Tuesday, October 23, 2012

Five Year Forecast: My Comments

At last night's meeting, I made the following statement regarding acceptance of the Five Year Forecast brought before the School Board for approval. See also my prior article on this matter.

Along with the 2020 Plan and the Continuous Improvement Plan, I consider the Five Year Forecast to be one of the most important strategic planning documents produced by our District.

I am very concerned about the proposed Five Year Forecast before us tonight.

It’s not that I think there are errors in the calculations. I have full faith in Mr. Wilson’s skills, and know that the numbers are an accurate representation of the assumptions which accompany the forecast.

Nor can I point to any one assumption and argue that it is incorrect. I am confident that Mr. McVey and his leadership team have seen to it that the spending plan in this forecast is consistent with the 2020 Plan and the CIP.

But the amount of new money required to fund this plan is too much to ask of our community, in my opinion. By 2017, this plan shows a $20 million gap between annual funding and annual spending, with an accumulated deficit of $28 million.

As a Board, we made the commitment to the community that if they passed the 5.9 mill that we placed on the ballot in November 2011, we would not ask them for more money until 2014.

I understand that as our expenses grow, the school funding system we have in Ohio requires us to periodically go before the voters and justify the need for more money. I believe this is a good thing – it holds us accountable to be good stewards of the taxpayers’ money.

And we need to help the taxpayers understand that costs do go up – in particular the 86% of our budget related to compensation and benefits go up – and with state funding flat, and having the potential of dropping further still, the only way to fund these increasing costs will be additional local taxes.

By my calculations – not confirmed by the Treasurer – a levy of 7.7 mills would need to pass in 2014 to fund this forecast. That’s about $235 more per year per $100,000 of valuation, or about $475 more per year for a typical homeowner.

click to enlarge
I very much doubt that our community has the appetite for a tax increase of that size. Maybe the economy will be in much better shape in 2014, and a levy of this size will sound reasonable. And maybe the State will come through with more funding if the economy recovers. But I doubt it.

I think the time has come to start having some tough conversations about the breadth of our academic offerings, and the services we provide. We need to think some more about the extent of our extracurricular programming, and how much is funded by taxes vs participation fees.

I believe that approving this Five Year Forecast implies that everything is just fine. But we have some very hard work to do, as a School Board, as an Administration, and as a community. We together need to recalibrate our expectations with what we are willing to invest, and we need to start doing that sooner rather than later.

Therefore, I believe it is appropriate to not approve this proposed Five Year Forecast, and that the Board should ask the Superintendent and Treasurer to come back to us with a new Forecast , or perhaps two or three new forecasts, with spending plans requiring a significantly lower level of additional local funding.

When the vote was taken, I voted against accepting this Five Year Forecast. The other members all voted in favor, and the resolution passed 4-1. 


  1. Paul,

    We appreciate you pointing out the obvious to the other board members. We realize that most of the time facts and figures seem to fall on deaf ears.

    However, what I really want to know (and you promised a post on this that I have yet to see) is what level of financial discussions took place at the board retreat.

    1. There wasn't really much in the way of financial discussions at the Retreat. I had a sent in some questions in advance, and many of them were answered, but there was no discussion of financial matters as they relate to the strategic vision - aka the 2020 Plan.

      There is what I think is an odd perspective about the Five Year Forecast, that being that even though the Five Year Forecast shows a $28m cash deficit by the end of FY17, that won't really happen because the law doesn't allow there to be a cash deficit. Therefore the problem will be fixed before then, so it doesn't hurt to approve a Forecast that shows a big deficit.

      But WHAT is going to be fixed? That's my question.

      Are we going to assume a big levy can be sold - meaning we don't have to change the spending plan?

      Or are we going to make some big changes to the spending plan so that a smaller levy will do - or no levy at all? If so, isn't it better to start the process to make those changes now, and not wait until the last minute?

    2. I am quite concerned that 86% of the budget is for wages and benefits!!! Ask the post office how thats working for them

    3. A school system is essentially a professional services organization, and we should expect the budget to be consumed primarily with wages and benefits. Some might argue that the most efficient school system possible would spend money on nothing but teacher comp and benefits.

      The issue is the rate in which these costs grow. In the last decade, average comp grew at 5%/yr, primarily because of the deals the teachers negotiated. In the decade before that, the number of teachers grew by the hundreds as our student population exploded from 10,000 students to 15,000.

      We're in a more steady state now - the student population hasn't changed much for a number of years. Yet there has been growth in both the number of employees and the average comp, and both of those factors drive up costs.

      The whole reason to point out that comp & benefits is 86% of the budget is to make sure we give at least 86% of our attention to that factor. It's not about empty buses, the price of diesel fuel, or whether the lights seem to always be on at the football stadiums.

      It's about how many people we employ, and what we pay them.

  2. Thanks, Paul. It's rare to find an elected official who remembers promises made during an election cycle. I certainly hope Hilliard voters recognize and appreciate your contribution to the Board.

    With respect to the five-year forecast, if I understand your comment correctly, the forecast (as published) can't possibly be fulfilled as it stands. Given that, wouldn't it have been a whole lot easier (and just as effective) to publish a one-year forecast followed by a bunch of "this page intentionally left blank" sheets for subsequent years?

    I know that's sort of harsh, but it really sounds like this was something of a punt -- as in, "someone else will have to deal with this later," unless the whole intent of the forecast is to draw attention to the negotiation needed to keep spending and revenue matched. As it stands, it sounds like the forecast that passed is evidence that the Board understands (as a group) that there's a gap that will have to be filled, one way or another, and that this fact is known to everyone on the current Board as of October, 2012.

    Keep fighting the good fight, Paul.

    1. Thanks.

      Interesting idea! However, the structure of the Five Year Forecast is set by the Ohio Dept of Education, and by law every school district must submit one in Oct and May of each year.

      Every school district and school board had its culture. In our district, this Five Year Forecast is seen by most to be primarily a tool to give warning when a levy will next be needed - ie that the spending trajectory is fine, and that all that's needed is more revenue.

      If, at the last minute (just before we run out of cash), that new revenue does not materialize (ie a proposed levy fails), then it is seen to be the responsibility of the Superintendent to make big cuts in programming and services.

      I want to reverse the thinking. Let plan on putting a levy on the ballot in 2014, but discuss now what size makes sense to the voters. Then let's draw up a plan to adjust our spending to align with that level of revenue, and start making those adjustments right away.

    2. Yeah, I was being intentionally ridiculous to call attention to the fact that we're perpetuating this culture of cultivating a crisis, only to solve it at the very last moment under threat of doom, gloom, and the absence of High School sports.

      It seems as though that cycle is really a choice we're making, given that we've got a pretty decent understanding of where we're headed on a five-year horizon. I actually think it's very encouraging that we've got that sort of forecast in place, but for extra credit (wink), let's see if we can start managing over that sort of horizon, rather than creating an artificial catastrophe.

      Granted, that's not nearly as exciting, but if there are those among our elected officials that crave that sort of adrenaline, there's always skydiving.

      As an aside to any other Hilliard citizens who might read this, be sure to pay attention to what quiet competence looks like. Heroes are great, but the *last* thing we need are heroes that arrive just in time to put out the fire that they started in the first place. Let's elect some more managers who are willing to draw up a plan and work the plan they said they'd work. It may not be exciting, but I'd just as soon keep the drama on our football fields and in our auditoriums.

  3. Paul, I appreciate the work you do on the Board and commend you for making your statement regarding the Five Year Forecast. Did any of the other board members have any comments or concerns before they pulled out their "APPROVED" rubber stamp?

  4. Great post/talk Paul. 7.7 mills shouldn't even be a close call - it's way too much. But then we knew going in that the only way to get change on the school board was to get multiple fiscally-sound members elected and that didn't happen. I don't know what it's going to take to get people to vote in board members will get this under control.

  5. Paul, thanks for the forecast updates and agenda presentation as usual

    A community summit on this is needed from all facets of the community and not just from the usual group of everything is wonderful

    ThiAsis will not happen however b ecause your four colleagues operate as business as usual. Would like to get on the the superintendent search as the first quesion would be what kind of adjustments would they be in favor of instead of just more $$$$
    And as suspected our newest member is more of the same

    Which is what we have with our newest 5 year forecast, same stuff different day, and if the community does not care enough to raise revenue with out meaningful thought out adjustments then they are against education NYET

  6. Kicking the can says,

    Thanks again Paul, but here we go again .... .Let us all look at all the local Super's getting out while the gettings ($$$$$$) good !!! Yea it's all about the kids !

  7. Paul, you are the only person I've ever voted for that I felt like actually represents me (even if we don't always agree). So thanks for that!

    I get really uncomfortable when you talk about things like scaling back our offerings. Not so much what you are saying, but how you are saying it.

    I certainly agree there is room for improvement in how we structure our classes. But I dont understand how this is a problem with the course offerings and extra-curriculars in our secondary schools.

    Is Study Hall somehow cheaper than Spanish? You still have 8,000 kids that have to take some class for x periods a day.

    No, I believe this is a question of class size optimization. And not a one-size-fits-all approach for every grade, subject, and ability level....

    Please stop presenting the false dilemma between lowered expectations or higher costs.

    1. T - It depends on your definitions of expectations.

      The fact is we offer in the region of 300 courses at High School (I believe that's the number Paul' said in the past).

      A lot of these classes have 10-15 students in them, which is not the best use of a teacher's time if we're trying to get the most value for our money. Reducing the course catalog will reduce the number of teachers, and thus reduce the amount spent on compensation and benefits.

      Will it reduce options? Yes... is that a bad thing? Well, it depends on how you're looking at the big picture.

      So Paul's point, I believe, is completely valid.

      That all said, the ideal solution is the same offerings at a lower cost, but that would take all 5 board members and Superintendent actually trying to solve the problem...

    2. It's far from being a false dilemma.

      If in the equation: COST = #employees * COST/employee, then if COST/employee increases, and we want to keep COST constant, then #employees has to decrease.

      Decreasing the #employees has to change service levels. Here the variables are #sections and #students/#sections. A section is a particular course offered at a particular period.

      So let's say we want to offer a course in alchemy. If we have 300 students in a high school who want to take this course, it could be offered in 10 sections of 30 students, 20 sections of 15 students, or 30 sections of 10 students. Since our high school teachers can be assigned at most 6 periods of classes each day, these configurations would require 1.6 teachers, 3.3 teachers, and 5 teachers, respectively. Very different costs.

      You correctly point out that those kids have to be in some class anyway, even if it's a study hall. But a study hall could have 100 kids in it, and still be monitored by only one teacher.

      It's all about the student/teacher ratio. Having more offerings tends to dilute the student/teacher ratio, and as this ratio goes down, costs go up.

      It's a non-trivial problem. Many teachers have very narrow certification/licensure, meaning that you can't interchange them easily. So if you have a teacher certified to teach Latin and nothing else, you might as well fill that teacher's schedule with Latin sections, even if there's only a handful of kids in each class. And yes, I recognize that there are other solutions to such a situation - all I'm trying to point out is that it's not as trivial as one might first think.

  8. Paul, thank you for standing up and saying what needed to be said. Simply saying "Look, we'll be out of money soon." without doing anything about it is irresponsible at best.

  9. Definitely not trying to trivializing things.

    Just pointing out that personnel/contracts/convention seem to be the constraints rather than financing.

    "Many teachers have very narrow certification/licensure" - Huge problem in my opinion.

    "A lot of these classes have 10-15 students in them, which is not the best use of a teacher's time if we're trying to get the most value for our money. "

    The problem is you aren't evaluating it based on value, just cost. It all depends on what kind of students and teachers you have. What would you say if a class of 5 students won a national robot competition or something like that? Would that be worth it?

    1. T - Your last question is right on point, and it relates to the extracurricular funding issue as well.

      The question is whether the whole base of taxpayers should be asked to pay for programming and services that benefit only a few?

      The Ohio Constitution requires only that we offer a "thorough and efficient education." We can debate about what that means, but from a practical standpoint, it means the set of courses required to satisfy the minimum standards set by the Ohio Revised Code. Anything beyond that is a matter of local choice.

      Over the years, our school district has developed a rich set of optional programs and services. That's what attracts people to our community, and it has a direct bearing on our property values.

      But there's an offsetting penalty - all this optional programming costs all of us a bundle in property taxes, and the cost is going to keep climbing with the cost of our team of teachers, staff and administrators.

      At some point one or both of these things becomes more significant: a) the voters put up increasingly stiff opposition to new taxes; and, b) the demand for existing homes in our community decreases because of rising taxes, which in turn decreases home values (sellers have to lower the price at which they are willing to accept to overcome the tax burden).

      Upper Arlington can be said to be a community that is built around its schools. UA Schools are understandable considered to be among the very best public schools in Ohio, and have been for decades. The demand for access to those schools have kept property values high: $280,000/student vs our $155,000 despite the fact that UA has a tiny commercial tax base.

      Nontheless, UA has this year - for the first time I can remember - formal opposition to the operating levy issue which appears on their ballot this November. If it fails, will the demand for UA housing soften?

      The opposition group claims the district can deliver a great education, keep the desirability of their schools high, and yet not have to spend more money. Supporters of the levy disagree, saying that more money is needed to maintain the quality of their schools.

      One vote will be taken at the polls in a couple of weeks. The other vote will be taken by all the potential homebuyers.

      It will be interesting to see how this turns out.

    2. T - I am only basing on cost because that's what the majority of taxpayers base it on.

      We will eventually have pay-to-pay high school sports (it's just a matter of when) because eventually enough taxpayers will decide it's not worth the cost.

      If people based everything on value, every minivan and SUV sold would be one with every single possible protection under the sun for the children that will be inside.

      But that doesn't happen, because simple economics (what people can afford) takes precedence over the ultimate safety wagon.

      No one (I would hope) would say their kids' safety wasn't worth the value assigned to the vehicle, but the cost is just prohibitive.

      This debate cannot be based solely around value (which is always how it's portrayed) forever; eventually, cost has to be considered.

  10. Paul,

    I agree with your comments regarding the five-year plan, and thank you for making them. My son graduated from Darby HS in 2011. During his time there, he had more than one computer programming class with a total of 5 students. This is an expensive approach to education and should be the focal point of discussion when there is a controversial levy on the ballot. Too often the school administration jumps right to the elimination of extra-curricular sports as the hammer to elicit support for such a levy. Most voters are proably not aware that we have the breadth of classes that serve a very small minority of the student body.

    All of these extras, along with their asociated costs should be on the table when evaluating what the disctict can reasonably afford, and what must be cut.

    Keep up the good work!!

    1. It would seem that if the logistics of transportation could be worked out, have a single class for the 3 High Schools for these special offerings might allow the district to save money and still offer a diverse range of special classes. Five kids isn't cost effective, but 15 is much better.

    2. We already have a couple of advanced foreign language classes which are offered via tele-learning, meaning the kids are in the classroom, interacting in real-time with a teacher who is in another building (or another state for that matter).

      I believe Chinese is offered by a 'roving' teacher, who goes from building to building.

      We need to look for more of these opportunities.

  11. Sure, I want to own a Mercedes. But I own a Honda. Our future is interesting to think about. As always, Pablo, I do appreciate your sticking up for us!

    A $20m shortfall will be tough to fix. If my memory of the pay to play sub-committee is correct, all of HCDS HS sports cost $3m a year. So, tough decisions are coming. Your point, that we should start making those decisions sooner rather than later, is dead on.

    Similarly, your comment about UA property values is just as relevant to Hilliard….oops, HCSD, I should say. What will happen if we eliminate programs, whether that’s football or computer programming classes? It depends on what is eliminated and how we do it, doesn’t it? It will be hard work.

    In closing, I’m famous for asking one of my kids, “Where do you see yourself in 5 years?” We should ALL be asking ourselves that along with the follow up question, “Assuming you see yourself in Hilliard, what will the schools look like then?”

    1. I think the process we go through is at least as important as the eventual decisions. If they are made with empathy and compromise, then some pretty radical solutions might arise. But such a process takes time, and will be unavoidably frustrating.

      But if we wait and cause these decisions to be made in crisis mode, they are likely to be decisive and have long-term negative consequences.

  12. Kicking the can says,

    I for one hope the UA housing market softens, I have been watching it for awile, if it does I will move to UA and take my $9000.00 a year taxes with me. The UA Schools also will be needing to replace the Super which will make it even harder on Hilliard. The " RED KNOB " is spinning wildly out of control with this new agenda.

  13. Kicking,

    Believe me, I am keeping ALL of my options open too. But I'm going to call your bluff.

    I've said here a few times that I believe that anyone in HCSD with a $350k+ valuation is more or less captive in the current market.

    How could it possibly make sense to incur $20k in transaction costs (not to mention the headache of moving) in order to save maybe $1k per year in property taxes (if that, see below).

    Plus, specifically in the case of Arlington, just go take a look at what $350k buys there. You're going to have to spend a lot more there to get the same house you are used to...

    1. Kicking the can says...

      Trust me I wish I had a bluff to make. Hilliard is in for some serious trying times and as Taxpayers we need to wake-up !! Our Mayor is in lock-step with the Developers and not the School District. Coming soon near to you.... A new Giant Eagle (Where DANA Corp. used to be) along with several Hundred Apartments. Also Homewood is ready to go with its project. Oh ,and also there is a push to build a hugh Housing Development over by NW Bible, and that is only the start... It does not take a mental giant to see that soon we will be in need of a New Elementary and a New Middle School. This will coincide with the School Staff coming off of the wage freeze, and guess what ? Here comes another Tsunami of Levies to get the Money!!! Why buy a home in Hilliard when you can rent and still get the Schools?? I say take the hit now ($ 20,000) because who is going to want a $350,000 Home in Hilliard in a few Years! Arlington and a few others are Landlocked, so to speak. Thus, in the long run well worth the investment. We as the Taxpayers must get this under control, and I thank Paul because He does see the bigger picture and is trying to get a handle on it.

    2. UA isn't immune to these forces by the way. UA is being 'recolonized' with young families. When UA was first developed 60 years ago, the school district was inundated with beaucoup school age kids, and they had to grow their capacity very rapidly. But as those kids started graduating in the 1960s and 1970s, the student population started to level off and even decline (e.g. Wellington School is built on the grounds of the former Fishinger Elementary school, which UA had closed due to a lack of students).

      The folks who originally settled in UA are now in their 80s and 90s. Most have already moved away or passed away, and their homes were taken over by younger families. Many of that generation have been empty nesters for a while, and are themselves moving on, making room for families with school age and younger kids. UA may be on the leading edge of spike in student population.

      There's some of that in Hilliard, but our growth threat is still from new development. The economic attractiveness of apartments is going to be a real challenge, and if we get lots of school age kids from those apartments, it's going to be a stressor on our system.

  14. Paul, kind of interesting to read about San Bernardino's crash and burn ( http://mobile.reuters.com/article/idUSBRE8AC0HP20121113?irpc=932 ). Salaries and pensions of public employees the problem. You always wonder how they allowed it to happen, how they didn't see it coming.... The money quote appears to be:
    The chronic mismanagement in San Bernardino, though, is a common feature of local government in California and around the United States. Much power over municipal finance lies in the hands of those with the most at stake — city employees, elected officials and others who depend directly on government for their livelihood. And California is moving to put even more responsibility and funds, not less, in their hands.

    In an item in the New Yorker on the bankruptcy of Hostess, the author says that unions were looked on favorably when there were a lot of union members but that now they aren't since they get perks few people get these days.

    "The real issue here is that people’s image of unions...seems to depend quite a bit, in the U.S., on how common unions are in the workforce. When organized labor represented more than a third of American workers, it was easy for unions to send the message that in agitating for their own interests."

    I think there's some of this with school teachers. Folks are getting a bit tee'd off by the good benefits, good pay, long vacations and such.

    1. I've long said that the root problem with union agreements is that they tend to lag the economy. When the economy was booming in the 90s, it took a few years for that upswing to get negotiated into the union agreements.

      Likewise, when the economy tanked, most union agreements still had escalators and benefits increases baked in.

      We can have all kinds of debate about whether teachers are underpaid or overpaid. Passionate arguments can be made in either direction. In the end, it will be settled by negotiation.

      I expect the next negotiation with the teachers' union - which will take place in 2013 - to be challenging. I doubt that either side will walk away from the bargaining table fully satisfied with the final deal. But that's what happens in a tough negotiation.

      I just hope we can carry out the process with respect and with empathy.

  15. IT's arguably iunfortunate that there will be a negotiable with a union instead of letting market forces determining teacher salary, which is the way almost all other job compensation is decided.

    1. I agree, however let's not forget why the teachers unionized in the first place: poor pay, meager benefits, little job security, etc.

      I don't have a problem with unions in principle - historically they have been very important to our country. The problem is as with every other aspect of politics in our country - we have become increasingly polarized in our views, and less willing to listen, be empathetic, and compromise.

      The result is that we oscillate between extremes, into winners and losers, with the losers desperate to regain power regardless of the 'collateral damage' for our communities and our country.

      The teachers were once powerless, and unionization was their way to level the playing field. Now that they have great power, are they being empathetic to the situation of the rest of us? If not, the attacks on them will become more focused and fierce. The SB5 fight may have been just Round 1...

  16. http://www.hilliardschools.org/news/newsRelease.cfm?releaseID=120312b

    Lean yet stable............

    1. One way to rephrase the Treasurer's statement is to say that 'given the configuration of programming and services we offer, the way we choose to staff that configuration, and the magnitude of salaries and benefits we pay to the teachers and staff, we are running with a lean budget.'

      What if we offered only those programs and services required by the Common Core Curriculum? How much would it then cost to operate our school district? I don't yet know what that number might be, but the difference between that number and what we actually spend is the cost of the 'options' we built into our school system.

      The next big class of decisions before is, I believe, what we have to change about that option list to keep things affordable for folks while our economy fully recovers.

      I don't accept that the first choice should be busing and sports. Yes, those things are 'options,' but are they the first options we put on a list of options we're willing to eliminate?

      Or are they just the things that elicit the most emotion when cuts are threatened?