School Funding (reprise)

The way public school funding works in Ohio isn't hard to understand. It really isn't. But folks find it easier to just believe whatever misinformation they hear from a neighbor or friend than doing the research themselves. And frankly, few school districts or elected representatives are trying to educate their constituents about school funding either, so misinformation continues to propagate, and gets reinforced in its repetition.

One of those is about the constitutionality of using property taxes to fund our public schools in Ohio. Most people believe the Ohio Supreme Court ruled that property taxes may not be used to fund schools. We saw that mistaken belief expressed yet again in a Letter to the Editor published by The Columbus Dispatch today.

If you want to understand this constitutionality issue, I invite you to read this article, published on the EducateHilliard website.

Instead, I'd like to focus on the simple facts. Let's start by looking at the sources of our funding:

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Residential Property Taxes: This is our primary funding source, providing 47% of our total funding, or $5,200 per student per year. It changes due to two primary things: a) a new operating levy is passed by the voters; and, b) when new homes are built in the school district. Every dollar of property tax we pay stays in our school district.

Let's correct another common misconception: EVERY residential property owner in our school district pays EXACTLY THE SAME property tax rate. Our property taxes fund many agencies, and the agencies which appear on our individual tax bills depends on which municipality one lives in. Our school district includes all of the City of Hilliard, pieces of Dublin and Columbus, and all or some of several townships. Each may impose their own property taxes, making us have differing total tax rates. But we all pay the same school property tax rate, and it all comes to Hilliard City Schools.

Commercial Property Taxes: These are property taxes paid by the commercial property owners in our school district. They don't get to vote on the levies we put on the ballot (unless the commercial landowners are also residents of the district), but they pay the same property taxes as residential landowners nonetheless - unless a property tax abatement is granted by whichever municipality the business lies in. It's a bizarre thing: a city may waive up to 75% of the property taxes for a business without the approval of the school district. But it's not their revenue to give away in the first place!

Nonetheless, a city and school district acting in partnership will often decide that an abatement is a good thing. Such a decision was made at our last School Board meeting, when we agreed with the City of Columbus to grant a ten-year 75% abatement deal to Boehringer Ingelheim Roxanne Labs, who is competing internally for the opportunity to expand their operations. To not grant this abatement would mean losing the opportunity to collect any new revenue. It's a reasonable deal for an important community partner that we'd all like to see grow and be successful.

As is the case with Residential Property Taxes, every dime of the Commercial Property Taxes collected in our school district stays here. Today it is 15% of our funding, or about $1,700 per student per year. When our family came to the school district thirty years ago, the total Commercial Property Taxes was about equal the total Residential Property Taxes. This commercial percentage has gotten smaller not because there are fewer businesses now than then, but rather because there are thousands more houses, and of course thousands more kids to educate.

The problem here is that the incremental property tax revenue generated by the typical new single-family home is a fraction of the incremental cost to educate the school age kids who will live in that new house. That's why we need lots more commercial property development in our school district. Otherwise the school funding burden created by new homes has to be funded with new levies - meaning more taxes on the rest of us.

Federal Grants: As you can see, this is a relatively minor revenue source, consisting mostly of things like our Title 1 funding to help disadvantaged children. It amounts to about $500 per student per year.

We got a nice Federal stimulus gift of a few $million for a couple of years, and that's not reflected in this percentage, but it was one-time money and is long gone.

State Grants: This is our second largest source of funding, representing 33% of our revenue stream, or about $3,700 per student per year. The bulk of this is the so-called Foundation Aid, the primary state funding stream. Foundation Aid increases with the number of students, and decreases with the perceived affluence of a school district, as measured by aggregate property values, whether residential or commercial.

This is the component of our funding which causes all the angst among Governors, members of the General Assembly, and a myriad of lobbying groups such as:

• The Ohio School Boards Association - representing the interests of School Boards (we're a member)
• The Ohio Education Association - the statewide teachers' union
• The Ohio Association for Equity and Adequacy of School Funding - representing mostly lower income school districts. This was the group that file the DeRolph case.
• The Alliance for High Quality Education - representing mostly affluent suburban school districts. Hilliard City Schools is a member

In the past ten years, our Governors and the General Assembly have tried three different approaches to determining how much funding each of the 614 local school districts should receive from the State. None of them have satisfied everyone, and we still don't know what the Kasich administration is going to propose as a replacement to temporary funding mechanism now in place.

But the common philosophy of all past, and likely all future State funding schemes is that the more affluent a local district may be, the less State funding that will be provided. Here's a chart which shows how much Ohio income tax is paid by the residents of several local school districts versus the amount of state funding they received:

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In our case, we get back 41¢ for each $1 we pay in Ohio Income Tax.  Three area school districts, Pickerington, Reynoldsburg and Canal Winchester get back every penny they pay in Ohio Income Taxes. Two districts, Whitehall and Hamilton get back multiples of what they pay.

This isn't going to change.

The assumption made down at the Statehouse is that districts like ours have the capacity to pay an ever-increasing fraction of the cost to run our schools. That's the reason they thought it was okay to accelerate the phase-out of our Personal Property Tax reimbursements, which is one of the primary reasons we put a 5.9 mill levy on the ballot in November.

So that's it - school funding in a nutshell. I'm happy to answer your questions. We'll discuss spending (again) in an upcoming post.

All data used in this article were taken from the 2010 CUPP Report, published by the Ohio Department of Education.

Navigation

One of the top news stories this week has been the wreck of the the cruise ship Costa Concordia, which struck submerged rocks off the coast of Italy and sank. Fortunately, nearly all the passengers and crew were able to reach safety. It sounds like the one right thing the Captain did - before he cowardly scampered overboard to safety, leaving his passengers and crew behind - was to quickly steer the ship to shallower waters so that it wouldn't fully capsize, like in the movie The Poseidon Adventure. This action undoubtedly saved many lives.


But this tragedy was set up by decisions he made a long time before the hull was torn open.

I've had the opportunity to stand bridge watches on one of our Navy's ships of the line. I never saw the Captain just 'wing it' when sailing close to land, or in a narrow channel. Before leaving or entering port, or just sailing near a coast, the Captain and Navigator develop a maneuvering plan which includes waypoints and course bearings, and in doing so they pay close attention to all the depths and obstacles marked on the official nautical maps. Once underway, observations are taken continuously via radar, sonar depth finders, and visual means - even with the existence of things like GPS. Every few minutes, the actual position of the ship is plotted on official charts, which become part of the legal record of the passage. Other than maneuvers which might required to avoid other vessels, there is no deviation from the plan.

You don't kid around with this navigation stuff, whether the ship is a naval vessel, an oil tanker, or a cruise ship. Mistakes can be extraordinarily deadly and expensive.

Big ships can be surprising fast. Not only are our nuclear aircraft carriers the largest ships in the fleet, they're also the fastest. Although you won't find official confirmation, in the right sea conditions, carriers are said to be able to go over 40kts (about 45mph) - think a thousand foot long, 100,000 ton ski boat. Carriers need to be fast because the amount of weapons load an aircraft can carry when being catapulted off the flight deck is directly related to the amount of airspeed which can be generated over their wings, which is the sum of the actual windspeed while pointed into the wind, the speed of the carrier, and the terminal speed of the catapult.

But you had better not want to change course very quickly if you're sailing a carrier at flank speed. And if someone falls overboard, the carrier doesn't even try to go back and rescue the poor soul. It takes many miles of turning and a good deal of time for a carrier to return to a spot it has passed, so it's much quicker to dispatch a helicopter or one of the other ships always sailing with a carrier.

The captain of the Costa Concordia didn't think his maneuvers through very well. He clearly picked a track on which no large cruise ship had ever before sailed, and he was reportedly doing it to show off to the folks on the island they were passing. Apparently lots of cruise ship captains do this in this part of the world. Maybe this captain wanted to be the hottest of the hot-dog captains of the Mediterranean cruise industry, so he took a gamble. But even if they had seen those rocks from a mile away, it would have been too late to avoid a collision. The ship is too big and too fast. Inertia wins every time.

Our school district is like one of these big cruise ships. There has been a huge investment of talent and treasure to get us where we are. The quality of the experience our kids will have going forward will be dictated by the quality of decisions and plans made largely out of the view of the students and parents.  But once execution begins, and the kids roll into the classrooms, things happen fast, and changing course can be very difficult. There is such a thing as organizational inertia as well.

The executive team of our district produces a few key planning documents which are used to lay out the course. The longest-range plan is the 2020 program, initiated in 2006 by Superintendent Dale McVey. It sets the  general course for the school district, and gives guidance for planning and action all the way from the central office to the classroom. It should be read, reread and adjusted as necessary to make sure all stakeholders agree on the course and speed of our collective journey.

I very much enjoy reading naval history, especially of the World War II era. I'm currently reading Neptune's Inferno by James Hornfischer, which tells the story of the battles at Guadalcanal in the south Pacific. It never occurred to me before reading this that even with the sinking of many battleships at Pearl Harbor, the US Navy still had a fair number of battleships in the fleet. However, in the first couple of years of the war, battleships were not used much in the Pacific.

Why?  Because they were gas hogs (actually they burned a very thick fuel called Naval Fuel Oil). The admirals had only so much NFO available which to operate their fleet, and a limited number of tankers available to transport it to the ships, so they decided to give priority to the carriers, which were much more effective in the ship-to-ship warfare of the early years of WWII, such as the Battle of Midway.

It was a tough choice. Battleships might have lost their prima dona role in the fleet to the carriers, but when it came time to land on the beaches, the Marines very much liked having the big guns of the battleships around to pound enemy emplacements. There would be a time and place for the battleships, just not right then.

The point is that these were resource-constrained decisions the admirals had to make. They would like to have had unlimited fuel available, and been able to sail both carriers and battleships in their fleets, covering vast distances in short periods of time. But most of their fuel was coming by slow tankers from ports on the west coast of the US, and so the admirals needed to make fuel availability and fuel consumption a core part of their planning. More ships require more fuel. Faster sailing speeds consumes more fuel. Tradeoffs had to be made.

Our version of that is depicted in the Five Year Forecast. If you've been a long time reader of this blog, you know that I write about the Five Year Forecast very often. It's not because I believe the Forecast, prepared by Treasurer Brian Wilson, is the most important document in the world, or because I believe financial matters trump everything else.

It's because a school district than runs out of money is like a naval fleet that runs out of fuel: Dead in the water.

The Navy didn't have an infinite supply of fuel in WWII (or now for that matter), and we don't have an infinite supply of money. The Five Year Forecast illustrates how fast we plan to burn fuel, and helps us determine when we need to be resupplied (ask for another operating levy).

Barring some significant change in thinking, the current execution plan for 2020 shows us needing to be refueled sometime after 2014. For that to be true - for it not to be sooner - we have to limit our spending to the rate shown in the Forecast - about 1.3% growth per year. There also needs to be no further erosion of supply (eg further cutbacks of State funding).

As implied by the name, the current Five Year Forecast paints one version of our fiscal future through FY2016. It shows the spending growth rate kicking up to a little more than 4% per year starting in FY2015. The main difference versus earlier years is the assumption made as to the cost of compensation and benefits. Those costs will be driven primarily by what programs and services we want to offer, how many people we employ in the district to deliver those programs and services, and the terms of the next collective bargaining agreements with the teachers' union and the support staff's union, which will need to be renegotiated by the end of 2013.

Maybe our planned fuel consumption rate and our assumptions of the fuel resupply rate are accurate and in balance. I suspect they may not be. Both may need some adjustment, and the conversations won't be easy.

We can't wait until 2013 to start having these conversations. The captain of the Costa Concordia could have avoided this tragedy by doing better long-range planning, rather than assuming that he could make last-minute decisions if needed to avoid disaster.

We need to do the same.

Spending Priorities

The first meeting of the School Board each calendar year is an organizational meeting, and ours was held last night. The purpose of the meeting is for the five of us to elect a President and Vice-President, and for the new President to make committee appointments for the other Board members.

There is also a resolution authorizing the Superintendent and Treasurer to take various actions during the course of the year, essentially delegating authority for a specific set of things to those two executives.

The Board also authorizes expenditures to sustain our memberships in a three organizations, the National School Boards Association, the Ohio School Boards Association, and the Metropolitan Education Council.

I thought it was appropriate to discuss the need to continue our NSBA membership, and made a motion to amend the resolution to delete references to NSBA - in other words to terminate our membership. I thank Heather Keck for seconding my motion, and allowing a discussion to take place. These were my verbatim comments:

"The cost of our NSBA membership and services last year was $13,000.

It is not my contention that this is wasted money - only that I don’t believe it’s our highest priority. We’ve promised the people of Hilliard that we wouldn’t put another levy on the ballot before 2014, and to keep that promise, we have to be even more frugal with our spending.

I believe our highest priority should be in classroom and school buildings. This $13,000 could purchase a dozen additional ELMO digital overhead projectors, or allow us to upgrade some of the well-used copiers in our buildings. We could buy more of the innovative student tracking software like we saw demonstrated by the math department at Davidson recently.

It could buy new tires for a bunch of school buses, or patch up a few potholes in school parking lots.

Or it could not be spent at all, and help us regain the 10% operating reserve which is our policy.

No spending cut is without impact, and this is a relatively small amount of money in comparison to a $160 million budget. But I believe this sends the right message to the community and to the employees of the school district - that the Board is willing to make cuts in its own budget as well."

Other Board members expressed their opinions in regard to the value our district receives from our NSBA membership, primarily in two areas: a) the importance of continuing professional development for Board members, both for the benefit of the members and to set an example for the professional team; and, b) the value of the national and state lobbying efforts made by NSBA on behalf of its members.

I don't disagree, but think there are more impactful ways to spend the taxpayers' money.

My motion was defeated 1-4, with me casting the one "yea" vote. The main resolution then passed 5-0.

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.

How Much is Enough?

On December 9, 2011, Colorado State District Court judge Sheila Rappaport, in the case of Lobato v. State of Colorado, issued a court order declaring Colorado's funding system for public schools to be unconstitutional, going on to say:

"Evidence establishes that the finance system must be revised to assure that funding is rationally related to the actual costs of providing a thorough and uniform system of public education. It is also apparent that increased funding will be required."

The Court has given the Governor and the state legislature until the end of the 2012 legislative session to come up with a fix.

Without even attempting to read or understand this case (I'm not a lawyer), I'll assume that that the arguments in this Colorado case have little difference to those raised by DeRolph v. State of Ohio, which was filed almost exactly twenty years ago.


DeRolph was the school funding case that made it to the Ohio Supreme Court, which declared the public school funding system then in use to be unconstitutional. Most people mistakenly believe the Supreme Court declared the use of property taxes to fund schools to be unconstitutional, but that's not at all what they said. Regardless, DeRolph is now moot, as the General Assembly has enacted two  different funding systems since then, and neither has been test by a lawsuit.

It looks like Colorado might be the next state to go down this road. Lobato will undoubtedly be appealed. If it isn't, and their legislature doesn't satisfy the Court's order, it will still raise the constitutional question as to whether the legislative branch in their state can be ordered to do anything by the judicial branch.

Both states have similarly vague, and not very useful constitutional standards in regard to public education. Ohio's Constitution talks about a "thorough and efficient system of common schools"  (Article 6.02), while Colorado's says "thorough and uniform system of public education."

It will be interesting to watch the Colorado case as it progresses. Lots of people would like to know how much a public education should cost and how it should be funded.

So how would we go about figuring that out - what Judge Rappaport called "actual costs" - and where should the money come from?

It seems to me that we first have to go back to the fundamental fact that 80-90% of the money spent on public education (88% in our district) goes to pay for the compensation and benefits of the teachers, staff and administrators who are employed by the school district, and most of that is spent on the teachers.

I'm not saying that's a problem. As long as educational services are delivered primarily by teachers in a classroom, that's where as much of the money as possible should be spent. Everything else should be viewed as support for what happens in the classroom, or as "extras" above and beyond the State requirements.

But how much should teachers be compensated, and how many of them should we employ (in relationship to the number of students)?

The notion of Governor Strickland's "Evidence Based Model" funding approach was that there are clear answers to those questions. The EBM specified how many teachers there should be, and how much they should be paid - at least at a minimum. It also specified how many folks we should have in key administrative and support staff roles, and also what they should get paid.

Here is a copy of our district's PASS report, the document which shows how a school district was funded under the EBM approach. Page 2 of the report spells out how many people we should have in specific job categories. For example, lines 6-12 detail the minimum number of teachers we should have in various categories. The State would then give a district $56,902 of funding per teacher, adjusted by the "Education Challenge Factor," which is essentially another measure of how affluent a district might be. Our ECF was .98509, meaning that the State's contribution would be adjusted to  $56,902 x .98509 = $56,054.

This $56,054 is supposed to cover both compensation and benefits. In our district, the average teacher compensation is $69,369 plus 35% in benefits, or $93,648. So the EBM would cover only 60% of the cost of one of our teachers. The other 40% was our local contribution beyond the State funding.

Of course, Gov. Strickland's EBM was never fully funded, nor was the system it replaced. In the case of Hilliard Schools, and most school districts like ours, the changeover from one system to the next had virtually no impact on the amount of funding we received from the State, due to the effects of the so-called Transitional Aid Guarantee.

Any change in the school funding algorithm creates winners and losers. Since the objective of such a change is always to get more money to the poorest of Ohio's school districts, the winners are usually those districts while the losers are districts like ours. The Transitional Aid Guarantee came to be to prevent there being any such losers - a matter of political expediency rather than good policy.

So if 80-90% of the spending in a school district is on compensation and benefits, is there any data which helps us figure out how many folks we need on staff, and what we should pay them?

How about if we go back to the philosophy of the Empirical (Augenblick) Method, which was the approach used from the early 1990s until it was replaced by Strickland's OEBM in FY2010?  Only this time, let's use only the 81 districts rated as "Excellent with Distinction" in 2009 as the sample set.

The Augenblick Method is to list the per-student spending of the school districts in the sample set, throw out the lowest and highest 5% or so to eliminate outliers, then average the rest. With this algorithm and using 2010 per student spending from the CUPP report, we get $10,026/student as the benchmark number, .

In other words, we don't know how exactly a district should or would spend the money, but it seems like with $10,026/student, any district should be able to achieve a rating of "Excellent with Distinction."

Yet the actual range is quite large. Throwing out the 4 high and 4 low districts (5%), the per-student spending still ranges from $14,733 at Sycamore Schools (Hamilton County) to $7,949 in Wausean Schools (Fulton County). So why can't Sycamore Schools get the job done at $8,000/student/year like Wausean - close to half the cost?

As said before, it's all about how many people the school district employs, and what they are paid.

At Sycamore, the ratio of Regular Education Teachers to Pupils is 17/1. At Wausean, it's 21/1. The average Wausean teacher has 24% more students in the classroom than a Sycamore teacher, yet they both achieve the same rating. So do the Wausean teachers get paid more for achieving the same result while having larger classes?

The average teacher salary in Sycamore is $71,137, while in Wausean it's $55,668, meaning Wausean teachers have 24% more students in their classes than Sycamore teachers, but get paid 22% less. So it's not class size or teacher comp which determines the rating on the State Report Card.

How about teacher experience?  The CUPP report gives the percentage of teachers with 0-4 years of experience, 4-10 years, and 10 or more years. For Wausean, those statistics are 14%, 19% and 67%, respectively. For Sycamore, it's 14%, 17% and 69% - nearly identical, and both skewed to the higher experience band. That would certainly suggest that experience makes a difference in terms of results, but doesn't explain compensation differences between districts (Hilliard's numbers are 12%, 22% and 66%).

I should stop here and remind folks that correlations are not the same thing as "cause and effect," and that merits remembering here. There are within this dataset school districts which achieve Excellent with Distinction yet have fewer than 25% of their teachers with 10+ years of experience. Twinsburg for example achieves this rating while having 60% of its teachers with 0-4 years of experience.

So is there anything we measure which seems to be a strong predictor of outcome? I'd suggest that there is, at least within the constraints of the data published in the CUPP report. That predictor is the level of poverty in a school district. Among the 81 Excellent w/ Distinction districts, the average and median number of students living in poverty conditions is 22% (stdev=13). As poverty goes up, performance goes down, and it doesn't matter that much what the per-student spending might be.

For example, Columbus City Schools spends $14,904 per student, second in our area only to Grandview Heights, which spends just $74/student more. Yet the Performance Index for Columbus City Schools is only 80 (2009 data) vs Hilliard's 101.5, which we achieve while spending $3,400/student (23%) less. The difference: 80% of Columbus kids live in poverty, while 21% of ours do (I suspect that number is surprising large to many in our community).

So how do we determine how many folks we employ in our school district, and what we pay them?

The best answer I can come up with is that it's all a matter of local choice.

Across Ohio, teachers are paid according to what their local union negotiates with the local school board, and it seems clear to me that local school boards in more affluent communities tend to settle the labor contracts at higher salaries than do those in less affluent communities. That's about it.

So it behooves a young teacher to get hired in an affluent district like ours, or one of the many suburban districts around Ohio. Presumably those districts can be very selective in their hiring, so only the most promising young teachers get a job. In our district, new fulltime teachers typically serve as substitutes for a year or more before being hired. It's an effective way to give them a 'try-out' before being invited to join the team, and I've been impressed with the new crop every year when we get to meet them. It must be a valued opportunity, as we have literally thousands of applicants each year for dozens of openings.

Does that mean the tens of thousands of teachers in the less affluent districts are all duds, because they couldn't find jobs in districts like ours?  Certainly not!  Many things will cause a young teacher to live in a less affluent community: family, spouse's job, lifestyle preferences, etc. And there are districts that achieve Excellent w/ Distinction in spite of having very low teacher salaries. Bloomfield-Mespo (Trumbull) is such an example, with an average teacher salary of $37,751, less than the starting salary in our district of $38,362.

And the 'how many' part of the equation is a matter of local choice as well. We choose locally the overall student-teacher ratio. We decide locally the breadth of programming we wish to offer, and how those programs will be staffed.

You may respond that YOU don't get to make those decisions. But that's a cop out. You elect the school board members, and you should hold us accountable for making decisions consistent with your wishes, understanding that there will never be 100% agreement on anything about anything.

Your input makes a difference. Input from a lot of you makes a big difference, and can change the direction of important decisions. We've seen that a couple of times this year.

It will seem like we're entering a 'quiet' time right now. We have a workable agreement with the teachers and support staff through 2013. With your passage of the levy, we are committed to not putting another levy on the ballot before 2014 - provided the State doesn't hammer us with another significant funding cut.

Indeed we can take a little breather. But I feel strongly that we soon need to start the community education and communications effort to prepare us for 2013, when we'll next be negotiating with the teachers and support staff, and for 2014, when we'll be voting on the levy to fund that new contract.

The basics of school economics aren't difficult to understand, but we have lots of people to educate.

School Choice and HB136

HB136 is currently working its way through the Ohio General Assembly.  This Bill creates the "Parental Choice and Taxpayer Savings Scholarship Program," also known as PACT. The core purpose of this legislation is to allow parents to redirect the money the State of Ohio sends to the local public school districts to properly approved private schools.

Some school boards have recently chosen to pass resolutions in opposition to HB136.  The Ohio School Boards Association, of which our School Board is a member, is lobbying in opposition to HB136.

I recently read through the Bill Analysis, prepared by the Ohio Legislative Services Commission, a body appointed by the General Assembly to render non-partisan, independent views on proposed legislation. The general notion of this legislation seems pretty good to me. And I can't believe what I believe about the importance of free markets and competition, or write what I have written about school choice, and be opposed to the principles of this Bill.

But it still needs some work. My friend Marc Schare, who is also current President of the Worthington School Board, submitted written testimony to the House back in April. I agree with much of what he said.

The Bill in its current form specifies that parents could apply to have up to $4,563* subtracted from the funding their local school district gets from the State and redirected to a scholarship account which could in turn be used to pay tuition and other expenses to an approved non-public school. The intention is that the school district would retain all the funds it raises from local sources - primarily homeowners and businesses - but that the money provided by the State could be used to pay tuition at a private school.

The problem, as Mr. Schare points out in his testimony, is that not all school districts receive $4,563 per student from the State. The amount of funding a school district receives from the State is determined to a large degree by the affluence of a community, as measured in terms of property value. By this measure, we are a fairly affluent community, and consequently our State funding was reduced to $3,741 per student in FY2010 (see CUPP Report produced by the Ohio Dept of Education).

This means that if a student were to take $4,563 with him to a private school, we would have to send along the $3,741 of State funding we receive, plus $822 that we have raised locally through tax levies.

Mr. Schare says this is inappropriate because the people of the community voted to be taxed that amount of money in order to fund their public school district, not to have it diverted to a private school.

I see his point, and agree somewhat. But here's where one's perspective is important.

From the perspective of folks with kids in the public school system, this sounds like their money is being taken away to subsidize kids in the non-public schools. From a practical standpoint, one of the more significant challenges with HB136 is that it allows PACT money to be withdrawn for students already attending non-public schools. So if we have 1,000 kids in our community currently attending non-public schools (I don't know the real number), it means we aren't currently allocating any resources to educate those kids, but we could still have as much as $4.6 million of our State funding diverted. Same number of kids, $4.6 million less funding. That's equivalent to about 50 teachers.

But from the perspective of the folks with kids in non-public schools, it means an end to having their tax dollars being taken to fund the public schools their kids don't attend. This has always been an issue with the families who send their kids to the Catholic schools for example - they feel like they're paying for both the public schools and their parochial schools. For these folks, HB136 seems pretty fair.

We also have to remember that it's unlikely that any of the votes taken to approve public school levies were unanimous. There might have been a fair number of people in the community who voted to NOT send additional funds to the public school district, but are required to do so anyway because the majority dictates to the minority when it comes to levies.

I recognize that this argument stands on shaky ground. The rule of our democracy is that the majority wins, even when the margin of victory is only one vote. This is one of the challenges of democratic capitalism - knowing when to let individual choices and appropriately regulated markets determine how resources are allocated, and when we should allow majority-wins elections to decide the outcome for all.

I prefer the former whenever practical.

That's my core reason for saying what I did in Food Stamps - that we should operate our schools like we do our food distribution system. Our society has set up a food production and distribution system which is the envy of the world, and one of the key drivers is the ability for any shopper to buy whatever food they want, wherever they want, and at whatever price they find acceptable. The competition for customers drives producers and retailers to create fantastic choices at prices the market will bear.

But instead we fund our schools like the Soviets ran their food distribution network - government control of what was produced and in what quantity, and where it was distributed. Their food may have been free or nearly free, but there were massive shortages and the food was generally of poor quality (no, I'm not saying our school district is of poor quality - we all know it's quite the opposite). And of course the black market thrived, but only for those with the means. The majority of the population just had to suffer.

We think food is a pretty important component of life, so for those who can't afford to buy sufficient food, we provide a taxpayer-funded public assistance program we call "food stamps," even through the little books of coupons haven't existed for a number of years.

We could organize our education system in the same way - most people would pay tuition to the institution in which they wish to enroll their kids during the years they were in school, and otherwise be off the hook. For those who can't afford a "thorough and efficient" education, as required by the Ohio Constitution, we would have a tax-funded scholarship program, akin to food stamps. No one who wants it would go without an education.

I recognize that such a radical shift in thinking is not in the cards, at least not for the near future. HB136 has some good ideas, but has not been sufficiently thought through, as was the case with SB5. It will further stress the public school districts without having practical, workable solutions to the real problems it will create.

* The actual amount of the scholarship available to a student is reduced as family income increases. The full $4,563 is available only to families whose combined income is less than 278% of the Federal Poverty Level,. For a family of four, this means the full scholarship amount is available only if the combined family income is less than $62,000.  No scholarship money is available when the combined family income is more than $95,000, so this isn't a way to help pay the tuition for rich kids at expensive private schools.

Levy Passed, What's Next?

I'm happy that our community passed the levy issue, albeit by an extremely slim margin.

I've come to view levies as the mechanism which the School Board uses to facilitate a negotiation within the community. There is not now, nor will there ever be a time when every single voter in our community agrees on exactly how our schools should be run, or what it should cost. It will vary depending on whether the voter has kids in school, on the voter's financial status, on the voter's political philosophy, and a myriad of other personal factors.

So I look at a levy issue as more of a proposition, explaining what will be offered if the levy passes, and what will happen if it fails. If a majority of the voters accept the proposition, the levy passes. If not, it fails.

What should happen if a levy issue fails?  I think that when that happens, the School Board should adjust the proposition and ask again by putting a new levy proposition before the voters. I think this because not putting a levy on the ballot denies folks a chance to accept a different proposition.

That doesn't mean that if a levy fails I advocate running a levy at every single opportunity following until one finally passes. I think that would annoy the community, and unreasonably burden the emotional, physical and financial resources of the levy campaign team. I think there's a better way to go about this - more later.

In this case, the community rejected the proposition offered in May, but accepted the proposition offered in November, which included the commitment to not ask for more money until 2014 at the soonest (but we have to be realistic and say that we might have to revisit that if the State of Ohio makes further significant cuts to our funding).

As a result of the levy passing, here's what our Five Year Forecast looks like in graphical form:

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As has been the case for years, 88% of our spending is on comp and benefits, which is as it should be. It's also the only part of the budget which is growing materially. That's good too - it indicates that the 'overhead' part of spending is being held constant.

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Notice that the projected spending for Compensation and Benefits for future years is well less than it was projected to be just a year ago - by about $18 million in FY15. This reflects the terms of the new agreement with the unions for 2011-2013 - including the projected impact of the early retirement incentive program for the teachers and additional contribution toward the health insurance premium.

It also assumes a resumption of annual 4.15% step increases in 2013 (which is effectively 2.3% given the mix of teachers on and off the step years), but with only 1% base pay increases starting 2014.

Since the most significant of the budget, and the only part that's growing is comp and benefits, that's where we need to focus our attention. So what drives up the cost of compensation and benefits?

Clearly, the most significant driver is whatever gets negotiated into the teachers' contract in terms of the salary grid. If you're not familiar with how this works, I recommend that you read an article I wrote titled Teacher Salary History. Their current contract runs through 2013, and I don't anticipate engaging in negotiations again until then.

So in regard to teachers and staff, the labor rate is set, but that's only half of the equation. The other half is the number of teachers and staff we choose to employ. At the end of FY11, our district employed the equivalent of 1,716 full time employees, 1,117 of whom were teachers. The remainder includes 202 pupil and teacher support staff, 131 building and grounds maintenance personnel, 125 bus drivers and other transportation staff, and 108 administrators (source: 2011 CAFR, page 110).

So what determines the number of teachers we employ? It depends on the grade level. At the K-5 level, it's mostly about the number of students we want to have in each classroom. As you can see from the monthly Enrollment Report, the overall K-5 ratio is 23.6 students per classroom.

When you get to the high schools, the variety of course offerings also becomes a driver. Our high school catalog offers over 300 courses, although not every course is offered every semester. Some classes are pretty large, with 30+ kids, and some - such as our new Chinese foreign language offering - have single digit enrollment.

Overall in our district, the student-teacher ratio is 22.5/1, while the average for our region is 25/1, and that ranges from 18/1 in Upper Arlington and Bexley to 35/1 at Groveport-Madison.

If we increased our student-teacher ratio to 25/1, our need for teachers would diminish by 70, which could reduce our spending by about $3.5 million per year (assuming junior teachers averaging $40K+benefits). We have a unique opportunity to do such a thing in the coming year, with potentially a large number of teachers retiring to take advantage of the early retirement incentive program. It's an opportunity to adjust staffing levels without layoffs, and that must not be ignored.

In addition to their normal pay, many employees of our district also receive stipends and supplemental salaries. Once again, these rates are set in the union agreements, but there is a choice as to how many of these roles will be funded each year.

As is shown on the agenda for Monday's School Board meeting, we will be considering a resolution to authorize stipends for the 2011/12 school year for about 1,000 roles, ranging from $350 each for the 182 participants on the School Improvement Teams ($64,000 total cost), to $1,200 per semester for supervising the high school weight rooms (12 person-semesters/yr for Davidson, 3 each for Darby and Bradley), adding up to about $22,000 each year. The total outlay for all stipends will be more than $600,000 next year.

The resolutions to approve supplemental salaries are dealt with a couple of times during the year. A complete list of these are included in Appendix L of the teachers' contract, starting on page 94 of the Master Agreement. These are expressed as a percentage of the base salary for each teacher, ranging from 15% for the head football, basketball and wrestling coaches, as well as the head instrumental music directors, to 5% for an assistant drama director or an assistant middle school tennis coach.

Administrative contracts have terms of varying terms and expiration dates. You'll see these come before the Board for action at the appropriate times.

My opening statement was to describe levy issues as the way the School Board facilitates a negotiation within the community. I also think it's an extraordinarily inefficient way of accomplishing this task.

We have lots of things to talk about in regard to our community and our schools, and with the passage of this levy, we've bought some time to figure out a better way to get this done.

My suggestion is that we use a process that has worked pretty well for us over the past few years - a large committee (~100 members) of diverse viewpoints called together to deal with a challenging question. It has been used for adjusting attendance boundaries when Bradley and Washington were built, for looking at student housing alternatives, and most recently for developing an approach for Pay-to-Participate fees.

What do you think of that? Would you participate?