I have received further comments from Ray Clarke concerning the TESD Finance Committee Meeting last night which I’m glad to post. Again, thank you Ray for keeping us in the loop!
Further Comments from Ray Clarke re TESD Finance Committee Meeting:
- Much discussion of appealing assessments. Maybe they miss the point that the reason property owners are getting their assessments lowered is that “they are fed up and can’t take it any more”? 53% increase in school tax rate in the last 10 years – way above inflation.
- In the last month, the 2010/11 “gap” increased from <$8 million to the current $9.2 million. A teacher benefit switch (next point) was one reason. The other was a realization of the impact of the teachers moving across (more longevity) and down (more credits) the salary matrix. (I may have switched Across and Down)
- Big drivers of the current year benefit cost increase: Bad claims experience elsewhere in the group (that was lauded as such a great deal last year), and teachers switching from cheaper to more expensive plans. Note: Cost to TESD for a family plan $15,000, of which the employee pays $960.
- There seemed to be little detail on ideas to close this year’s deficit – Overall the financial reporting is well-intentioned, but it sure is difficult to follow. The big problem, from what a business would be used to, is that there is no cycling of the budget by month, so it’s really hard to know how they are doing by looking at the reports. What’s presented depends on how much they decide to “encumber” (set aside for the remainder of the year). I’m sure that is driven by municipal accounting rules, but they could make it easier for us to know what’s going on!
- Teachers did offer an early retirement deal: pay off senior teachers with $30,000 so that the schools can hire cheaper newer teachers. The admin thinks that would be a saving – but not in Year 1, I’d think, and at what cost to the program? Didn’t work for Circuit City, did it?
- Eliminating FLES saves $378,000/year.
- Example of flawed thinking: Claimed saving of $84,000 from closing the print shop, but this is just salary etc. savings, not net of the replacement cost for contracted printing!
- Let’s not under-estimate the fights there will be over some proposed cuts – 7th and 8th grade program changes, athletic programs, club sports, ….
- Another note: the request for exceptions to Act 1 to get the additional 3.7% increase is just that – a request, and based on very specific costs. May not be approved by the state (but I can’t imagine it won’t be)
- And here’s something: if the exceptions are approved or denied, by March 19th the district has to submit a referendum question seeking voter approval, for inclusion on the primary ballot on May 18. So, an opportunity for debate!
In general, if citizens are interested, there is an opportunity to weigh in – will anyone take the trouble? You can help!
There’s much more to be understood with the Bond issue question – possibly financial engineering can provide some short term help?
The next Finance Committee meeting has the bond issue on the agenda (no time to discuss last night …..) and is set for 1/4/2010 (same as BOS), just before a special TESD board meeting to discuss the budget.
Thanks again Ray for your comments. Mike (of Berwyn) you sent in a comment which I posted. As another person who attended last night’s meeting, what is your take on the meeting? Any further comments in regards to Ray’s assessment of last night?
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Ray provides excellent additional detail to what was discussed. As Ray mentioned, some of the way the accounting is handled is hard to understand, probably due more to my limited understanding of municipal accounting than anything else.
The administration has identified cuts that make sense and did a good job of explaining them, in light of an evolving educational program. The world changes, therefore what and how kids are taught must change – a bonus is that some of the new approaches will save $s. For example, they will eliminate Applied Tech (wood and metal shop to us old-timers) and they will reduce the amount and change the type of basic computer training because today’s students are so skilled and experienced at using computers. That said, I’m sure there will be resistance to some of the cuts – FLES, specials, etc. Let’s face it, difficult economic times force tough, but sometimes overdue, changes (see Tredyffrin Twp. 2010 Budget, and virtually every municipality and business).
For 2010-11, they might be able to get by with a tax increase of 6.63% (median of $292 per household) allowed by Act 1 and a draw on reserves of $1-2 mm. Current reserves are about $28mm and support the AAA bond rating the TESD enjoys.
Beyond 2010-11, it gets much tougher, largely due matters beyond the control of the District – the rapid rise in projected contributions to PSERS (the retirement plan), health care benefits, deregulation of electricity prices, etc. Ray points out some of the other challenges to TESD from the current teacher contract, which expires in 2012. Should be an interesting negotiation – about 75% of the TESD’s costs are personnel and the vast majority of that are the teachers.
BTW, 53% over ten years is about 4.2% compounded vs. a CPI of about 3% – is that “way above inflation”? Especially when you consider the exposure the District has to personnel costs, especially health care costs. Right now, if someone told me my school taxes would go up 4.2% compounded for the NEXT 10 years, I’d take it in a heartbeat!
Finally, I agree with Ray that it’s important to become knowledgeable about the facts, in order to reach an informed opinion about this situation.
I offered this perspective on the teacher contract in a comment at Petersen’s blog, but I think it may be just as helpful here:
First note that the best discussion I saw of details of the current TESD contract was at http://schoolspending.wordpress.com/2009/05/22/im-back-and-talking-about-contracts/
I think the most recent teacher contract was outrageous, but it may be as much the fault of the parents and taxpayers as their representatives on the board. After all, our state laws heavily tilt the contract process in favor of teacher unions. The only way the taxpayers can oppose the power of the teacher unions is to make it clear that they are prepared to weather a strike.
It’s teachers against parents against taxpayers. The teachers get whatever they want, unless the taxpayers protest aggressively enough. The parents are stuck in the middle, because they bear the costs of a strike, and they benefit disproportionately from raising taxes to overpay teachers and provide more school services.
Until the taxpayers get angry enough the school board doesn’t have enough political capital to reign in tax increases, because on the other side of tax restraint are parents bemoaning service cuts and teachers’ powerful publicity machine spinning their exceptionally generous jobs as somehow inadequate.
And until the public understands that we’re losing educational services to line the pockets of the teachers there won’t be political will to credibly weather a strike.
I hope the taxpayers are ready to stand up to the teacher union when the current contract expires.
Here’s some relative inflation data. CPI is All Urban Consumers, US City Average, All items.
Property Tax Rate 2008/9 vs 1998/9: +53%, +4.3%/year
CPI, July 2009 vs July 1999: +29%, +2.6%/year
An 67% annual premium for property taxes over inflation, results in an 81% greater increase for the taxes over ten years. The magic of compounding. Also noteworthy is that the tax base was increasing all this time.
Cost increase for median homeowner with stable assessment $1,519, before state rebate $180 (I think).
CPI, Average 11 mo 2009, vs Average 11 mo 2008: -0.5%
Property Tax Rate, 2009/10 proposed vs 2008/9: +6.6%
Relative rates : not measurable
I suspect that the only reason a 4.3% increase looks like a bargain is that we are facing 10% annual increases to catch up with the shortfall in PSERS and future contractual liabilities.
Note, too, that the current TESD contracts can be found here:
The teacher salary matrix is complicated and you need to know longevity, education level, training certifications etc. for the entire staff to figure out the annual impact, but it’s at least 6% per year through 2011/12. The basic increase in hourly rate for the non-instructional staff for every year out to 2013/14 is 4.5% per year.