Wednesday, December 28, 2011

Who looks at the financials? Any financials?

I suspect that most people who complain about White Hat have never examined the financials of their own public school district.  This isn't really about disclosure, or accountability.

It's about competition.


  1. But Paul, if we did not have the levy we would be providing a bare bones education. Quoted from your fellow board members, campaign committee, and most supporters. We Only provide in the 160 million range of dollar support. We are deficient in providing appropriate money for the HCDS. We dont care about the children. The work to the contract was realy a myth.

  2. Mr. Lambert,

    I recently got my 2012 tax bill and was flat out shocked by it. Value of my home dropped but my tax bill increased by 9.3%. The bulk of the increase is due to the school levy that was passed (I did not vote for it). The increased amount exceeds the stated number ($181 / 100K). Do you have a comment ?

    Also, I (along with many others I have been working with), will NOT tolerate a tax increase every 2 years. I strongly suggest you rein in spending and start to think outside of the box with regards to cutting the budget.

    People who work outside of the school district deal with budget and pay cuts all the time. Simply stated, most are expected to do more with far less resources (the idea of an annual raise and increased budgets in out dated).

    Thank you

  3. I've just done the calculations on my own tax bill, and find that the amount the school tax went up was $178.02 per $100,000 of market value for the 2010 tax year (assessed value is 35% of the market value), and $185.78 per $100,000 of 2011 market value (because my 2011 market value went down 4.18% - yours may have been more or less).

    Neither of these numbers are much different than the $181/$100,000 disclosed with the levy information - and those differences are I'm sure due to some technicalities having to do with the collection rate on the operating levy passed in 2008.

    There were a number of moving parts in the transition from 2010 to 2011. You identified one of the more unusual ones - the general devaluation of property values across the county as part of the mandated reappraisal that happens every six years.

    The Hilliard City School District is a patchwork quilt of governmental boundaries, so there are many combinations of tax obligations. For example, I live in Brown Twp, so have that township's taxes on my property tax bill, but I don't have any city property tax, which you might have.

    And to be clear, all property owners in the District pay the same school property tax rates, regardless of which municipality they live in.

    The total voted millage for me and my Brown Twp neighbors was 117.92 in 2010, and is 124.62 in 2011, an overall increase of 6.7 mills. Of that, 5.9 mills is the new school levy, which was approved in November.

    The other 0.8 mills is the result of changes in the collection rates of other agencies, some up and some down.

    There is a law on the books, often referred to as "HB920," which was enacted in the 1970s to prevent property taxes from going up when property values are generally rising. But it also has the reverse effect, to keep property taxes from going down when property values are generally reduced.

    This is done by adjusting the "Reduction Factor," which you can see on your tax bill. When general property values go up, the Reduction Factor is increased so as to keep the dollars collected constant. Likewise, when property values go down, the Reduction Factor is decreased, again to keep the dollars collected the same.

    For 2010, my reduction factor was .333274, which means that I actually paid about 67% of the 117.92 voted mills, or 78.620360. But for 2011, the reduction factor was reduced to .299492, meaning that this year I will be paying about 70% of the voted mills, or 87.297335.


  4. continued

    I appreciate what you are saying about the willingness to raise taxes. Another of the unusual events we had this time was a substantial cut in our State funding. In 2009, we received $64.3 million, including Tangible Personal Property Tax. In 2013, that number will be $55.6 million, or $8.6 million less than it was in 2009. Most of the money raised by this levy is being used to fill that hole.

    We hear lots of people saying we need to cut spending. Given that nearly 90% of our spending is on compensation and benefits, there's no way to make a material dent in the spending without either cutting salaries and benefits, or reducing staff, or a little of both.

    The School Board can't just cut salaries and benefits. These are negotiated with the unions representing the teachers and support staff. As a result of the repeal of Senate Bill 5, those unions retain the authority to strike if they don't like the way the negotiations are going. So the people of our community have to decide whether they're willing to push things to a strike if they want pay cuts.

    I think that would likely end in a 'scorched Earth' scenario, with neither side winning anything and the innocent kids suffering the consequences.

    The only way to reduce staff is to increase class sizes and/or reduce programs and services. Our district has much to offer, including an incredibly rich course catalog and extensive extracurricular programming at the high school level. If we are to reduce staff, some of that has to be given up.

    So I'm willing to listen to your guidance as to which of these components we should adjust to reduce our spending, and I expect my four colleagues feel the same way. But you can be sure that anytime a cut is on the table, a group of folks come before the School Board to protest those cuts, because those programs and services are important to their kids.

    So we put proposals before the community in the form of levy issues, accompanied by lists of things that will be cut if the levy doesn't pass.

    Pass the levy - keep the programs and services. Fail the levy - cut the programs and services. The community gets the final say.
    This time they passed the levy.

    I'd like to change the process however. Let's spend the time between now and 2013 getting more people informed and engaged in the dialog. Let's figure out our strategy for programming and staffing well before it comes time to put a levy on the ballot. Let's make the levy vote merely a formalization of that strategy.

    Will you participate in that dialog? Will you invest the time to understand the basic dynamics (which is much simpler than many believe)?

  5. Mr Lambert,

    My calculations show the number to be $218 / 100K. I discussed my concern with the Franklin County Auditor's office and after much discussion with several sub standard employees, I got a reasonable answer. I was told that the 5.9 million was the best estimate given at the time and that the actual number could vary by several hundred thousand dollars (to bad voters did not know this a few months ago). I have checked with others in my area and they are also showing a similar increase.

    I believe salary and benefits are the bulk of your costs but that does not mean they cannot be reduced. Has anybody ever considered increasing class size by one or two students ? How many students need to be added to have a meaningful impact to the bottom line ? How many teacher's aids are truly needed ? I find people can do amazing things when pushed but they must be willing to change (if the quality of education is important to the teachers, parents and students, then they should be willing to do what ever it takes to maintain it without asking for handouts). Have you ever considered what type of lesson this teaches students ? The message seems to be do not worry when money gets tight as somebody well always bail you out. As you know, life does NOT work this way. What ever happen to self reliance ?????

    Asking teachers to contribute more of there own money to cover health care is another option. As far as the pension goes, it is basically gold platted and unlike any I have ever seen. Is it really fair that I pay to ensure a teacher has a better standard of living when they retire when I am struggling to save for my own retirement ?

    What is your definition of education ? Mine does not include countless after school programs and activities (I should not be funding sporting events, band equipment....etc). If the parents feel this is important then they should absorb 100% of the cost.

    I am more then willing to invest the needed time in the matter.

    Thank you

  6. The levy was for 5.9 mills, not $5.9 million.

    The thing we don't know when the School Board picks the levy size is how much in aggregate it will raise, because it was not known then how the County Auditor was going to adjust property values.
    However, before we take the final vote to put the levy on the ballot, we have in hand a certificate from the County Auditor telling us exactly how many dollars the levy will raise given the properties on the tax rolls at that point in time.

    The folks at the Auditor's office may have been trying to explain that the exact amount raised by a levy from year to year changes as new properties are built, other properties are improved, and occasionally some properties are demolished.

    But here is exactly how one calculates the effect of a new levy...

    $100,000 market value
    x 35%
    $35,000 assessed value
    x .0059 this is 5.9 mills
    x 0.9 10% rollback
    x .975 2.5 rollback

    ...which is exactly what was communicated with the levy issue, and it's the impact on your school property taxes as a result of the levy passing.

    But the new 5.9 mill operating levy isn't the only thing going on with your school taxes. Before the passage of this levy, there were already 22 levies in force. Of those 14 are for operating expenses. This are the ones affected by HB920, meaning that the dollar amount collected by each of these remains constant regardless of what happens to the appraised value of your home - up or down.

    This adjustment is aggregated in the "Effective Tax Rate" shown on your tax statement. However, the adjustment on any particular levy will be different - generally the longer the levy has been in force, the larger its individual reduction factor.

    For example, the 8.9 mill levy passed in 2004 was in 2010 collecting only 8.12177 mills. The levy passed in 1983 is collecting only 1.36 mills. I don't know what the original millage was, but it was surely a good deal larger than this.

    Six of the levies in force are bond levies, issued primarily to construct our school buildings. These are best thought of as mortgages that are the responsibility of the entire community. Regardless of what goes on with the operating budget, these bond obligations have to be paid, and each of us get a proportional share of the debt service costs. The County Audit adjusts the millage rate as necessary from year to cover the debt service costs, which generally means our individual shares go down as more new homes and commercial properties are constructed.

    In 2006, voters approved a Permanent Improvement levy (now collecting at 1.98 mills). These funds can only be used for the upkeep and improvement of tangible assets, primarily our buildings.

    And the finally, there is the 'inside millage' levy. By Ohio law, as much as 5 mills of taxes can be levied in aggregate by local governments without the approval of voters. Many decades ago, it was decided by the powers that be in Franklin County that our school district would get 4.45 mills of the total of 5 mills which could be charged to landowners in our district. Other school districts have different arrangements, but this is ours.

    Inside millage is not affected by HB920. So when property values go up, inside millage collections go up. And when property values go down, inside millage collections go down.

    So, all that stuff is going on in your tax bill. How precisely each component affects your taxes is influenced by which taxing districts have jurisdiction over your parcel. I'm happy to help you with that analysis if you want to share your 2010 and 2011 tax bills with me.

    I would enjoy the opportunity to sit down with you to teach you what I know about school economics (and school politics), and also to gain your advice about how we should spend money differently. Feel free to communicate with me directly via email if you prefer.

    Thanks for the dialog.

  7. Correction on the above: the Inside Millage is allowed to be as much as 10 mills, not 5 mills.

  8. Mr. Lambert,

    I am well aware of politics and the damaged caused by a system that rewards (provides raises) simply by showing up to work. The US auto industry was nearly destroyed using this model.

    Raises / promotions based on performance tends to diminish the political influence along with truly rewarding the best performers.

    All I ever here is how important the education is to the students and how much they will suffer if a levy fails. The actual situation seems to be based on how employees will be compensated.

    I am looking for leaders within the school district to move away from the old methods that have been used and come up with a realistic way to fund the schools (tax payers must help but there must be a balance).

    Thank you.

  9. Paul stated:

    "The School Board can't just cut salaries and benefits. These are negotiated with the unions representing the teachers and support staff. As a result of the repeal of Senate Bill 5, those unions retain the authority to strike if they don't like the way the negotiations are going. So the people of our community have to decide whether they're willing to push things to a strike if they want pay cuts"

    Paul, having read your blog for a few years, you often refer to a "STRIKE". Which I happen to think is a bit overblown. You do realize, since 1989, there has been ONE, yes ONE teachers strike in central Ohio. Since the collective bargaining law went into affect in 1982, there have been LESS strikes than there were prior to this law. Collective bargaining works.
    Fed Up Tax Payer,
    You do realize you have the option to move to a place where taxes are less, don't you? Nobody is forcing anyone to live in Hilliard. We all have choices. If you choose to live in a community that offers a good education, then we choose to pay more taxes. There is a reason our community is what it is. And the schools are one BIG reason why Hilliard is a disireable community.
    I also tire of hearing about those outside of education who are forced to do this, forced to do that. Didn't we have a choice of what we wanted to be career wise? When times were good, and many people in the private sector were raking in bonus after bonus (yes, I know many who were and still are), you dont' hear those in public sector whinning about it or asking to share the wealth. I am not trying to be insensitive to some. But there are certain things that are becoming irritating to hear.
    I am not sure anybody enjoys paying taxes of any kind. And I do realize many don't have a choice to move. But there are some who do. There are some who continue to live in 300K houses, who are empty nesters. Why live in a home that large? Isn't it wise to downsize? But many don't. I could go on and on. There are options out there. But some just choose to complain instead of doing.

  10. You do realize, since 1989, there has been ONE, yes ONE teachers strike in central Ohio. Since the collective bargaining law went into affect in 1982, there have been LESS strikes than there were prior to this law. Collective bargaining works.

    Yes, I understand that this is the union perspective, spoken often during the SB5 fight.

    I've been reading a book titled The Dead Hand: The Untold Story of the Cold War Arms Race and its Dangerous Legacy by David Hoffman, which won the Pulitzer Prize. One of the many important points it made is that the invention and deployment of massive nuclear weapons made it so that any future war between nuclear powers would not be fought by armies lining up on remote battlefields, but rather by the killing of hundreds of millions of innocent non-combatants, leaving a scorched Earth which might never sustain life again. That's what makes nuclear war unthinkable, even though we got much closer to that happening than most would guess.

    A teacher strike is a like a nuclear weapon, in that it's not so much the decision makers who get hurt if that weapon is launched, but rather the innocents who are not party to the politics. In this case, I'm obviously talking about the kids.

    People move to communities like Hilliard because of the schools. They have school age kids, or plan on starting a family, and want to get them into a good school system. Those without kids still want to buy homes in desirable school districts because the perception of the quality of the school district is the major influence on the future value of their property.

    So there is a built-in bias to support the schools. And if parents have high-school age kids in particular, there is a very high degree of motivation to see to it that their kids' once-in-a-lifetime opportunities are not threatened by cut backs in programming and services - especially extracurriculars.

    Interesting story: the last teacher negotiation in Ohio that came to a strike vote that I knew of was in a very small district on the Ohio River near Wheeling. The thing that influenced the school board to settle was that the high school band had a very special trip coming up, and if the teachers went on strike, the trip would have to be cancelled. Those parents pressured the school board to settle so their kids could make the trip. However, I'm not sure those same parents showed up to support the levy necessary to underwrite what the teachers had won.

    So there haven't been teacher strikes because school boards - reflecting the feelings of their community - aren't willing to negotiate that aggressively and bring harm to the kids.

    It's not an idle threat either. Correct me if I'm mistaken, but I believe that during the 2008 negotiations, the Hilliard teachers authorized their union leaders to call a strike if the leaders felt negotiations weren't progressing to their satisfaction. How much influence that had on the contract settlement, I couldn't say. But the teachers were willing to arm the missile, open the silo doors, and let the union leaders sit with their finger poised above the launch button.

    By the way, I can tell you why empty-nesters continue to live in their big homes rather than moving: a) it's not an easy thing to sell a home for enough to pay off the mortgage these days, especially with school taxes on the rise; and, b) there's no place to run to - every suburban school district in Ohio is going through this same turmoil.

    There are more options than: "Pay up or get out." One is to stand our ground and fight.

  11. Fed Up:

    The law limits the ways a the local leaders (School Board) can choose to fund their schools:

    - Time-limited property taxes: A levy which expires. Levies have to be renewed to keep funding the same. A levy failure causes revenue to decrease. Hilliard Schools does not currently have any of these levies in force.

    - Permanent property taxes: A levy which never expires. This means local revenue never goes down (except in very rare circumstances). This is the form that HCSD uses exclusively.

    - Income Taxes: Frequently used in rural district where land values are low. Paid by anyone who lives in the school district, regardless of where one works (the opposite of municipal income taxes, which are paid to the municipality in which you work, regardless of where you live).

    - Earned-Income Income Taxes: Tax form designed to excuse seniors from paying income tax on retirement income. Often easier to get passed because seniors are reliable voters, and relish the opportunity to side-step school funding obligations.

    That's about it. Other forms require the passage of new laws by the General Assembly. I pushed for Impact Fees a few years ago - when we were in a growth boom - and our local State Representative, Larry Wolpert, took such a proposal forward. But it died in committee, or rather under the weight of opposition from real estate developers.

    If we want to keep our school district solvent, we'll need to figure out how to keep it affordable to live in Hilliard, and that means keeping our spending growth (ie compensation growth) reasonable in relation to the general economy.

    We also need to bring in more industrial operations, especially along the I-270 corridor. Building more houses just makes things worse, something I've been saying for a number of years.

  12. So Anon, you are telling every person including seniors, those on fixed incomes, those on layoff
    with double digit medical increases every year, who have been loyal to this community, have supported levies time after time to bring about the infrastructure that he HCDS has to just move.
    Paul brings up agreat point about the 2008 contract, and it is no myth that some teachers brought the contract into the building. How is that about the kids. At some point this kind of nonsense will eventually blow up in this districts face and it is going to cost all of us
    the taxpayers a heck of amount of money to settle a lawsuit, especially when you bring the feds in regarding federal funding, federal scholarships, federal civil rights act in denying students access to federally protected
    information, and access to federal scholarships.
    The community has provided an outstanding infrastructure, and some of the programs, supplementals etc are just simplly over the top.

    The community has never hurt the schools or the kids, but in 2008 that was another story from the
    OTHER SIDE in the negotiations. Why, because the crap our board members throw out there about medical contribution by the HEA members does not match up to what the "work to the contract" actions of 2008 because they did not want to pay anything toward health care and the vote was very close.

    So while Fed up taxpayer might miss some points, the FACTS are that while the majority in the private sector are paying anywhere from 75 to 150 dollars per week in medical, a similar HEA member pays 50 per month and has free dental and the deductible picked up.

    Last time I checked it was a free country to liver where you want, not where the school district and their supporters want you to.