The Board of Education Building at 389 St. Clair

The Board of Education Building at 389 St. Clair

Next month’s GPPSS Board of Education stands a chance to be historic. It’s possible that it could result in four new trustees.

I won’t be endorsing candidates or sharing my voting intentions on a candidate level. Instead I’ll focus on the two most significant issues of this election

  • The pending conclusion of the district’s bargaining unit contracts
  • The potential for a tax increase in the form of a bond issue / millage increase

I recommend to the voting public that they inform themselves of these issues and the candidates’ positions on them.

By far, the largest issue is the pending conclusion of the district’s contract with the local teachers’ union, the Grosse Pointe Education Association (GPEA). The current contract, which was ratified in March 2013, will expire in August 2017. The next configuration of the Board will be the decision makers on the ensuing agreement.

On average, about 85% of any Michigan public school districts’ budgets are consumed by employee compensation which is governed mainly by two things: the state defined employee retirement system as well as the local union contracts negotiated according to parameters set by the local school board. The remaining 15% presents very little discretionary spending options. Small margins, percentage wise, make all the difference. If you get your contracts wrong, almost nothing can be done to make substantive financial change. I treated this topic in depth in this entry from April 2015, The Simple Math of GPPSS Budgets.

In the GPPSS every percentage point of spend represents about $1 million. If spending on employee compensation exceeds 85%, the odds are very good the district will run a deficit, which drives fund equity down. If it can stay below 85%, options exist for savings (to increase fund equity) or for reinvestment in areas of need. In the GPPSS, the areas of need tend to be technology based funding and, to some extent, building repair funding.

The financial and contract structure of the GPPSS established that fund equity should be about 10% of the total annual spend in the district. This translates to about $10 million. This target was set in 2010 when the district’s fund equity was at about $20 million. As of today, the district estimates fund equity of about 7%, or about $3 million under the target. To understand why we experienced such a reduction please read my entry from last May, The Dangers of Ignoring Total Compensation.

So to emerge from this wonkiness, let’s recall what happened last May. The board had the opportunity to exercise its rights under the contract to reduce employee compensation to recoup about $500,000 of fund equity since targets set in the contract were not met. They decided against that action. While current district financial projections show a return to 10% fund equity in 2018, this will be achieved mainly through staff reductions – which is a lose/lose strategy for everyone involved.

On top of all this, with the return to 10% fund equity levels stalled, the current board has no means to restore budget room for basic technology funding. This budget area was raided in the dark days of the Great Recession when school funding was cut and employee retirement rates skyrocketed. So what do you do when you have expenditures you need to fund out of the General fund but not enough money to do so? Well, you go to voters to increase their taxes and this increase revenue.

This is exactly what the GPPSS board tried to do with the Tech Bond vote of February 2014, the one that failed by the historic 70% to 30% margin. And thus we have the second major issue at play in this election. Here is how they are inextricably linked.

For candidates who favor using tax increases to solve the budget constraint issues around tech and building repair funding, there is a greater likelihood that they will try to reverse the current employee contracts that trigger salary reductions if fund equity targets are not met. For candidates who oppose a tax increase, they will almost undoubtedly need to rely upon the unique GPPSS employee contract clause that reduces employee compensation relative to fund equity levels.

It is possible that a candidate will adopt a nuanced position that takes pieces and parts of both options, but those candidates should be pressed for specifics on how they would execute their position. If you run across a candidate who says there are other options, press him or her for specifics. Odds are it will involve massive reductions in teaching staff, whether the candidate knows it or now.

An added wrinkle here is the pending Wayne County millage issue that will be decided upon in this same November election. This one is a net loser for GPPSS taxpayers as it would cost $5 million and yield $3 million. But should it pass by county wide vote, it would render a local millage increase moot as a local millage (tech bond, capital bond, etc.) would simply not be pursued.

Let’s net out some of the questions voters might ask the nine candidates relative to these issues:

  1. Do you support the Wayne County RESA mileage that would cost GPPSS taxpayers $5 million and return only $3 million?
  2. If the GPPSS annual financial audit reveals in November that the district’s fund equity targets established by the current employee contracts have not been achieved, would you enforce the contract clause that would reduce employee compensation accordingly?
  3. If elected, would you seek to retain the employee contract clause that ties employee compensation to district fund equity targets?
  4. If the Wayne County millage proposal fails, would you support the GPPSS to bring a bond proposal to district voters? If so, how much money would you seek and what would you fund? How would you see this new tax increase having success in light of the tech bond failure?
  5. If the Wayne County millage fails and you do not support a tax increase, how do you plan to address needed funding for technology and building repairs?

We could add a third issue – declining enrollment. To me, this is the source of most of the district’s financial problems. I am skeptical that outside of open enrollment/school of choice, that the local school board alone can drive increased enrollment. I think this is a Grosse Pointe demographic/population based issue. For the record, I oppose the GPPSS resorting to an expansion of school of choice and I believe all nine candidates do as well. However, the current board did resort to limited school of choice last May, which I addressed in this entry. But there is simply no evidence that the school district can execute policy change that will counteract local community demographic patters, which I analyzed here.

There you have it. I encourage readers to put these questions to all the candidates to best inform their votes. As always, I welcome comments and questions.