Debunking the 65/35 split myth...

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 Debunking the 65/35 split myth...

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Dave
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PostDebunking the 65/35 split myth...

A large amount of information was recently made available through a review of Seekonk's fiscal performance over a multi-year period.

I will post the information here and add my thoughts in a reply below it. The link to the reports mentioned in the below article is underlined in red.

Financial Report Spreadsheets

Quote :


TO: Seekonk School Budget Review Group



FROM: Dave Tobin, School Finance Consultant



SUBJECT: Review of Seekonk Finances March 5, 2010


I was good to meet with you on Friday. The purpose of my visit was to review fiscal matters related to Seekonk and the affects upon the Seekonk public schools. My excel worksheets are attached.

My major conclusion is that there is a need for much more open communications between the town and the school department relative to the town’s and school’s finances. A greater sense of trust and communications needs to be fostered. A new Superintendent to Massachusetts is seeking that degree of openness and trust.

We reviewed the fiscal situation as viewed by an outside consultant:

1. The town has a structural funding problem that needs to be addressed in an open, honest way.
2. The average single residential property tax bill and tax rate are well below the state average and an override to keep a school open failed.
3. A political problem exists because of the timing of collective bargaining agreements that results in a school district agreement’s last year raise at a time that town units are being held flat. There is a history to both salary histories.
4. School spending as a percentage of total spending has been on steady decline.
1. FY 01 Education is 61% of total town spending
2. FY 08 Education is 48.5% if total town spending see excel worksheets attached.
5. Fixed cost spending reported for town (and schools) has increased dramatically
6. Most town spending has been constrained but remained at the same share of the total over the years while the schools have fallen.
7. Health insurance has been addressed (lead by a school contract) but continues to be a serious drain on resources. Plan design needs to be addressed in a town-wide resolution. Employee unions, administrations, and board. State law changes are needed.

FY11 fiscal plan is conservative, and “prudent” at this stage of the game.

1. Local aid resolution in H-2 is leveled, but it may be cut with legislative action.
2. Estimated local receipts are estimated well below FY09 actual, though that is the year of dramatic decreases.



Questions and practices:

1. The superintendent needs to be informed of any opportunities for correction of funding shortfalls that may be available or considered up to and after the annual town meeting.

i. The November 09 adjustment did not included discussion with the schools which make up near half the budget.

ii. Evidently a correction was allowed for technology in January 2010.



2. Free Cash:

i. What is the March status of free cash account?

ii. What amount is planned for use FY11.

iii. What is the estimated amount of free cash for July 1, 2010

1. Based on spending constraints this year

2. Revenue trends over estimated for FY10

iv. What agreement can there be that free cash will be available for both the schools and town needs after July 1, 2010?

3. Stabilization Account:

i. What is the March amount in the stabilization account?

ii. What amount is planned for use in FY 11?

iii. What portion is planned for school use?

iv. Will there be transfers to this account in FY11 and if so how is that determined?

4. Estimated Receipts:

i. In the difficult year of FY09 estimated receipts were $219 K greater than estimated by the town.

ii. Estimated receipts for FY11 are conservative

1. New Growth at $100 K, excise taxes etc. What is the rational for these lower estimates?

2. Vs State’s estimation of $648,045? In property tax growth?

3. Ask for a review of FY09 actual receipts?

4. How are receipts going in FY10 compared to FY 09.

5. What can be realistically expected in FY11

5. Overlay Reserve:

i. What is the current status of that account?

ii. How is planned use in FY11?

iii. How realistic is the amount be held?

6. A review of school spending NSS

i. FY09 Spending for administration is below the state average

ii. Instruction is slightly below the state average

iii. Review of the memorandum of school and town spending should consider

1. Maintenance charges

2. Insurance charges to school’s personnel / actual

3. Retired employee insurance that is high?

7. State Chapter 70:

i. How can the town and school work with their legislative and state official to get the Chapter 70 revisions back on track the would lower formula requirement for the town and increase state aid (+$2 M since FY05)?

ii. The consultant estimated that $135 K could be cut from FY11 Chapter 70. How will that be addressed?

8. Spending per pupil: Seekonk school’s are performing above the state average. The state is performing at the top in the country in English and math. Why is Seekonk spending below the state average in administration, instructional leadership, instruction, etc.?

9. Low Income Students: How can Seekonk identify more low-income students, and get more aid for servicing them? (Talk with Tri-County).

10. Aggregate wealth: Seekonk is stronger on property value than income compared to the state. RI un-employment rate is affecting Seekonk resident’s income.

Seekonk FY10 Tax Recapitulation Form



FY 10 Tax Rates Rates Amount Raised % of Total Raised

Residential
$10.57 $17.367 M
59.2% 40.4%

Commercial/Other.
$21.57 $11.961 M
41.8% 27.8%

To be Raised by Tax
$29.329 M



Other Revenue
$13.628 M
32.8%



Total to be Raised
$42.957 M
100%



Cherry Sheet Charges & Abates
$466 K



Gross Total to be Raised
$42.957 M


Cherry Sheet FY 10 Receipts
$ 7.148 M



Local Receipts $ 3.038 M
Enterprise Funds $ 1.265 M

Total $4.521 M



Other

Free Cash $1.448 M
Other Available $ 512 K
Total $1,960 M



Total Estimated Receipts $13.628 M



Local Revenues

FY 2009 $ 3.365 M

FY 2010 $ 3.038 M $327 K less





Appropriations from Free Cash

May 12 $250K for What?

July 1, 2009 Free Cash Certified $ 1,324,386



November 30 for FY10 Appropriations from Free Cash

1. FY10 Debt service expenses $ 234,569
2. Police Tasers $19,180
3. Communications $19,838
4. Payroll funding Police/Fire help $18,200
5. Digital Zoning map $6,000
6. Stabilization $500,000

Total from Free Cash FY10 $797,787

Remaining Free Cash 11/30 $526,599 ?

Overlay Reserve $274K



Excluded Debt $ 1.442



Financial Report Spreadsheets
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Debunking the 65/35 split myth... :: Comments

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Re: Debunking the 65/35 split myth...
Post on Mon Apr 05, 2010 4:56 pm  Dave
So here is why I get a bit upset over things like the busses…

People are continually fed that the schools get 65% of the budget and that they suffer from poor management. While I think every department has a responsibility to operate efficiently, Seekonk certainly seems to be borderline obsessed with miring itself in the history of why things are the way they are and who is getting an advantage over whom. This report debunks much of the negativity directed at the schools and shows that perhaps the leaders of the town should consider focusing on their own spending habits.

My read on the reports is this…two people share a credit card. One is the primary cardholder and both people have a system in which the primary gets 35% of salary and the other 65%. Now the primary charges more and more onto the credit card (aka debt, free cash, stabilization). They say that the other person will get 65% after deducting payments for the shared credit card, even though they are the ones deciding what goes onto the card. Over a period of years less and less money is left for the 65% person and now their budget actually amounts to less than 48%. At the same time the primary cardholder complains to them that they need to control costs, while increasing their own spending.

That is my basic take…read the reports and draw your own conclusions.
Re: Debunking the 65/35 split myth...
Post on Mon Apr 05, 2010 5:41 pm  seek2mend
Dave,

Why isn't the report available on the school website? Or is it?
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Re: Debunking the 65/35 split myth...
Post on Mon Apr 05, 2010 5:57 pm  Dave
It was not in a committee meeting packet, so it would not be in our regular posting, but I felt it prudent to put the info out for readers to digest. Lot of numbers and it is a daunting read.

Good idea though and I will request that it be placed there.

D
Re: Debunking the 65/35 split myth...
Post on Mon Apr 05, 2010 7:08 pm  seek2mend
Definitely daunting. I got as far of Mr Tobin's #2 and my radar went up.

Does he understand that our tax structure allows much of the burden to be placed on our very vibrant commercial sector? Of course he does. Does he understand that with the stroke of a selectman's pen that tax burden can be shifted back towards an unsuspecting homeowner? Probably not.

My point is this. His #2 suggests we do not support schools because we did not support the 2006 override which forced the closure of the North School. I was here. The override failed for a number of reasons. But the long and short of it was we did not need 3 schools.
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Re: Debunking the 65/35 split myth...
Post on Mon Apr 05, 2010 7:14 pm  mkreyssig
Dave...did you post this in google docs? I am being denied access for some reason. Maybe it is my browser?
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Re: Debunking the 65/35 split myth...
Post on Mon Apr 05, 2010 9:08 pm  Dave
Yes it is a Google doc...but I set it to shared doc...Seek you saw it correct?


Will recheck the settings-
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Re: Debunking the 65/35 split myth...
Post on Mon Apr 05, 2010 9:25 pm  Dave
Hmmnnn...somehow I unshared it but no worries..sharing again...

Seek I too am digesting and will try to get answers on things like "fixed costs" that area went way up in 2003-2004... I want to find out why. As that went up, the education allotment went down.

I assume the author looked at the entire tax structure but I will look through things again. Also to my knowledge the author is not tied to Seekonk and has no interest in the who and why pertaining to closing North School.
Re: Debunking the 65/35 split myth...
Post on Tue Apr 06, 2010 6:11 am  seek2mend
[quote="Dave"]Yes it is a Google doc...but I set it to shared doc...Seek you saw it correct?]

No. But then again, I haven't tried yet. I will try to get to it today.

I do remember Mr Carroll explaining how the 65%/35% split was arrived at. Expenses such as health insurance were deducted from the towns gross revenue. Is this still the case?
Re: Debunking the 65/35 split myth...
Post on Tue Apr 06, 2010 9:33 am  tombenoit
Dave;

Clearly by the title of your post, you are already convinced that the 65/35 split is a myth. I can be convinced - but - I need to be convinced. I would be very interested in seeing Mr. Tobin's entire report (I hope it is more than your first post). I would also want to understand the source of the numbers quoted and who had engaged Mr. Tobin for the report.

There are references to 'fixed costs' in the report and spreadsheet. A definition of the town budget line items that are included here is critical since that plays into the 'split' calculation. The 'split' was first utilized when Mr. McLintock was on the board of selectmen and I was on the school committee. It was proposed and architected by the selectmen with the aid of the then finance director. The concept then was that fixed costs were non-discretionary costs such as debt service, health insurance, etc. While the town boards could influence the amount (i.e re-issuing bonds, changing health care insurance, and implementing co-pays, etc), at the end of the day, these items had to be paid. The remaining available funds were then made available to the two main boards for their budgets. The selectmen would have to figure out how to provide all their services with what they received and the school department would do the same for education. Each board had to prioritize within their budgets between what was core to their role and what was not. Part of that agreement was that any windfall from the state would be available according to the split and and shortfall would also be assessed according to the split. Free cash WAS NOT available.

Again - I really want to see all of the information from Mr.Tobin. When the school committee utilized a sub-committee system, I chaired the finance sub-committee. I believe I can provide an independent view but still ask probing questions.
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Re: Debunking the 65/35 split myth...
Post on Tue Apr 06, 2010 10:32 pm  Dave
Tom are you able to see the spreadsheet...I am curious on your thoughts about the history of the fixed costs line.
Re: Debunking the 65/35 split myth...
Post on Wed Apr 07, 2010 8:09 am  tombenoit
I can see the spreadsheet - but - without information on the source of the data and what is comprised in the fixed costs lines I can not draw any conclusions. Clearly there appears to be a sharp increase a few years ago - but - again, the devil is in the details.

I do not want to do any speculation.
Re: Debunking the 65/35 split myth...
Post on Wed Apr 07, 2010 9:02 am  seek2mend
This is a bit off topic. But I did link from the financial speadsheet to the 2009 per pupil spending report. What I found absurd is that Seekonk spends above 100% more for out of district services than the state average. We spend $44,856 while the state average is $21,024. The difference is $23,832.

Without knowing the details, IMO there are two ways we can look at this:

1) The school dept is doing something very right and saving taxpayers money by outsourcing and getting more bang for the buck.

2) The school dept is doing something very wrong by wasting taxpayer money while at the same time shortchanging the students.

These are the extremes, of course. The truth probably middle lies somewhere in the middle.
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Re: Debunking the 65/35 split myth...
Post on Thu Apr 08, 2010 3:01 pm  mkreyssig
I don't think that number is accurate Seek. I am pretty sure the School finance director stated at the open forum that the cost per student was around 22K.

Like Tom said the Devil is in the details, but I am curious to know why the Fixed Costs increased by 10% from 2004 on, and what exactly qualifies as a fixed cost. Based on that increase, if I were to speculate, it would be two things. 1) Something increased dramatically in cost. 2004 was when we started seeing the cost of petroleum rise dramatically, so it's possible that is the case. Or 2 - something was changed in the whatever formula or method that is used to determine what qualifies as a fixed cost.

Or maybe it was neither...but something changed in 2004.
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Re: Debunking the 65/35 split myth...
Post on Thu Apr 08, 2010 3:02 pm  mkreyssig
oh...and another interesting peace of data is the town population decline since 2004 as well.
Re: Debunking the 65/35 split myth...
Post on Thu Apr 08, 2010 5:54 pm  tombenoit
We can continue to speculate on what is in the fixed costs and what cause the increase. Who can provide that information.

While waiting for those details - when did the debt service on the Martin/High School start to hit the books. Debt service is definitely a fixed cost and it typically takes a few years for the state reimbursement to start flowing.
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Re: Debunking the 65/35 split myth...
Post on Fri Apr 09, 2010 10:34 am  Dave
I am working on defining fixed costs. Something did change back in 2004 and I am trying to confirm if this was a change in how health care expenses were presented.


I am also waiting on a breakdown in the debt line. When I titled the post as debunking my intent was to show how IMHO the system creates an imbalance. Because the idea behind the ratio split only applies to what is left of the pie and not the entire budget, then there would be natural tendency for the two sides to justify "spending' into as a much of the debt as possible. No wonder the politics is always an us vs/ them mentality.
Information is available
Post on Mon May 10, 2010 10:35 pm  atenreiro
Dave, I am on the finance committee, feel free to contact me with any other questions.

In 2004 the increases in Debt Service were ~78,000 for school bus leases (5 years), ~467,000 for Martin School Interest, ~115,000 for various other Cole Street, DPW, Town Hall.

In 2005 the increases in Debt Service were ~1,400,000 for Martin School Principal & Interest, 2nd year of bus leases, ~48,000 for town side listed above.

The fixed cost items were almost exclusively health insurance premium increases.

The 65/35 split has nothing to do with what percentage of the budget in school vs town but rather how the remaining town general revenue pool after subtracting fixed costs is allocated to each.

The finance committee meets monthly (3rd Tuesday) and these are all good questions for discussion. The finance committee is/are the eyes and ears of the town meeting i.e. the voters. We keep an awful lot of historical data and if we can not answer the question, we will help find the answer. The finance committee works on behalf of the voters, and is happy to respond to questions.
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Re: Debunking the 65/35 split myth...
Post on Fri May 14, 2010 9:27 am  Dave
Thank you very much for contributing Antonio. I suspected it had something to do with health care and your breakdown on debt was very informative.

I will say that I have found the Finance Committee one of the best groups to work with and that they say what they mean and have not shown to be influenced from politics.
 

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