Last night I was invited to speak at a meeting of the Mother’s Club of Grosse Pointe South. I was asked to provide a budget update in 5 minutes. With that compression of time, I thought through how I would frame the challenge. In short this was my message.
- The state of Michigan is our largest source of funding, based primarily on tax revenues that have scaled down with the state’s loss of wealth – sales, income, and property taxes.
- Our per pupil funding (the state determined Foundation Allowance) has not kept pace with the rising trend of human resources costs – namely salary, retirement, healthcare, and FICA. These are the four largest expenses in the local schools’ General Fund.
- The friction between these two forces is the root cause of K-12 budget challenges. Unless root cause is addressed, the problem will persist. This can only be fixed in two ways: Either state revenues need to start rising again at a rate at least equal to the rise in salary, retirement, health care and FICA or locally we find a way to curb the rate of growth of those same rising costs. Any other reaction the the budget challenge only masks this root cause problem.
To demonstrate the friction of these forces, consider the following:
- With the Foundation Allowance and 20J reductions of October 2009, GPPSS’ per pupil revenues are now below those of 2005-6. (Coincidentally, GPEA leadership has taken to the spin that this is the first time aid has actually been reduced. My comment is: Watch that first step. It’s a doozy!)
- If the state reduces the Foundation Allowance another $268 as has been forecasted by the state legislative fiscal agencies, GPPSS per pupil revenues would be at their lowest levels since 2003.
- On the expense side of the ledger, even if GPPSS ends up reducing our teaching staff as we are evaluating now, the total cost of teacher retirement, health care and FICA for 2010-11 for 533 teachers will exceed that same cost for 602 teachers from 2007-8.
- According to state of Michigan statistics, the average teacher salary in GPPSS has risen from $66,799 in 2003 to $85,985 in 2007-8. Our locally developed statistics differ from the state in this area, but not in terms of the rate of growth.
Any objective person would agree this is an unsustainable scenario. If we recall the two potential root cause resolutions referenced above, I have no faith or expectation that state revenues will rise to meet this challenge. How many of you think the lawmakers will vote for a tax increase of any kind in an election year? We’re now essentially a poor state and we cannot expect our revenues to remain at previous levels – let alone rise.
So how do we solve the problem locally? Last week Farmington schools, like Bloomfield Hills the year before, closed a handful of elementary schools. I put this in the category of responses that mask the problem. How does closing a school curb the rate of growth of salaries, retirement and health care costs? It will reduce some of those expenses by reducing staff, but when you look at the expense trends it is clear that this is a temporary fix. I’m not interested in that.
Viewing the challenge through the root cause lens is essential in evaluating alternatives. The GPEA leadership should do this as well. They call for taxpayers to reduce our fund equity to 7% from our current level of 17% (of total expenditures). That’s an allocation of $10.5 million taxpayer dollars.
The GPEA leadership rightfully argues that this money is earmarked for allocation to educate the children of our community. But the question must be asked: Is continuing to fuel the unchecked growth of salaries, retirement, health care and FICA for a smaller population of teachers the right path? It’s masking the root cause problem in a different, but equally temporary manner.
I’d much rather invest in more teachers than pay more for fewer – which is precisely what is happening today. This is why class size is rising. Who’s happy with this solution? I have heard students, parents, and teachers alike all advocate for smaller class sizes.
Bottom line: We have to establish a expense/compensation system that has a cognizance of our funding model. As things stand now each has no regard for the other. Clearly this is not working. As a result we expend all too much time and energy on re-visiting the recurring budget challenge (as we annually mask the problem) and not as much time as we would like grinding over ways to improve our educational program offerings.
Enough is enough. This has got to change.