01/26/2010

2010-11 GPPSS Budget Development: Background, Process and Timeline

The 2010-11 Grosse Pointe Public School System budget will present perhaps the most difficult challenge to the district in its history.  Approaching such a problem with stakes as high as they are will require careful planning, collaboration, and deliberation.  Above all else, it requires an understanding of the dynamics that contribute to the current economic distress.

Last night’s Board of Education meeting was the first official Regular Meeting of the Board of Education of 2010.  I am honered to have been voted by my peers to serve in the role of treasurer, but at the same time I know that the task and responsibility of the position could not be any greater than they are right now.

Having spent the last 4 and a half years on the school board, and over a year before that, educating myself on the economic factors at play for our district and all those across the state of Michigan, I approach this daunting task with a great deal of confidence and resolve.  The trite phrase is “Knowledge is Power,” but knowledge is impotent if not leveraged.  The more people who have knowledge and choose to leverage it, the better off we will all be.  My strategy will be to continue to accumulate knowledge and leverage it to the greatest extent to solve our problems.

In that context I continue to invest substantial amounts of my own time making financial information accessible – meaning not just available, but simple to understand – for as many people as possible.  That is why this blog exists.  That is why I created the Financial Transparency Series and many other tools and reports available both on this blog and on the district’s web site.

Last night I delivered the presentation below to introduce the 2010-11 Budget Development Process, but more importantly the economic backdrop to that process.  It represents an abstract of the entire Financial Transparency Series.  I welcome your questions and feedback – so much so that I announced last night I will make myself available to present to any group across the district that has an interest in the finances of the Grosse Pointe Public School System.  So if you are a part of a PTO, athletic or performing arts booster group, or any other community group please take me up on my offer. I will be there.

The actual Resolution codifying the 2010-11 Budget Development Parameters can be found here.

I am a great fan of the Citizens Research Council of Michigan, a non-partisan policy think-tank specializing in Michigan governmental affairs.  Their motto is “The right to criticize government is also an obligation to know what you are talking about.”  I take that to heart and hope everyone else does as well.  So please consume these materials so you can contribute constructively to the solutions we need.

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01/17/2010

School Employee Retirement Costs and the House of the Rising Sun

Most people know by now that Lansing is by far the most significant source of school district funding.  Lansing is also the unilateral source of our second largest expense – employee retirement costs.  Lansing sets the rates and we pay the bill – a financially lethal combination that puts local school boards in an unenviable predicament.

Last Monday, January 11th, the Grosse Pointe Public Schools Board of Education had a marathon budget planning Work Session that could best be described as miserable.  My personal projection is that we will unfortunately have to terminate the employment of over 60 district employees – all of them good people who add value to our mission and who are valued in return.  But we cannot ignore our economic reality.  The cuts are coming – hard and fast.

graphWe collectively stare down the barrel of our most daunting projected budget shortfall in the history of the district, brought about equally by Lansing’s wretched policy making combined with a Depression-level state economy.

I cannot repeat enough that Lansing is the largest source of funding for every public school system in the state of Michigan.  Lansing controls our per pupil revenue.  Lansing has cut our per pupil revenue this year resulting in the loss of $3,000,000 and is making plans now for cuts next year that will result in the loss of another $2,200,000.  Meanwhile salaries and health care costs rise and student population is shrinking.  This is the financial stew that is our sustenance.

The focus in this post is another ever increasing cost which, after salary, is our second largest expense – employee retiree health and pension costs – referred to as the Michigan Public School Retirement Systems, MPSERS.  Lansing unilaterally controls the rate of this expense.  To put this in perspective, if we receive roughly $10,000 per pupil for school funding, nearly $1,300 of it goes to employee retirement.

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01/05/2010

Steps, Lanes and More: A Technical Analysis of Teacher Compensation

State of Michigan statistics show Grosse Pointe Public School teachers are the highest paid in the state.  Questions have been asked and theories presented as to why this is the case.  Teacher salaries are every district’s highest investment.  As such we need to understand the dynamics of employee compensation fully, but undertake the analysis in an objective, constructive manner.

Teacher salaries.  This is a heavy topic.  So here’s the preamble.

You are NOT about to read an argument that makes a case that our teachers are overpaid, or that they are greedy, or that they are to blame for school districts’ financial predicament, or that unions are evil, or any other similarly negative interpretation of this analysis.  We have to be able to talk about compensation.  We cannot fearfully avoid these discussions.  This would be like a household under financial distress avoiding discussion about their mortgage as they plan their budget.

The fact is that teacher salaries are our highest investment.  This should come as a surprise to no one.  Furthermore, salary costs have a direct impact on our second highest expense, retirement costs.  When dealing with financial challenges such as we are today it would be simply foolish to avoid analysis of our two largest budget items.

In anticipation of the next logical question, how can I, as a member of the Board of Education, position myself as an objective analyst?   I myself am a graduate of the Grosse Pointe Public School System (South, ’86).  I remain in frequent contact with dozens of fellow GPPSS graduates who are eager to see the district flourish.  As a parent of three GPPSS students, an uncle to many more students, and friend or neighbor of the parents of scores more students, I want nothing but the best for our district.  These are my motivations for Board service.

I count many teachers as friends.  Many recall I, too, was once a teacher and know how familiar I am with the value they deliver, their motivation for their profession, and unique challenges of their jobs.  I recognize the importance of a mutually respectful and beneficial partnership.

I don’t buy into the idea that Board members and teachers have to be cats and dogs.  I have nothing to personally gain in the increase or decrease of employee compensation.  I believe, as I am sure our employees believe, that the Grosse Pointe Public School System must maintain financial equilibrium in order to deliver the services the community expects.  As a Board member, my responsibility is to help ensure short-term AND long-term financial equilibrium within the construct of how Michigan funds public schools.  So with that foundation, let’s get started.

In a recent post and in a variety of benchmarking reports I have pointed out the implications of employee compensation on school budgets.  This begs the question, if it is true that Grosse Pointe Public School teachers are the highest paid in the state, how did it come to be that way and how can we afford it?  One hypothesis is that our teacher salaries are higher because we have a more experienced staff (in terms of years of service) and better educated teachers (measured by degrees and post-graduate credits).

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12/31/2009

Fund Equity Is Not a Long-Term Solution to School Funding Challenge

As everyone acknowledges the reality of the financial distress facing public schools, the focus must shift from assigning blame toward crafting solutions.  Understanding fund equity is essential to a meaningful dialog on this topic.  An objective view of data shows that fund equity will help districts cope, but is clearly not a long-term solution to the root cause problems.

Remember the first time you saw the picture below?  Look at it one way and you see an old woman, but with a subtle shift in focus it looks like a young one.

old woman optical_illusion

A view of the state’s K-12 budget and those of the local school district’s can have  a similar effect – most notably in relation to a school district’s fund equity.  You can learn much more about fund equity in this installment of the GPPSS Financial Transparency Series, but in short fund equity can be defined as the aggregate of a district’s revenue less its expenses over the history of its operations.

Sometimes called a  “rainy day fund”, fund equity draws attention in times of budget contraction because it is viewed, rightfully, as an alternative to other imminent and unattractive cuts.  The key question, however, hinges on the nature of the budget shortfall.  Is it temporary or an annually recurring one? A recurring shortfall is referred to as a structural deficit.  The distinction is significant.  I view the budget contractions that Michigan K-12 schools are now experiencing as permanent, what I previously wrote about as the New Normal. Continue reading →

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12/21/2009

Contemplating the “New Normal” on Michigan’s Darkest Day

Michigan’s communities are engaged in a high stakes game, wrestling with the lethal combination of rising costs and falling revenues.  Despite the urgency of the situation, a long-term view is critical for long-term health.

New reports surface daily chronicling how communities are responding to the financial trauma plaguing Michigan public schools.  Here is a sampling of articles from Dearborn, Saugatuck/Portage, Wyoming,  Wayne-Westland/Livonia,  Bloomfield Hills,  Allendale, Coopersville, Grand Haven, Hudsonville, West Ottawa, Spring Lake, Charlevoix, Grand Ledge, Hemlock/Saginaw/Chesaning, Escanaba, Fenton/Holly/Linden, Lansing, Utica, Northville, Three Rivers, East Jackson, Adrian, Muskegon, Detroit, Walled Lake, and Birmingham. 

welcome to MI What’s the point?  The list runs the gamut of the wealthiest districts to those that receive the lowest per pupil revenue.  Some are very large and some are very small.  Some are urban, some suburban, and some rural.  Some were previously receiving section 20J funds and some never received them in the first place. 

The point is that if you’re a school district in the state of Michigan you are certain to be experiencing financial distress.  There are no exceptions.

Welcome to Michigan -  a great state, but great times?  Not so much.

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12/05/2009

The Economics of Class Size

“Doing more with less” was the recurring concern the Board of Education heard from teachers at our last meeting.  Who is getting more and who is getting less?  What are we measuring?  What matters most and to whom?  Let’s take a closer look at the dynamics and economics of class size as we wade into murky budget waters.

class size In my most recent blog I reported on my trip to the State of Michigan Board of Education meeting where economists delivered testimony on the state budget.  Tax policy, specifically the decision to raise taxes, is at the heart of the K-12 funding debate.  Let’s call it the tax question.

Governor Granholm and many Democrats argue that taxes should be raised to avoid painful cuts to local school district budgets.  They cite statistics that show Michigan’s tax burden is middle of the road in comparison to other states.  Senate Majority Leader Mike Bishop and many Republicans argue that whatever the rationale, increased tax burden will worsen Michigan’s already ravaged economy.

The state board put the tax question to  economist Patrick Anderson who advised, “Everyone who hires workers and pays taxes thinks [higher taxes] do matter…and they are the ones that really matter.”  This  position cannot be substantiated irrefutably, but is certainly logical.  Indeed, no one argues that increasing taxes is better in and of itself.

The same can be said of class sizes.  No one argues that higher class sizes are better.  Except in narrow examples (e.g. K-3 class sizes of less than 15 students) research is inconclusive as to whether smaller class sizes improve achievement.  To paraphrase Anderson, to the people who matter, higher class sizes DO matter.  Students, parents, and teachers prefer smaller class sizes.  Supported by research or not, who would not prefer smaller class sizes?

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11/08/2009

“It’s Hard Getting Poor”

Neither placing blame or ignoring the root causes of the current state budget crisis gets us closer to solutions.  Michigan must come to grips with the reality of our condition and get on with establishing a new level of economic equilibrium.

I decided to get a closer look at what was happening in our state’s capital and attended the Michigan State Board of Education meeting held on October 26th.  The state’s board, unlike local boards, has no authority over K-12 budgets, but they rightly see that the governor’s and legislature’s budget decisions  impact the service for which they are responsible, educating all of the state’s public school students.

mike-flanagan The state Superintendent of Schools, Mike Flanagan, presided over the meeting which was aimed at helping the state board get a better sense of the economic forces behind the state’s recent budget decisions.  Two economists presented loads of data, but this statistic made the greatest impression on me:

In the year 2000 Michigan had the 16th highest per capita income in the United States.  By 2006 we had fallen to 33rd.  By the end of 2010, we are expected to be in the bottom 10.

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