Archives for posts with tag: Budget

To meet school payroll and other expenses without layoffs or a cap on raises, we will arguably need something in the neighborhood of a 5% tax increase each year.

Unfortunately, very few people are experiencing 5% annual increases in household income.

Over time, that’s a problem.

Take a family earning $150,000 in 2012 paying $15,000 in school taxes. Assume property taxes increase by 5% each year, while household income increases by the national average of 2%.

Here’s what happens in 10 years time:

Year Household 
Increases
2%/year
Total
%
Change 
School Taxes
Increase
5%/year
Total
%
Change
 % of
Income to
School 

Taxes
 Year 1  $150,000  $15,000 10%
 Year 10  $182,849  22%  $24,433  63% 13%

In Year 1, this family spends 10% of income on school taxes. Over the next decade taxes rise by a total of 63% while income rises by only 22%, so now this family is spending 13% of household income on school taxes (and their children are taking out loans to pay for college).

When people talk about school spending and taxes being “unsustainable,” this is what they mean. The only way to fund Irvington schools at the level we are funding them is to gentrify: the “big rich” will have to move in, and the “little rich” will have to move out. It seems to me that this process has been taking place for some time now.

The “big poor,” a term coined by my friend D., need to move to Connecticut.

Or Riverdale. #SENDOUT

compound calculator
percent change
division calculator

AND SEE:
What people who do not have children in the schools pay
to educate the children of people who do

How we got here
4 is not 2
Budget vote
Core Knowledge: curriculum & property values

 2011-2012 – school taxes for a current BOE member w/2 children
 SCHOOL TAXES $14,859.08*
 BUDGET $50,324,892.00
 ENROLLMENT  1756
 COST PER PUPIL  $28,658.82
 COST FOR 2 CHILDREN IN IUFSD  $57,317.65
WHAT PEOPLE W/O CHILDREN CURRENTLY IN IUFSD SCHOOLS PAY TO EDUCATE 1 BOARD MEMBER’S CHILDREN  $42,458.56

The essence of public school funding is that people who do not have children in the schools subsidize people who do. That is why people who do not have children in the schools are the moral – and legal – equal of “school parents.” People who do not have children in the schools enjoy (or should enjoy) precisely the same right to express their views on any and all matters pertaining to their schools, to be listened to, to influence policy and curriculum, to run for school board, and to serve on the school board. Public means public. source: Greenburgh Information System

AND SEE:
PW: mothers on the school board
PW: meaningful ideology (mothers on the school board)
A woman without children serving on the school board
Bob Grados: skin in the game
Skin in the game: audacity
Peter Meyer: skin in the game
Fathers on the board
Projected school spending and enrollment 2012-2013
#SENDOUT

 BUDGET
 YES   904  57%
 NO   425  27%
 ABSTAIN   249  16%
 TOTAL  1578

Election: May 15, 2012

The folks in the press can quote me. We will need to go over the tax cap next year.
– BOE member Bob Grados
meeting of the Board of Education
March 6, 2012
Tape #5
20:53:55


AND SEE:
What people who do not have children in the schools pay
to educate the children of people who do

How we got here
4 is not 2
Budget vote
Core Knowledge: curriculum & property values

2011-12 enrollment = 1,756
2012-13 projected enrollment = 1,740 (as presented at BOE meeting)

source: Assistant Superintendent for Business IUFSD

Next year’s budget: $51,156,000
Per pupil spending: $29,400


WHITE LINE BREAK
UPDATE 6/9/2013
Enrollment as of Friday 5/10/2013: 1,799
Per pupil spending: $28,436

AND SEE:
What people who do not have children in the schools pay
to educate the children of people who do
How we got here
Enrollment back to 1977-1978
4 is not 2
Budget vote
Core Knowledge: curriculum & property values
16 new houses, not 50
Enrollment back to 1977-1978

The basic issue we face is simple arithmetic:

Taxes are capped at two percent, but the contract promises 4.

According to an estimate provided by the Assistant Superintendent, under the new contract the average teacher in Irvington will receive roughly a 4% increase in compensation each year until June 2016 next school year.*

Four is not two. That is the problem.

Although “four is not two” is obvious, percent change is not. With percent change, a number that sounds “small” can actually be “large” if it represents a large percent change (and vice versa).

Here is the way I’ve started to think of it:

Under the Irvington contract, if you pay a teacher $100K this year, you have to pay him or her $104K next year, on average.

That is a 4% increase, but we are capped at 2, so you have to find $2K in cuts to ‘pay’ for the raise.

Hence: layoffs. Some teachers are laid off so that other teachers can have 4% raises.

But if you paid a teacher $1.00 — just one dollar — for an entire year’s work, you would still have the same problem. The contract would require that he or she be paid $1.04 next year, and you would have to find two cents in cuts to pay for the 4-cent raise. Four isn’t two, and four never becomes two no matter how “small” the numbers you’re dealing with.

In short, the absolute dollar amount doesn’t matter; it’s the percent change that counts. So the problem isn’t that Irvington teachers are earning “too much;” the problem is that the yearly increase in their compensation is twice the tax cap. The increases are increasing too fast. 

THAT is the issue, and we can’t ‘cut’ our way out of it.

Yes, we can close Main Street School and potentially save a great deal of money. But in terms of the tax cap, closing Main Street School is a one-time deal. We wouldn’t need layoffs the year we closed Main Street, but the very next year we’d be back to square one because teachers are still getting 4% increases, and four isn’t two. To my knowledge, there’s no provision in the law allowing districts to ‘bank’ big savings in one school year to apply against the tax cap the next year. **

Yes, we can raise class size and save money, but that, too, is a one-time bonus to the budget. We would avoid layoffs that year, but the next year we’d be back to cutting.

Yes, we can cut electives. Again: a one-time bonus.

In each of these cases, cuts reduce spending, but they don’t fix the rate of increase. As long as we have a union contract in place that guarantees average annual increases of 4%, we can’t meet the tax cap without layoffs. The contract is funded by layoffs.

The logic of percent change also means that encouraging older teachers to retire so we can hire much less costly young teachers actually makes the problem worse because new teachers receive Step increases every year (usually 3%), while older teachers don’t.

We have only two possible solutions:

  • Persuade the union to agree to cap raises at 2%
  • Raise taxes by roughly 5 to 6% every year (a 4% budget increase is a 5 to 6% tax increase because of tax certs.)

It’s conceivable there is a third option: generate enough revenue outside of the tax levy to make up the shortfall. Perhaps parents could fund raise as they do in California (where property taxes are much lower and must be shared with all schools in the state – very different situation) or the district could rent out Main Street School and increase the rent enough each year to make up the shortfall —- ?

* update 5/26/2012: Looking at the terms of the contract again, I’m wondering whether 4% is too low an estimate for the year after next, when the one-year freeze on “increments” (steps) comes to an end.

** Apparently you can “bank” a savings from year to year up to 1.5% (of the budget you would have been allowed under the cap? Not sure; I’ll look it up. I don’t know how the sale of property applies to the budget.) The principle remains the same, however. If you bank a savings, you must use it to pay 4% compensation increases the next year, and the problem begins anew.


AND SEE:
What people who do not have children in the schools pay
to educate the children of people who do
How we got here
4 is not 2
Budget vote
Core Knowledge: curriculum & property values

Info from July 1, 2010 (most recent year analyzed in district actuarial report):

  • The district has 271 active employees and 135 retirees. Figures do not included spouses.
  • Average age of IUFSD employees is 44 for men, 46 for women.
  • Of active employees, 43 are currently eligible to retire.
  • As of July 2010, all employees, retirees and their spouses receive free healthcare benefits for life (no co-pay, no deductible).
  • Present value of all benefits (other than pension) is $100,000,000.

I am still learning the meaning of “present value.”

In a nutshell, “present value” means that to cover these future costs, which we have promised to pay, we would need to put $100,000,000 in a bank account today at an interest rate of 4%.

NOTE, however, that state law does not allow us to do this: state law does not allow us to fund (save money for) the benefits we’ll be paying.

By law, we are required to pay-as-we-go, which means that future parents and non-parents alike will have to pay out that $100,000,000 (and the figure will be higher when residents pay it, of course, because future taxpayers won’t have the 4% compounding interest they would have had if the money had been saved and invested).

I’m going to fact-check this post and come back to it.

AND SEE:
4 is not 2

Here’s a quick back-of-the-envelope calculation to estimate the shortfall we face in 2013-2014.

Assuming no change to “Other” expenses (which is probably unrealistic), I come up with a $610,000 shortfall. Personnel is 80% of the budget, so If the union does not agree to cap raises at 2%, that would mean roughly 6 teachers laid off in order to fund 4% raises.

(6 teachers because under LIFO the teachers earning the lowest salaries are laid off first. You have to lay off more of them to make up the shortfall.)

Obviously, these are very rough calculations, but they’re not a bad place to start.

FTE = full-time equivalent Essentially, 1 FTE = 1 teacher.

2012-2013 BUDGET
Personnel $40,800,000
All other $10,200,000
TOTAL $51,000,000
 2013-2014 BUDGET
 4% increase Personnel  $42,432,000
 All other (0% no increase)  $10,200,000
TOTAL  $52,632,000
PERCENT INCREASE   3%
 budget w/2% increase $52,020,000
SHORTFALL  $612,000
 # FTEs POTENTIALLY LOST  ~ 6

AND SEE:
4 is not 2

My sister says that a bar graph is much clearer than the line graphs I used in my first post. I think she’s right.

This chart shows the average size of three hypothetical employees’ annual rise:

BLUE: average Irvington teacher
RED: average employee of state and local government
YELLOW: average employee in private sector

The issue here isn’t the absolute amount of IUFSD compensation — but, rather, the speed with which it is increasing.

Every year for many years Irvington teachers have had a higher percent-increase in compensation than the average in the private sector and in state and local government. This is the difficulty, and this is what people are talking about when they say school spending is “unsustainable.”

Employee compensation can’t go up faster than taxpayer compensation forever. It’s unsustainable.

DATA:
Wages & Salaries: Private Industry Workers (FRED)

Wages & Salaries: State and Local Govt (FRED)
AND SEE:
4 is not 2

click image to enlarge

3 employees with some but not all salaries

Data used in chart

What’s important to notice here is that Irvington teacher wages, which will increase at an average rate of 4% a year for the next 4 years, are likely to pull away from taxpayer wages.

NOTE: In the chart above, I have assumed the following percent increase in wages each year:

  • 4% for Irvington teachers
  • 1.1% for  state and local government employees
  • 1.9% for private sector employees

If that assumption holds true, the gap between the blue line on top and the green and red lines down below will grow wider.

AND SEE:
Average teacher compensation IUFSD

Wages & Salaries: Private Industry Workers (FRED)
Wages & Salaries: State and Local Govt (FRED)

AND SEE:
4 is not 2

Estimated median HOUSEHOLD income for area code 10533 in 2010:  $113,840
Estimated median HOUSEHOLD income area code 10591 in 2010: $99,265
(Estimated median household income for New York: $55,217)

Average INDIVIDUAL teacher salary 2011-2012: $96,400*
(Average teacher salary 2012-2013: $99,150.00)

I don’t have a figure for average teacher salary in 2010. I’m guessing it was around  $89,000.

How does an individual income of $89,000 compare to a household income of $99,265 or $113,840?

I don’t know the answer, but I suspect that median household income of Irvington teachers is higher than median income household of IUFSD residents.

AND SEE:
4 is not 2

* I don’t have a median figure for Irvington teachers.

Figures from Asst. Superintendent For Business & Facility Mgmt:

Average teacher cost of compensation (w/o lane increases,* life insurance, disability insurance, workers comp):

2011-12: $129,644.27
2012-13: $134,739.75
Percent change: 3.93%

Complete set of figures:

2011-12
Average teacher salary $96,400
Social Security $7,374.60
TRS pension $10,710.04
Health insurance $15,159.63
TOTAL: $129,644.27

2012-13
Average teacher salary: $99,150.00
Social Security $7,584.97
TRS pension: $11,739.36
Health insurance: $16,265.42
TOTAL: $134,739.75

PERCENT CHANGE: 3.93%

* Lane increases are raises received upon completion of further education. Most lane increases are 5%.


WHITE LINE BREAK
UPDATE 5/29/2013

2011-12
Average teacher salary $96,400
Social Security $7,374.60
TRS pension $10,710.04
Health insurance $15,159.63
Life Insurance $84.00 ($7 per month x 12 months)
Disability Insurance $144.00
TOTAL: $129,872.27

2012-13
Average teacher salary: $99,150.00
Social Security $7,584.97
TRS pension: $11,739.36
Health insurance: $16,265.42
Life Insurance $84.00 ($7 per month x 12 months)
Disability Insurance $144.00
TOTAL: $134,967.75

The district has 310 employees in all, of whom 180 are teachers.
2011-12 enrollment: 1756
projected enrollment 2012-13: 1740
projected per pupil spending 2012-13: $29,400

Salary Schedules 2009-1010 through 2015-2016

AND SEE:
What people who do not have children in the schools pay
to educate the children of people who do

How we got here
4 is not 2
budget vote
Core Knowledge: curriculum & property values

(click on images to enlarge)

Quick note for people who feel they’re not good at math: These graphs show the percent change in people’s wages from the year before.

The figure 7.5%, on the left side of both graphs, means that in 2006 the “average” Irvington teacher received a 7.5% increase in salary over what he or she earned in 2005. That same year, the “average” employee of state and local government received a pay increase of 2.8%, while the “average” private sector employee received an increase of 2.5%.

To make things simple (I tutor pre-algebra – !):

Suppose it’s 2005, and we have three workers: a teacher in Irvington, a person working in the private sector, and another person working for state and/or local government.

Let’s say that each worker earns $100,000 for that year’s labor.

Here’s how things change the next year, 2006:

  • Irvington teacher now earns: $107,500.
  • State and local government worker now earns: $102,800
  • Private sector worker now earns: $102,500

The year after that (2007), here’s the situation:

  • Irvington teacher now earns: 115,562.50
  • State and local government worker now earns: $106,706.40
  • Private sector worker now earns: $106,087.50

After just two years, the Irvington teacher is pulling decisively ahead of both the private sector and the government employee – and this difference continues to compound over time.

The gap gets wider.

+++++

Arguably, the two graphs above tell our story.

First of all, by way of background, until very recently no one knew what the average teacher compensation actually was. Proposed budgets were extremely difficult to decipher, and the district flatly refused to tell voters – or the one board member who asked – what the average teacher was being paid. Contracts had to be FOILed, and the salary schedule was not published.

Average teacher salary was the one figure many people needed in order to make sense of the situation. Most of us aren’t accountants, and the arithmetic of percent increases and compounding over time isn’t intuitive.

All of that said, here is the story I think these charts tell:

  1. Prior to the crash, the district was paying salary increases to teachers that were in all likelihood far above the salary increases many or most Irvington taxpayers were receiving.
  2. After the crash, in a depressed economy, the district is still paying salary increases at least double what workers in the private sector are receiving (assuming they still have jobs) and nearly 4 times as large as the increases government workers are receiving (again, assuming the government worker still has a job).
  3. Irvington voters may have failed to notice just how large the district’s annual pay increases were in part because the annual increase in home value was even higher. We were in the midst of a boom, and (almost) everyone was getting richer. The financial reality of district budgets failed to register on voters (and the details of the budget were obfuscated by the administration).
  4. The crash changed everything. Home prices are now far below the level they were when voters were funding 7.5% wage increases and voting ‘yes’ on bonds.
  5. For their part, although Irvington teachers are still receiving annual raises double that of most taxpayers’ annual raises, they also, between 2008 and 2009, suffered a far steeper drop in their annual wage increase than private or government workers: from 7.5 to 4.5 on the day the 2006-2009 contract expired. Their increase decreased more. That matters greatly. People make financial decisions on the basis of projected future income, and suddenly, virtually overnight, teachers’ projected future income changed dramatically.
  6. Thus teachers feel they have made unprecedented concessions during negotiations for the new contract, while taxpayers feel they can’t afford to fund 4% pay increases when they themselves aren’t receiving anything close to 4% pay increases and the value of their homes has tanked.

Both are right.

Wages & Salaries: Private Industry Workers (FRED)
Wages & Salaries: State and Local Govt (FRED)

AND SEE:
4 is not 2

Average pension for new retirees: 2011
Compare and contrast: IBM raises & benefits

Hamilton Project Jobs Gap Calculator