GPPSS board vote: A tale of 6 cities

The Grosse Pointe Public School System is comprised of five cities (the Pointes) and part of a sixth (Harper Woods). It’s been that way for decades and the community takes that for granted in many respects – or painfully reminds us. (Unite the Farms, anyone?)

The North end / South end thing is indeed a thing of sorts. While some look with disdain or cast this thing aside with a trite phrase, the 2014 school board vote demonstrates mathematically that the difference between the two ends of the district is real.

2014 vote_NorthvSouth

While Margaret Weertz gained a seat on the Board this week, if the the South end had its own board of education, she would have lost and Cynthia Sohn would have won. Weertz overall top 3 finish is attributable mainly to her Woods success where she beat Sohn by over 1,100 votes. Her message didn’t play too well down South.

So what?

The message Cynthia Sohn brought to the campaign resonated strongly with the South end. The newly configured Board of Education, when seated in January 2015, ought to take note of this.The board really ought to endeavor to resolve why the South end cities’ perspective is so different from the North end’s.

Speaking of unity, this breakdown also demonstrates that Summerfield and Ismail would have won in both these hypothetical districts. That matters, like it (or Ismail) or not – particularly in light of this past election cycle and “the slates.”

I was puzzled from the get go on why Weertz, Summerfield and Howlett chose to formalize their campaign. Their responses to repeated questions about it rang hollow and were really counter to their own calls for unity.

Why? Because their alignment was really designed to block Ismail from winning… and it didn’t work. I make this claim mainly because Sohn’s candidacy was the square peg to the slate’s approach. By almost any objective view, she would be a great trustee. Why go out of their way to block her? Well, apparently because she was thought to be aligned with Ismail. And that’s who the district establishment – including members of the board and staff – really did not want to see win.

Well, he won. Now we’ll see whether the call for unity was real and genuine or a pandering campaign slogan. Hint: We’re not off to a great start.

What I will call “The Ismail Factor” is a topic worth more attention and I will write more about it. I have some experience there having known Ahmed Ismail for years and having served on the Board with him.

For now, we know that Ismail’s reputation (good and bad) precedes him. We know that this past campaign was influenced in large part to block Ismail’s candidacy. We know that despite that effort, Ismail’s candidacy was well received by both the North and South end of the district – more balanced than even Margaret Weertz’s candidacy.

All that matters because we’re talking about the voice of the voting community. The same voices (votes) that entrusted this board with $25 million annually in renewed millages also believes Ismail is worthy of their trust and that Sohn should have represented the South end of the community.

Updated: 2014 GPPSS school board results

UPDATES: We now have results by city. Of note is now Summerfield becomes top voter getter. Amazingly tight Park race with just 70 votes ranging from 2nd (Weertz) to 4th (Sohn). Amazing that Howlett goes 5th in the Park. Big (proportionally) win by Ismail in Shores, even beating Weertz there.

Top 5 biggest wins by city and candidate:

  • Sohn – GP City – 22.2%
  • Summerfield – GP Park  and Weertz – GP Woods – 20.4%
  • Ismail – GP Shores – 19.7%
  • Sohn – GP Farms – 18.7%

More analysis to follow.

Nov 2014 GPPSS Election Results

 

Where did the $18M in fund equity go?

At the end of the 2008-9 school year, the Grosse Pointe Public School System had $20 million in General Fund equity and ran almost a perfectly balanced budget. By the end of 2012-13 fund equity was $2 million. How did it happen?

The short version is that state funding cuts and declining enrollment reduced revenue by $30.4 million. In the same time, $30 million in cost reductions were found, but other costs increased by $17.4 million. The net effect was an $18 million loss of fund equity.

This first chart shows the revenue variance from 2009-10 through 2012-13 in relation to 2008-9 when the budget was balanced.

 GPPSS Rev Loss v 2009

From 2008-9 to 2009-10 the GPPSS experienced a $5.8 million revenue loss, the majority of which was the result of then Gov. Jennifer Granholm’s cuts of October 2009. That same $5.8 million persisted and got worse in the ensuing two years. Revenue was moderately increased from 2011-12 to 2012-13, but nowhere near the earlier losses. (More details on revenue patterns here.)

The second chart here sums up all the expense and revenue categories that affected fund equity from 2009-10 through 2012-13.

 

GPPSS 18M FE Loss

The black bars represent shifts that work to preserve fund equity. Those total $30 million. The red bars work against fund equity. You see again the $30.4 million in lost revenue wipes out the total effect of the black bars (and then some). It’s the other four red bars that generated the vast majority of the $18 million drop in fund equity. The biggest culprit – again – is ever increasing retirement costs. (See recent post on retirement costs for more detail.)

These charts may beg the question, how did the district generate $20.6 million in compensation reductions? Was it the contract formula clause?

The short answer to the second question is no. The biggest contributor to direct compensation cost reduction was job reduction. From 2008-9 to 2010-11, the district cut 80 full time equivalent positions. Also, the effect of the early retirement incentive (ERI) replaced dozens of our most highly paid staff with new employees who received significantly lower salaries.

The formula clause did not kick in until 2012-13 and even then, it reduced direct compensation by about $2.7 million. This means that 90% of direct compensation reduction is attributable to job reduction or the ERI effect. Meanwhile, as the second chart above shows, total compensation costs were increasing due mainly to rising retirement costs. The chart below summarizes the problem of relying on job reduction to balance the budget.

GPPSS Comp v FTEs

So in 2011-12, despite 78 fewer employee FTE’s (or 9.2%), the district’s total compensation costs were just $2.2 million lower (or 2.4%). About half the cost increases from 2010-11 to 2011-12 were retirement increases. The other half is attributable to direct compensation cost increases.

Of course history proved this did not work. The district was running annual deficits that averaged $4.5 million per year from 2009-10 to 2012-13.

In summary, the $18 million drop in fund equity is primarily attributable to rising retirement costs and significant reductions in state revenue. The ensuing employee contracts are essentially adjusting employee compensation to respond to those two state driven issues. As we’re seeing now, fund equity will return to 10% – the agreed upon levels – by 2016-17 and job loss has been stemmed.

Retirement costs in the GPPSS

Last week in response to the current gubernatorial election issue of K-12 funding, I wrote about state revenue to the Grosse Pointe Public School System in both the Granholm and Snyder administrations. My take was not all that different from the non-partisan Citizens Research Council brief published a few days ago.

Here’s an abridged abstract of the CRC report:

“Is school funding up or down compared to four years ago?”

Here the answer is an unequivocal ‘up’. While total state funding is up over $1 billion from FY2011 to FY2015, the increase is almost exclusively earmarked to satisfy school employee retirement costs.

“Has education funding gone up as much as it could have?”

Here the answer is ‘no’. State tax policy and budget decisions effectively stretched the School Aid Fund.

“Are individual school districts better off today than they were four years ago?”

An answer to this question is far less definitive. While the amount of per-pupil funding is up, districts are paying higher retirement bills. This leaves fewer resources for other school expenses.

 

The third answer above is the key one. Let’s look at the GPPSS’ retirement cost trends over the last decade. This first chart paints the picture. From 2002-3 to 2012-13 the district’s retirement (MPSERS) expense more than doubled, from $7.4 million to $15.7 million.

GPPSS Total MPSERS Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over this same period of time, state revenues varied, but by 2012-13 it was $2.9 million lower than 2003-4. Throw in the $8.3 million increase in state mandated retirement costs over the same time and it created a $11.2 million budget problem. Recall that state revenue and state retirement costs are solely dictated by the state, entirely out of local control. All we get locally is the problem.

 

GPPSS State Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Taken as a percentage of the total General Fund budget, retirement costs (MPSERS) that had once consumed 7.8% of the budget in 2002-3 grew to consume 15.9% by 2012-13.

MPSERS as percent of GF revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

How did the district try to solve this problem? The shortest explanation is that jobs were slashed. In 2002, the district employed 1069 full time equivalent employees. By 2010, the district employed 852 – a reduction of 20% of our workforce – far outpacing the 7% reduction in enrollment.

GPPSS FTE Employees

 

 

 

 

 

 

 

 

 

 

 

 

 

So why the reduction in retirement costs in 2013-14 (as seen in the first chart above)?

That is the ultimate effect of the employee salary reductions of 3.4% in 2012-13 and 4.9% in 2013-14. Reducing salary cost is the only way to reduce retirement costs.

From 2007-8 to 2011-12, without the benefit of the contract formula, fund equity plummeted by $18 million despite that massive reduction of employees. After the contract formula took effect, the district started to run annual surpluses that will return fund equity to 10% by 2016-17. Meanwhile employment levels remained flat.

Fund Equity Trend

 

 

 

 

 

 

 

 

 

 

 

 

 

Reducing direct compensation costs via the contract formula was the only permanent means of fixing the problem created by the state funding mechanism and was crafted primarily to prevent the underfunded state retirement fund from destroying the Grosse Pointe Public School System.

GPPSS in Granholm, Snyder Eras

Tonight’s town hall meeting, a form of debate between incumbent Governor Rick Snyder (R) and challenger Mark Schauer (D), the gubernatorial candidates sparred over Gov. Snyder’s record on K-12 funding.

“Today, it is a fact that schools still have less per pupil dollars in the classroom than when he started four years ago,” Schauer said. “…Don’t take my word for it. Talk to any teacher. Talk to school board members, parents all across this state.”

These are complicated answers, but here’s a start with some facts. The first chart below, extracted from the Grosse Pointe Public School Systems’ annual financial audits, shows total state revenue flowing to the district. It spans the Gov. Jennifer Granholm era (2003-2010) and current Gov. Snyder’s era (2011-2014).

 

GPPSS State Revenue

 

 

 

 

 

 

 

 

 

 

 

 

The greatest cuts in state aid to the GPPSS is undoubtedly from the 2007-8 school year through the 2009-10 school year, during which time the Granholm budgets cut state aid by $9.1 million. Meanwhile, in the Gov. Snyder era, state aid has increased in each of the last three years.

We need to go a layer deeper here though. In Michigan, state aid follows student enrollment and we can’t necessarily blame Gov. Granholm directly for lost student enrollment. The correlation between declining enrollment at state aid is clear in the period from 2007 through 2010 when the GPPSS lost 483 students. At roughly $8,000 in state aid per student, that’s about $3.8 million in lost state revenue.

If we deduct that from the $9.1 million state aid loss, that’s still a $5.3 million cut in state aid to the GPPSS in that three year period.

GPPSS Enrollment

 

 

 

 

 

 

 

 

 

 

 

A different cut of the numbers normalizes for enrollment fluctuation. If we look at just the defined state aid per pupil, gathered from the Michigan Department of Education data, we can see the most significant reduction came in the 2009-10 school year, at Gov. Granholm’s executive order, that led to a $520 reduction in state aid for GPPSS. The worst part of that cut was that it came in October of 2009, four months after the district was required to pass a budget that had not anticipated such a cut.

 

GPPSS Revenue Per Pupil

 

 

 

 

 

 

 

 

 

 

 

The subtlety of Schauer’s state is his qualifier “in the classroom.” He seeks to discredit Gov. Snyder’s K-12 funding increases by claiming those increases went to replenish the state’s decimated Public School Employee Retirement System (MPSERS), the retiree pension and healthcare fund.

You can’t segregate MPSERS cost increases from the budget picture nor claim that that money does not go “into the classroom” when it indeed funds the retirement benefit of the teachers and other staff who are indeed “in the classroom.” What’s more, if the shoe fits for Gov. Snyder, it does so for former Gov. Granholm as well, as I wrote in this March, 2010 blog on this very topic.

Lots more time would be needed to contrast these two administrations, but if Mark Schauer were to ask me, I’d tell him the Granholm administration’s budgets have done far more damage to the GPPSS than Gov. Snyder’s and the numbers bear that out without dispute.