to pull some old forecasts to see what Brian said in the assumptions...