by Lynn Mangan
Imagine running a business in a world where you can’t generate new revenue. Your income statement is always flat – unless you go to the community and get approval for additional funding. There are no meaningful options for raising prices, offering new products, raising investment, or taking on debt without public approval. These are the unique challenges our schools face.
Some key drivers of this situation include:
- Ohio public schools don’t receive increases to their revenue when our property values increase (HB 920) or inflationary costs rise; despite the fact that the current funding system was declared unconstitutional due to DeRolph vs. State of Ohio.
- While public schools can increase a very small portion of their budget through pay to play fees, technology fees or tuition for non-required classes (ex. Full day kindergarten), this doesn’t come close to covering the costs needed to continue to educate our children well.
On the other hand, costs go up. All the time. And I’m not talking about new programs, investments in new capabilities at this point – although the community also agreed to invest in those areas in 2014. I’m talking about structural costs of running a school ‘business’ – salaries, health care premiums, building maintenance, utilities, security, safety, etc. They eat away at the operating funds that should be used to provide superior services to students and the community.
In 2014, the Loveland community voted to increase the School’s revenue stream with a direction to deliver going operations AND improvements in programming. Our schools were ranked pretty low relative to the state (433 out of 608 public school districts in value added ranking in 2016 when the investment from the 2014 levy started), and the community wanted to invest in turning that around. Since then, through introductions of new programs focusing on STEAM classes, AP and gifted curriculum, counseling, reading, and safety, Loveland schools have consistently improved. As of 2019, they are ranked #22 out of 608 districts in value added measures. Loveland schools are a shining example of outcomes that can occur when schools are supported by their community.
Now, here we are in 2020, 6 years later and we want to sustain and optimize the community’s investment from 2014. In that time, structural costs of doing business as a school have predictably risen.
- Health care premiums saw a 10% increase last year after 3 years at 0%
- Instructional materials have seen significant cost increases
- Technology is needed at all grade levels and for all staff members
- Investments in student and staff safety have rising costs
Yet, we have to go out for a public vote again. Some in our community are stating the district has spent too much. Here are a few thoughts for you to consider:
- Total expenses for the prior 5 years increased by an average of 3.82%
- General fund expenses (those funds used by revenue generated from property owners) for the prior 5 years have increased by an average of 5.05%
- CUPP Operating Expenses only contain two funds that are reported to the state (classroom and non-classroom instruction). Over the past five years, CUPP operating expenses have increased by an average of 5.22%
In private business and a personal budget, we have certain years when we are making investments and expenses are higher than the average year. It is not uncommon to see expenses rise as investments in R&D occur. The same goes for a school. Look at the trends since the district started its investment from the 2014 levy and you’ll see that the averages paired with the outcomes delivered make sense. Take a look at the reasons why the costs went up and I guarantee they will be the same expenses going up in your personal or company budget (ex. healthcare, technology, safety, etc.).
All of the measures above focus on a backward look at expenses. So, what does the future look like? The district is listening to our community and knows that we need a growth rate in expenses that the community can sustain. As a result, the board has committed to keeping the general fund expenses under 3% for the next 4 years (the current forecast is at 2.70%) and has already reduced $2.7 million in expenses.
I’d also ask you to consider the following: unemployment rates are at an all time low in our country. That means, retaining talent (employees) for every type of employer is that much more difficult. Demanding no raises for those employees, who are regularly innovating on the newest skills that our students need to succeed when they graduate, is not a formula for success. Every employee in our district needs to be innovating to provide students with the academic, social and emotional skills they need to succeed today and that talent isn’t free. Like a private company, our district’s board has a compensation committee that evaluates wages relative to peers and the overall labor market to proactively address wages and overall benefit packages to retain top talent.
If you’re interested in how the district is optimizing resources, take a look at some of the changes happening at our high school:
- 418 students are enrolled in business classes (financial literacy, marketing, investments and money management, honors accounting, Tigers Inc (partnership with local businesses)) that did not exist up until two years ago.
- 211 students are enrolled in applied technology classes through the addition of two AP classes and numerous College Credit Plus courses (computer networking/system admin, web development, database management, virtual reality and video game programming)
Like private business, there are supply and demand needs. This is a classic example where the district realized there was a demand and since 2015-16, invested to meet the demand.
Finally, imagine if you only received your paycheck twice per year and had to budget your money to cover 6 months at a time? This is the case for Ohio Public Schools. The district receives property tax twice per year. Thus, the cash balance that the school maintains needs to be sufficient to cover the recurring expenses of the district between payments. The cash balance the district is targeting is not “a rainy day fund.” It is a fund to maintain cash to meet monthly expenses. This plan is very similar to the deposit reserves that a bank is required to keep on hand to ensure that they have cash on hand for all withdrawals. Not being able to pay a withdrawal at a bank is very similar to not being able to pay bills at a school. The district must plan several years ahead for cash needs.
In summary, our public schools are challenged with:
- Funding that doesn’t change when property values or inflation changes and structural costs that are constantly trending upward
- Funding that is primarily received twice per year requiring cash balances to be maintained carefully
- A world in which the skills needed to compete in the job market are changing at a rapid pace
- School staff who are required to constantly learn new courses and skills to teach our children
- Unemployment rates that are at all time lows, and
- A community that wants what is best for our children – “Preparing our students for tomorrow, today,”
Providing students in our community with outstanding academic, social and emotional skills so that they are productive citizens each day when they leave the schools as well as when they graduate is the primary objective of our schools. Educating approximately 4,500 students in our community is no easy task.
This a complex problem that from a revenue and cash balance perspective varies from what many of us encounter in the private business world each day. Our district is committed to continuing to deliver outstanding outcomes for our children while making sure our spend is less than a 3% average increase. I encourage each of you to invest in our community’s students: know the facts, consider what you want for your community and VOTE YES on March 17th. And after March 17th, let’s continue this dialogue and work with our State legislature to transform our current unconstitutional school funding.