Saturday, February 11, 2012

The Spending Side of the Equation

In the previous article, I discussed how our schools are funded, and hopefully was able to dispel some of the misconceptions folks have.

This article address on the other side of the equation:  Spending. Where does the money go?

Treasurer Brian Wilson, in collaboration with Superintendent Dale McVey, periodically presents a Five Year Forecast to the School Board, as they are required to do by state law. You can find the current version here, on the District's website, where a number of other pieces of financial information are posted as well.

It takes about 2 minutes of examination to understand that nearly all - 88% - of our operating funds are used to pay the salaries and benefits of our team of teachers, staff and administrators.

click to enlarge
Many people have assumed that I point this out because I think it's inappropriate. I don't. A school system is a professional services organization, and as such, will always spend the bulk of its money on people.

I'll not rehash here the many articles I've written about teacher compensation (click on "teachers" in the topic list to the right if you are interested in reading them). For new readers, an article I wrote last year titled "Teacher Salary History" might be helpful in understanding how our teachers are compensated, and how that pay structure is defined.

Please understand: the only reason I keep bringing up compensation and benefits is because it's the only component of our budget which changes much over time, as the chart above shows. There is a myriad of stuff that falls into the category "Everything Else," and certainly, we need to demand that our team does a great job of keeping those costs as low as possible.

One way that happens is through efficient use of electricity, natural gas, and diesel fuel. You may have seen the announcement that our District received an incentive check of $112,000 from American Electric Power to reward us for a number of energy conservation projects which have been completed. As time goes on, I'm sure we'll find additional ways to save money on energy usage.

You might be surprised to learn that the cost of paper textbooks is significant for our District, as it is all school districts. That's the reason there is so much interest in the potential of electronic textbooks, delivered on devices such as Apple's iPad or the Amazon Kindle.

But we're not there yet. The publishers of scholastic textbooks still need to go through the same painful industry transition as has the music industry. Capital Records et al had to accept that they're in the 'music industry' not the 'record industry,' and that they would have to make their money by producing content people desire, and not via the manufacturing and distribution of plastic discs. The textbook guys need to do the same.

Until they do, there is no money to be saved with electronic books, as the prices the publishers set for electronic editions remain close enough to the printed editions so as to leave no room to purchase and maintain the reader devices. We'll get there, but there are still many barriers to being able to save money via the use of electronic books.

We spend a lot of money to run our school district - $160 million per year and growing. It's a little more than $11,000 per student per year. That's not some magic number. It's just what we have decided to spend.

Some say we have to spend that much to maintain our rating of "Excellent with Distinction."  I don't agree. The median spending for the 81 districts rated Excellent with Distinction in 2009 was $9,600, and it ranged from $7,200 (Bethel Tate/Clermont County) to $21,000 (Orange City/Cuyahoga County). Which one is the right number?

We could spend a lot less in our District and still be Excellent with Distinction. But we would not be able to offer the richness of programs and services that we do. A district can be Excellent with Distinction without offering Chinese as a foreign language, or Pre-Engineering. Having well kept buildings and grounds is not a factor in our Excellent with Distinction rating. Nor is having exceptional extracurricular programming. These and many many others are all over-and-above programs we have locally decided to offer, and are a significant driver for our cost of operations.

I'm not comfortable with the notion of an a la carte public school district. I believe that every opportunity we offer should be available to every student without regard to their economic status. I don't even like the fact that we charge academic fees, where even the elementary schoolers have to chip in for the cost of consumable supplies. It's just an unvoted additional tax, and a regressive one at that.

But as we offer more and more variety of programming, each program serves a smaller part of the total student population. And not all programming costs the same. Offering Chinese means finding one qualified teacher, but there may be only 10 students in the class. Offering Ceramics means a qualified teacher plus a kiln and other equipment. A cross country team needs a coach or two and a path to run on. Football requires magnitudes more than that, but also generates substantial income.

Maybe an a la carte system is the way we have to go. We can't keep asking every taxpayer to fund every program. Maybe we have come to the point where our public school system is just too expensive given the resources and demographics of our community, and we need to think about a different way of organizing and funding all these things that we do.

That's not going to be an easy conversation. But it needs to be had.

I welcome your comments.


  1. Paul, I see from the agenda that there are multiple over the top coaching positions for track and field 24 for the 3 HS. This is way over the top. the salary schedule may be subject to the current contract, but at some point we have to address the number of coaches plus we are paying weight room folks a new contract 1200 per quarter or 4,800 dollars per year on top of other compensation. Cant accept this type of over the top spending on positions that needs to be addressed I am hopeful you can address this and ask the SUPT why we are funding such positions over and above what colleges do ! ?? Every dollar is important. And by the way, I have looked for the posting of these positions for the spring having the past experience in track and cross country and would work for less than what they are paying. Why is this a closed shop? And no experience for some of these folks, Nepotism very much involved ? This should be open to all district residents to apply. You might just get some volunteers thus saving money.

  2. Rick: You've made your point about the number of track coaches on many occasions, and I've heard you. The list of Spring supplementals on Monday's agenda adds up to $390,351 for a total of 104 coaches at an average supplemental salary of $3,753.

    Of these, 35 are track coaches, who are paid on average $3,726, and in aggregate are paid $130,413, or 33% of the total appropriation of this resolution. This is more money that for any two other sports.

    I'll have to dig up the stuff from the Athletic Sustainability Cmte, but aren't there a ton of kids participating in track? On a per-kid basis, this might be one of the least expensive sports.

    And remember, what is one person's waste is another person's favorite program. That's not saying we shouldn't always be willing to look at every item of spending, but nothing gets cut without objections.

    But that's why you elected us.

  3. Okay, found the numbers.

    According to the Athletic Sustainability Study, the direct cost of our Track program (ie the costs that would go away if we cancelled Track), is $140,000/yr, of which $130,000 is for supplemental salaries for the coaches.

    However, we have about 440 kids participating in Track each year, making the cost come out to about $315/kid.

    In comparison, football costs $770/player and basketball runs $1,156/player - our most expensive sport on a per-player basis.

    The Pay-to-Participate proposal brought forth in the Spring said the fee would have been set to $600 per player per sport - the weighted average cost of all sports. If the objective was to make the net cost to taxpayers of our extracurricular programs equal to zero, then this $600 sounds like the right number.

    But remember that the calculation included 440 Track participants. We can be pretty confident that if parents were charged $600 for their kids to run track, we'd lose a significant number - I'm guessing 80% of them. At 90 participants, the cost jumps to $1,400 per kid. Of course, we'd reduce the number of coaches as well and probably knock the cost back down to something closer to $300/kid.

    But still, the overall denominator in the equation would decrease, and I doubt that total cost divided by the number of participants would remain at $600. What if it rose to $1,000? Would we still have an athletics program?

    Yes, we need to continue to have a conversation about this stuff, and all of us on the School Board welcome your feedback. But let's agree that Track isn't the problem.

  4. Paul,

    Thanks for the data and sound reasoning on this. It is good to see logic prevail over assumptions! There is something to be said as well for having teachers as coaches, since they have the training and education about child development. As a parent of two teen athletes, we have seen several examples of non-teacher coaches who lacked the maturity to work effectively with kids.

  5. Paul, I must admit that I am a bit shocked to hear you state that an ala carte system may be necessary given that you have generally been against any type of fee structure. As a firm proponent of "pay to play" for most things beyond the basic college curriculum, I have felt that way for years. Spending has to be based on revenues and the revenue stream has changed drastically in the last few years. With the last levy winning by less than a handful of votes, we have half the taxpayers left feeling that they are paying for things that they don't necessarily agree with. While extra curriculars might be necessary to a well-rounded education, the costs have to be borne by someone and I firmly believe that cost should be borne by those who participate. I'm sure there are more than a few students who participate very little in those things, but their parents still pay for it. It is kind of like the gasoline tax - it pays for roads which are used more by those buying more gasoline, i.e. those using the roads more. Yes, you can buy a more fuel efficient car. And yes, you can find a more efficient way to cover the costs of the extras in the schools too, which parents might do if they had to bear the direct costs. And that includes many of the high upper level classes - why should I have to pay for other students college credits? It's a new age and the same old same old doesn't work any longer.

  6. Hillirdite: As I said in the article, an a la carte system isn't my preferred solution. But it seems like the choice is to either significantly reduce the variety of extracurricular programming we offer with taxpayer dollars - which just concentrates the benefit on fewer kids still - or stop the taxpayer support altogether.

    My worry is about the kids without the economic means to pay to participate in extracurricular programs. But then, by law, it's not the responsibility of the taxpayers to support extra-curricular programming at all, which is the reason it always appears on the cut list at levy time.

    That's the reason I support an external club system to an a la carte internal system - it cuts the cord and makes in clear that these things are NOT extracurricular offerings of the school district, but rather separate operations altogether.

    We know that there are some sports which thrive in a club system. Soccer is perhaps the best example, and HOSA does a fine job getting hundreds if not thousands of kids participating. I suppose there is still Little League around too.

    But one of the practical challenges is that we have this thing called the Ohio High School Athletic Association (OHSAA), which is the sanctioning body of all these high school teams. You have to be part of OHSAA to compete for State Championships, and to my knowledge, OHSAA does not admit club teams. So we if we converted all of our school-sponsored extracurricular sports to community-operated clubs, there would never again be a new State or Conference championship banner hung in any of our schools. For that matter, I'm not sure any OHSAA team would be allowed to schedule one of our club teams.

    At least a Pay-to-Participate system keeps things under the umbrella of the school district, which preserves membership in OHSAA, until that stranglehold can be broken.

    Interesting that you bring up gas tax. Every once in a while, you hear a state official lamenting that with more fuel efficient cars, the gas tax revenue is going down, and they might have to raise the tax rate to be able to afford road repairs going forward. Similar stories with tobacco and booze taxes...

  7. A former school board member from Olentangy blogged on this topic a few years ago and his post stuck with me.

    The question you wrestle with is this one. To what degree should the cost of participation in extracurricular activities be transfered from the student's parents to the student's neighbors. This was a very thought provoking article on the subject.

  8. Thanks Marc. I remember reading Mr. Fedako's article, and I think he makes some valid points.

    My baseline philosophy remains the same as always - if a program/service is to be offered through the public school system, and if there's going to be a public school system, then that program/service should be accessible to all students who wish to participate and have the aptitude, regardless of their financial resources.

    So my preference would be to shift over time to club activities.

    A transitional step might be to shift to a la carte system - Pay-to-Participate is the customary lingo - under the auspices of the public school district.

    I believe a reasonable, arguably necessary exercise for any school board is to run a Five Year Forecast scenario assuming a P2P extracurricular approach. We know the "knobs" are spending rate growth, levy interval, levy size, and the cash reserves target. A P2P approach will reduce spending (although not necessarily spending growth), which might create a one-time opportunity to stretch the interval, reduce the levy size, or build up the cash reserves.

  9. Paul, I appreciate your pragmatic viewpoints and how you manage to avoid getting sucked into pointless philosophical debates.

    I went through a Libertarian phase before concluding that we are very interdependent. It always concerns me when I see a powerful intellect paired with an immature world view...

  10. T: Thanks for your comment.

    Last year, I officially changed my voter registration from Republican to Unaffiliated. I find that no political party lines up with my beliefs very well, and I don't want a label attached to me which causes people to assume they know what I believe. As I note in my Facebook profile regarding Political Views: "you have to ask me about a specific issue."

    One of the Founding Fathers, perhaps Jefferson, warned about the evils of political parties in the functioning of a government. I wish we had listened.

  11. Paul,

    I have disagree with your comment to Rick that Track isn't the problem. Track is absolutely the problem, along with all these other high-cost extra curricular activities.

    Track alone may not be the problem, true, but we have to address this as a complete issue. Any one of us could make an argument for keeping any given program, but that's what leads to ridiculous spending. (See: Washington, D.C.)

    I will, however, point out to Hillrdite that the college level courses don't cost the district any more than educating the same kids in a "general" class on the same subject. All the costs (fees, etc.) associated with a college-level, or AP course are borne by the participating kids (or their parents). My checkbook will confirm that if you'd like to see it... :|

  12. M:

    You and I are saying similar things.

    Chances are that at some point in the future, our public schools will cease offering most if not all of today's extracurricular programming, and turn that responsibility over to external organizations.

    The question seems to be whether we are going to do that via the ugly path of levy battles, where extracurriculars are top and center of the list of things that will be cut if a levy is voted down, or whether we'll do it as a planned process, saying essentially "Extracurricular programming is being phased out over the next 10 years in the following manner ..." accompanied by an explanation of how that will effect funding needs going forward.

    One outcome of such a move is that it will lay bare the fact that our extracurricular programming isn't actually that large a fraction of the budget - only 1-2% - and that it is pay raises which drive the growth in spending.

    The comp/benefits increase dialed into the Five Year Forecast for FY16 will lift annual spending by $7 million - or about 3 mills.

    For just that one year.

  13. In round terms, for each 1% annual increase in comp/benefits costs, a levy of about 1.6 mills is needed every 3 years.

    The current step schedule built into the teachers' union contract requires a 2.2% increase per year to fund, without any base pay increase. That's about 3.2 mills every three years.

    The current Five Year Forecast shows an annual increase in comp/benefits costs of 4.5% starting in FY16. This funds the step increases plus 1% base pay increases.

    That requires 6.5 mills every 3 years, which works out to a 33% increase in our property taxes in the span of 10 years, assuming no increase in our funding from the State of Ohio.

    That's the conversation we need to have.

  14. At the risk of bringing up some really bad memories, we had that statewide conversation last November and 63% of Ohioans said that they were perfectly OK with maintaining step schedules, benefit costs and so forth. Elections have consequences. Paul's math, which can be replicated in hundreds of districts throughout Ohio, is a consequence of that vote.

    1. These unions may still have the legal right to negotiate for these things, but hopefully it doesn't mean they are always granted. When school boards do their jobs, and act in the best interest of all, the children, the district employees and the taxpayers, these items will be truly negotiated and not just rubber stamped in favor of the unions.

    2. When the unions really want something, and are being told no, they often threaten the community with a teacher strike. Are you willing to have your school board members stand firm and let a strike take place? That's really the multi-million dollar question.

    3. Well then it is a game of chicken. Now that the community is well aware of the history of generous compensation and benefits, would the teachers and their union really be ready to ruin their reputation in the community, maybe irrevocably, by going on strike? How much sympathy would they garner? They would really need to balance what they have to gain with what they have to lose.

    4. Paul, absolutely the board should take a hard stand on the next contract negotiation.
      And............. should their be a strike then so be it for all this stupid stuff then if it really is about the kids. We can make that dog hunt for along time.

      The electorate gets backed into a corner and the district says and the board for that matter says we have to ante up or else.
      At some point the real estate taxes here become unmanageable for more than just a few.

      We have lots to cut in supplemental contract numbers of employees, not necessarily the amount paid, but also look for volunteers to help coach who have a wealth of experience.
      No one seems ready to ask, and heaven forbid
      that anyone would consider that. Fee increases can fund athletics, music, busing et al and as you said it is a small part of the budget.

      The medical coverage benefit, vision, dental
      plus pension, snow days, excessive sick days
      15 really ?????? and all the other supplemental items need to be looked at.
      It seems we pay extra for anything outside the regular 6 hours of instruction which is accurate when you take in planning time and lunch time.

      I hope we are not allready planting a seed to be afraid of a strike. The economy is far from recovery, but I think we spend a good deal of money allready. We are projecting into the 180 million area. Small raises of 1 to 1.5 % based on merit are good
      but the step raises should not be over that amount either.

      Of course according to the boards math
      spending what we do now is really bare bones education !!!!!!!!!!!!!!!!!!!!!!!

  15. Kicking the can said...

    The unions are driving the bus and this last levy passage just filled up the tank for another joyride !! Let's see if the Westerville Levy get a recount. When the word recount is mentioned, you know a passage is the next word said.The wheels on the bus go round and round ....