Reform District Spending, or Red Ink will keep flowing

I wrote the following article in response to unwise call for tax increases:

Reform district spending, or red ink will keep flowing - Detroit Free Press (02/21/07)

Here is the original article as written:

Faced with another mid-year per-pupil funding cut, educators expressed a huge sigh of relief when Governor Jennifer Granholm instead proposed raising taxes with her “2 cent” solution.

Re-invigorated after their Proposal 5 defeat, the Michigan Education Association website is now promising, “an all-out lobbying effort to support Gov. Jennifer Granholm’s State of the State proposal…”

Calling it “Prop 5” or “2 Cent” doesn’t change the underlying problem.

Shifting funds or raising taxes only provides a short-term fix, and we’ll continue to face these tax increase debates until schools get spending under control.

Data from Michigan’s CEPI website shows total revenue – and total spending – for schools in Wayne, Oakland, and Macomb counties increased more than the rate of inflation over the past 10 years. And, these increases are despite the “spending cuts” that schools are quick to point out year after year.

Here are the facts for each county:

	1994-95	2004-05	10 Year Increase	Percentage
Oakland Revenue	$1,298,409,624	$2,007,591,469	$709,181,845	54.60%
Oakland Pupils	170,557	201,884	31,327	18.40%
Oakland $ Per-Pupil	$7,613	$9,944	$2,332	30.60%
Macomb Revenue	$762,673,159	$1,150,736,533	$388,063,374	50.90%
Macomb Pupils	114,135	134,527	20,392	17.90%
Macomb $ Per-Pupil	$6,682	$8,554	$1,872	28.00%
Wayne Revenue	$2,297,171,454	$3,011,680,076	$714,508,622	31.10%
Wayne Pupils	322,091	320,593	-1,498	-0.50%
Wayne $ Per-Pupil	$7,132	$9,394	$2,262	31.70%

These numbers are state, local, and federal revenue, and don’t include bond dollars.

Also note inflation during this time period was 24.9 percent.

Michigan taxpayers and business attempting to survive in a horrible economy should feel insulted with a tax increase now, especially given that it serves in part to bailout local school boards who refuse to adapt.

But the alternative – simply holding school boards accountable – might result in our children paying the price.

So as the debate begins legislators should make sure that any tax increases be directly coupled with requirements that school boards start spending wisely.

In the 2000-01 school year, schools spent 21.4 percent of their funding on benefits, which totaled $2.8 billion dollars. By 2004-05 benefit spending skyrocketed to $3.6 billion, and represented 25.0 percent of spending. The state legislature bears some responsibility for maintaining an out-of-date retirement system, but school boards are the larger problem because they continue to approve employee health benefits they cannot afford.

District organization also wastes money. There are scores of high-performing districts around the country with 30,000 to 50,000 pupils, but not in Michigan.

Following that sizing model in the tri-county area suggests 15-20 districts might be appropriate, but there are currently 83. Macomb County has 21 school districts, Wayne has 34, and Oakland County has 28.

Just a one percent savings achieved through district consolidation would translate into $60 million more available dollars every year to spend on teachers, or programs – or to avoid layoffs and cuts.

These ideas are nothing new; school boards simply ignore them, and it’s this lack of responsible action that leads to increased school demand for more of tax dollars.

Governor Granholm also chose not to address the benefit problems, but did recognize the value of consolidation. Unfortunately she wants to rely on incentives, which have been offered in the past without success. This time the governor said she’d consider penalties next year if the incentives don’t work.

Under less dire circumstances incentives would be appropriate, but this budget shortfall demands swift and effective action. School boards are known for neither – with or without incentives.

Assertive leadership, and a coordinated approach with Republican lawmakers could solve much of this now, rather than waiting for a definite “maybe” in the future.

Pull the concept of penalties forward a year. Include a similar plan to help drive reform on health benefits. Revamp the retirement system to match what the state does for the rest of its employees. And if there’s time left, then finish the job of moving elections to November!

Any discussion on new taxes should include specific and immediate requirements for wise spending at the local level.

Bold leadership is needed now to solve the budget crisis, and perhaps more importantly these moves are necessary to ensure the long-term health of Michigan’s public education system.

==> Mike

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Are Schools a drag on Michigan?

Manny Lopez wrote a great opinion piece today:

Yes, let's invest -- in accountability and results - Detroit News (02/25/07)

It makes us realize how "investment" is being considered the omnipotent answer to every problem facing the state:

Gov. Jennifer Granholm is big on investments these days.

Almost as big as she is on buzzwords, catch phrases and public relations campaigns. Nary an interview goes by without her breathlessly insisting that Michigan's future rests with investments.

We need to invest in education, worker retraining, health care, kids and the elderly, she says. We need to invest in roads, technology and new economy jobs.

It's hard to argue with that, but how we do it is another game altogether. When pressed about how we can invest without having cash on hand, she sidesteps: "How can we afford not to invest?"

Pardon me while I hurl.

Mr. Lopez astutely points out, "We can't afford to pump any more money into the system until spending is tied to results"

Now consider those thoughts in the context of the interesting piece by Ron Dzwonkowski of the Detroit Free Press:

Choosing to Move - Detroit Free Press (02/25/07)

It summarizes a discussion with a young couple that is moving due to "more security, growth, and activity in Chicago."

Surprisingly, the article doesn't mention education, but it does include many other reasonable points: concern over crime, taxes, stability, growth, and "quality of life" issues.

It ends on a sad note, with Mr. Dzwonkowski suggesting were he 30 years younger he might be following them to a brighter future.

So what do we do to rebut those concerns? How do we stop the caravan of U-Hauls out of Michigan? And more importantly, what could be done that might attract that couple -- or other new residents who become new taxpayers -- to relocate (back) to Michigan?

Mr. Lopez points out, "More money isn't the answer. Michigan doesn't need to invest more, it needs to invest better."

What it takes is leadership.

Schools are a major part of this equation, and those of us involved in education need to be held accountable.

Consider these two factors:

1) Schools receive over one-third of the state budget. When combined with federal and local spending, the total dollars dedicated to education tops $20 billion dollars. Per-pupil spending by the state has increased at twice the rate of inflation over the past 10 years, and is among the highest in the nation. But despite all of this funding, school spending is out of control. There is plenty of investment, but no financial accountability.

2) Despite this huge “investment”, schools are generally producing poor results. Michigan schools -- and Michigan parents -- can myopically rattle off the best performing schools in their local area. But what most Michiganians don't understand is that Michigan schools in general don't rank well against many other states when looking at many national statistics, such as the NAEP (used as “The Nation’s Report Card”). And, the "best of our best" are not very remarkable when compared to their peers in other states on things such as ACT, SAT, International Baccalaureate, and Advanced Placement Participation.

These two factors are a major drag on Michigan.

First, the financial aspects are putting incredible pressure on lawmakers to either reallocate more tax dollars to education (and away from other important items), or instead increase taxes. Education's insatiable appetite for money is making it exceedingly difficult to invest in other things, and is a major contributor to the push for higher taxes.

Secondly, the lackluster school results can serve as one more compelling reason for people to leave the state, and they also works against us as we work to attract people back to the state.

Imagine how these factors – strained finances, potentially higher taxes, and mediocre schools – look to companies considering whether to make – or maintain – a major investment in Michigan. Imagine what it takes to persuade existing employees or new hires to move to or stay in Michigan.

Fortunately, Michigan has a great State Superintendent in Mike Flannigan, and he's working hard to fix this problem. But that is not enough. Most of the change must happen locally, where school boards are failing miserably to do anything other than whine about money.

Michigan needs a "culture of education" to drive improvement. This REQUIRES citizen involvement.

Whether you have children in the schools or not, you need to start paying attention to what your school district is doing. Check back soon and I’ll share some ideas on how you can go about doing your part.

==> Mike.

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MESSA Claims: Fact or Fiction?

In his Feb. 1 Detroit News letter, “Intervention in school health benefits unjustified”, MESSA lobbyist Gary Fralick reveals interesting new data, but his overall premise is still just wrong. (Update: Cynthia Irwin, MESSA Executive Director, contributed to the PR campaign with a similiar message in the Feb 13 Detroit Free Press opinion, "Teachers have sacrificed much for districts")

He rejects the idea of state intervention by saying, “Michigan school employees are doing their part to help districts balance their budgets through health care savings”.

However, verifiable public data on the Michigan Department of Education’s CEPI website paints a different picture, and suggests intervention is very justified.

CEPI Bulletin 1014 shows school board spending on employee benefits rose $212 million dollars between 2004 and 2005; a 6.2 percent increase. These costs skyrocketed by nearly $845 million since the 2000-01 school year; a 30 percent increase.

School Year	Benefit Spending (Instructional & Support Staffs)	Benefit Cost Per Pupil	Statewide Spending Per Pupil	Benefits as Percentage of Spending
2000-01	$2,817,399,458	$1,637	$7,628	21.4%
2001-02	$2,982,210,021	$1,723	$7,920	21.8%
2002-03	$3,261,322,292	$1,863	$8,110	23.0%
2003-04	$3,450,116,712	$1,990	$8,327	23.9%
2004-05	$3,662,252,049	$2,126	$8,507	25.0%

Benefits - The cost of both mandatory and non-mandatory fringe benefits for the staff directly involved with a given function.

And that came despite the fact school boards employed 1829 fewer teachers in ’05 than in ’04.

Meanwhile, Fralick’s point is based on data that cannot be verified because it’s stuffed in the MESSA “lockbox”. Basically, MESSA will not release data to schools or the public.

Ironically, the “intervention” opposed by MESSA is a bill considered by state legislators that would release MESSA data, and promote competition.

But Fralick’s claims – if accurate – suggest there may be evidence showing some education workers around the state are doing their part.

If factual, then those employees deserve to be recognized for being part of the solution, and MESSA should tell us who they are.

And, if Fralick’s claim is true that 42 percent of MESSA members are paying part of their health insurance premiums, then what does that tell us about the other 58 percent – plus those not covered by MESSA – who are generating the increases shown in the public data above?

Is this 42 percent mostly support staffs, administrators, or teachers?

Can the remaining 58 percent follow the example set by those cited by Fralick?

More openness by MESSA can help to address the financial crisis facing education, and Governor Granholm does need to get involved as Nolan Finely suggested in his Jan 21, “Students pay for Granholm’s fiddling.” Requiring MESSA to share its data would be a great start.

More good commentary is available from the Mackinac Center and Thomas Washburne in a piece called "Elected School Boards or Unions: Who Rules the Roost?".

==> Mike

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District Consolidation Incentives - Show Me the Money!

Michigan's Governor Granhom gave her State of the State Speech on February 6, 2007.

The full text can be found here:

The Detroit News: Full Text of Granholm's State of the State (02/07/06)

Here's a quote that shows she's onto something... but should've been more prepared.

Early in the speech she talks about the excessive number of local goverments (cities, townships, etc), and encourages them to consolidate and share services. She then moves into talking about schools:

"It’s simple. When they show us they’re consolidating or sharing, we’ll “show them the money.”

We will also ask our school districts to cut costs by consolidating services at the county or regional level.

My budget proposal will include incentives for districts to consolidate their business services in the coming school year.

A year from now, I’ll submit a budget that will penalize those who haven’t embraced this common sense way to put more dollars in the classroom. For example, it just doesn’t make sense to have 10 school districts in a single county buying separate software when they can save dollars and cents buying it together.

Consolidation of services makes sense, and it saves money. And whether it’s by using a carrot or a stick, we are going to make it happen."

--- Governor Jennifer Granholm

I have been an advocate of district consolidations or mergers for some time, as shown by the opinion pieces I wrote as early as 2004. Most people that look at the issue -- except for most school boards and most district administrators -- seem to see the value and potential.

It's great to see the Governor jump on the bandwagon.

But, I'm worried that revealing her idea without a firm plan may hurt more than it will help.

First of all, anyone that might currently be thinking about consolidating or sharing services is likely to put all plans on hold until the plan is revealed and passed. After all, it wouldn't be very smart to consumate a deal only to find out that waiting would've rewarded you with an incentive from the government.

And, this incentive plan will now serve as a rallying cry to everyone opposed to significant consolidation efforts. How can legislators even consider trying to force the issue now? The response will be, "Let's give the incentives a chance."

That would be fine if we had time, but do we?

And where are we going to get the money for any significant incentives?

I think it's unlikely that the government will be able to effectively define a meaningful consolidation of services. It's hard to see where they will be able to offer much in the way of incentives. And, it's unlikely that they will be able to do it quickly.

Consolidation seems to hold a lot of promise. Districts could see significant savings without a reducation in service. But school boards and district administrators, whose positions and jobs would be the first to go, are not likely to advocate for or effectively market the ideas. It needs to happen higher up the food chain.

Maybe a direct approach is best. The incentive could go to districts that publicy identify and begin discussions with a potential merger partner before the 2007-08 school year begins, and the penalty in the 2008-09 year would be a reduction in funding if you don't go through with it!

In the end, the most plausable scenario is that the government will devise small incentives that will entice districts to dabble in sharing services.

I guess baby steps are better than nothing, but it sure not the kind of bold leadership we need!

==> Mike

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Teacher Pay Per Hour

The Manhattan Institute for Policy Research released a report by Jay Greene and Marcus A. Winters entitled "How Much Are Public School Teachers Paid? (Well, that is their website headline; the report is actually called Civic Report 50, that that doesn't tell you much!)

The full report can be viewed here:

How Much Are Public School Teachers Paid?

There is a short synopsis here:

Wall Street Journal: Is $34.06 Per Hour 'Underpaid'? (02/02/07)

I don't know that I agree with the whole point of the report/article, but I think it adds value to the discussion and is a great "myth-buster".

From the report, TABLE 2 (here) is a short table that shows how the average hourly pay for teachers stacks up against other professions.

The interesting thing about this report is that it does take into account the extra time teachers put in -- and they do put in a lot of extra time -- but it also takes into account the extra time many of the other professionals also put into their jobs.

The report also takes a look at the number of hours put in per week by teachers nationally, and compares it to other professions locally. The data is found in Table 4A (found here).

I think we need to be careful looking at just the hourly rate. While teacher pay may be high when viewed as an hourly rate, it still doesn't compare as favorably when viewed as a annual rate, and that is undoubtedly a concern as we try to attract talented people into the profession.

The report does consider the annual compensation issue, but correctly points out:

"More important, we do not report annual earnings because any comparison between public school teachers and other workers is complicated by the fact that teachers typically are contractually obligated to work nine months out of the year, while other white-collar workers and professionals are 12-month employees. All else being equal, anyone working fewer months per year will have a lower annual salary.

But that would be an apple/orange comparison."

To make it more appealing as an annual rate will require fundimental changes in compensation structures, and that will be an enormous task.

First, schools should look at merit pay, which would reward those teachers that truly make a difference. Of course, the unions are generally opposed to that (see my entry on the Florida Merit Pay Plan).

Second, schools should consider higher annual pay but only if they tie it to year round school.

Third, schools need to examine their mix of salary and benefits, and the annual increases in both. Benefits are out of control, and rising much faster than inflation. Salaries, meanwhile, are governed by an out-of-date step system that was created in a completely different economic era. Teachers receive abnormally large pay raises for the first ten years, and then paultry raises after that.

This system requires a complete overhaul, not a few tweaks.

==> Mike.

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