"High Achievement always takes place in the framework of high expectation." - Charles Kettering

Wednesday, November 9, 2011

Ohio Voters Speak Loudly

Good grief, it's snowing like crazy outside (I just noticed). I shouldn't complain because I managed to make it all the way through fall soccer season without enduring one flake of the stuff, but I hate winter. I guess I better secure boots for my various kids!

Back to Ohio. Their Governor tried the same thing ours did with public sector unions, but put it to a vote of the people. They also included all public sector employees, not singling out those who belonged to a subgroup that just happened to help elect him. Ohio citizens spoke loudly and in record numbers for an "off year" election. 63% of them sided with labor on this issue.

This issue isn't as clear cut as the unions will have you believe. For one thing, they poured some 30 million dollars into fighting the law severely limiting collective bargaining. That's a lot of scratch. I presume the opposite side spent similar amounts. Imagine what Ohio schools might do with that money?

Unions would have you believe that demonizing the union is simply class warfare. Untrue. There are many union rules which enable boat anchors to keep their jobs at the expense of fabulous employees. This was pointedly illustrated in the last year in Wisconsin when a newer award-winning teacher got laid off while undoubtedly some place-holder who's been marking time for the last 5 years of so kept his or her job. Exhibit A: Years on the job does not equate to competence.

How about that benefits part of collective bargaining? In 2006, the ECSD found a health care package that cost 2-3 thousand dollars less PER EMPLOYEE to purchase. Did the district reap any benefit from their due diligence with taxpayer funds for this miracle they wrought? No, because the contract was written as total compensation package. The savings went into the teacher's pockets. So, if the staff members want to know how they are supposed to pay for their 5% contribution to the health care benefit package, I recommend they stretch their memories back to that (effective raise). While they're at it, they can thank the district for effectively saving them money on their expected contribution to their health care package. 5% of 15K is a lot better than 5% of 18 or 19K.

The new contract that administration rushed into before everybody knew exactly how big the cuts were going to be also benefit staff. Governor Walker asked for a full 12% contribution to Health Care. Reasoning that they had already realized such a huge savings in 2006, administration did not ask for the full contribution, arriving at 5% based on how much savings had already been realized in 2006. That was irrelevant to the legislature. Revenue caps were not altered because you were a good steward with taxpayer funds 5 years ago. Every district saw the same cuts. The magnitude of the "tool" remaining to offset the full amount of the cut was insufficient because the balance is in the teachers' pockets. Exhibit B: Nearly $700K deficit budget.

There was an amusing letter to the editor last week (in the Gazette) listing all the money taxpayers saved in local districts, including Evansville's "savings" of about 650K dollars. Number one, the writer didn't bother to discover the exact value of the deficit, which was 672K and some change. Number 2, apparently they are unfamiliar with how fund balances work. Target values for fund balances ("savings accounts") in Wisconsin are recommended to be at or near 15% of the fund 10 budget. Five long years of conservative fiscal practices in the district took that balance from about 6-7% up to 12% on June 30 of this year. With the stroke of a pen on October 24, it was reduced back to 8.6%.

The amount of fund balance a district carries effects their bond rating, just like the amount of savings a person has determines their "reliability index" for repaying a loan. Also, just like on the personal level, this affects the resultant interest rate charged for loans. The district's bond rating was upgraded a few years ago during a re-fi of one of the loans because the financial institution saw good progress toward the target of a 15% fund balance. If folks think this is insignificant, a review of the debt repayment schedule is available on the Observer blog or even the school district website by clicking on the annual meeting packet under "board meetings." This year the district will contribute about 2.7 Million dollars toward retiring the debt on the outstanding referenda. That figure will increase every year until 2020, ending at well over 4 Million dollars to pay off the debt. Anybody with a mortgage knows how much of this has been interest up til now and how much has been principle. Interest is paid through taxes too! If you suffer delusions that that "savings" of 650K are not offset by potential losses when bond ratings for districts fall in the next few years, you do math differently than I do.

What happens next year is anybody's guess.The one thing everyone seems to agree on is that the financial outlook for public / government employers will be as bleak as or worse than this year. A similar hit on the fund balance next year will decimate it by 46%. What happens if a boiler blows up? Which 10 teachers (or 6 administrators) will you lay off to realize such savings? Which programs will suffer?

The overall point here is that there is plenty of blame to go around for the budget mess in which ECSD finds itself. Writing deficit budgets for each of the last 3 years is a good place to start. This year's was the absolute worst, and to be fair, the first two years ended up being either much less a deficit or a surplus. I don't think they're going to find a spare $672K laying around somewhere in the budget, so we can stop hitching our horse to that wagon. How about a good old-fashioned idea like living within your means? I have heard at least 3 different board members express this desire. I realize many individuals suffer from the inability to live within the confines of their income. The last year I sat on the board was the first year the administration brought forward a deficit budget. I voted against it because it irritated me that anybody would plan to spend more than they anticipated they would make. If it turned out that they saved that amount, you get it the next year. But by God, don't start out planning to spend in excess of your income. Maybe next year, this old-school idea can come to fruition.

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