Memo to Lansing: Results Matter More than Ideology

Gov. Jennifer Granholm lamented in a quote the other day that it may be too late for state lawmakers to pass a statewide retiremement incentive for government workers including public school teachers.

“They should have gotten that retirement bill done last week,” Granholm says. “Frankly they should have gotten it done a month ago.”

Granholm’s reference to “they” speaks volumes.  Does SHE not have a role in “getting it done”? Does she think she can just unilaterally concoct a bill and expect it to sail through the legislature untouched?  If so, how naive.

The inevitable failure of this exercise to adopt a plan that might provide some relief to Michigan K-12 public schools speaks volumes about Lansing’s collective inability to get anything done.  This case is particularly disturbing.

Here you have all three players, the governor, Senate and House, all agreeing there is an opportunity here.  Yet each wants to get it done on their own terms with no compromise.  The end result?  We’ve seen it before. Nothing gets done.

How disturbing is this?  In a case where the three parties agree conceptually, they cannot deliver a solution for the benefit of the people they serve.  What about the majority of other issues upon which they cannot conceptually agree? 

Herein lies the problem of dogmatic devotion to political ideology.  When such devotion leads to the utter inability to deliver workable solutions to the people you represent, guess what?  Your political ideology has failed everyone.  Therefore as a policy maker YOU are a failure.

“Spare me the labor pains. Show me the child.”

I work in sales.  I’ve worked for some pretty tough sales managers in my day.  One particularly difficult manager had a message during sales forecast and results reviews.  He’d tell sales reps who blithered through a litany of excuses why the results were not where they should be, “Spare me the labor pains. Show me the child.” 

His message?  You are paid to deliver results.  Period.  Find a way to get it done and if you can’t, well, find a way to get it done.

Policy makers are elected to deliver results.  Results are the name of the game.  The citizens of Michigan are clamoring for results, yet we are getting none.  But political ideology?  Oh, we’ve got plenty of that!

An effective policy-maker finds a way to get things done.  If you cannot get things done but take refuge in spouting political ideology, quit pretending to be a policy-maker and go become a talking head.  Perhaps that would be more fulfilling for you.  I think both CNN and Fox are always looking for more.

For the people of the state of Michigan, the broken record routine in Lansing is undeniably unfulfilling – and frankly unacceptable.

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GPPSS Board of Education and GPEA Reach Tentative Agreement

Last night the Grosse Pointe Public Schools Board of Education authorized the administration to enter into a Tentative Agreement with the teachers union, the Grosse Pointe Education Association (GPEA).  Following the Board’s approval, the GPEA subsequently also authorized the Tentative Agreement.

Until the GPEA follows their formalized procedure, details of the Tentative Agreement cannot be shared.  The timeline, as I understand it, is as follows:

  • Monday, May 3 – GPEA General membership meeting to review provisions of the proposed contract.
  • Monday, May 10-GPEA  General membership meeting for questions and answers about the proposed contract
  • Monday, May 17 – GPEA Ratification Election

Following these activities, should the membership of the GPEA agree to the terms of the Tentative Agreement, the Board of Education would formally ratify the Tentative Agreement in a Open Session.  If the timeline above is adhered to, that should be soon following the May 17th vote.

I look forward to keeping everyone appraised of this progress, but again I cannot share details of the Tentative Agreement.  Stay tuned.

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Proposal A Giveth and Taketh Away

The landmark tax and school finance legislation approved by taxpayers in 1994 has been much maligned as of late, but there were less complaints when the state economy was healthy.  A review of the staffing, tax and compensation trends of the Proposal A era may help us make sense of the current challenges.

A Grosse Pointe South teacher’s quote in the paper may sum up the general feeling among his peers:

“The governor, the Republican Party and even school boards have made teachers their whipping boy.  I just don’t enjoy coming to work any more and looking toward that kind of a future.  It seems too many people care more about the cost than the quality of education.”

Was this said a couple weeks ago along the picket lines formed by current members of the GPEA?  Not quite.

It was said 16 years ago by my calculus teacher, the brilliant Frank Ford.  It is sad to think that Mr. Ford felt this way as his career came to a close just as it is sad to think this may be well how most our teachers feel now.  But was Mr. Ford’s dour outlook of the future merited?  Let’s take a look at what has transpired since then.

Using state of Michigan Bulletin 1014 data, GPPSS’ own data, and inflation calculators I compiled the following statistics comparing the GPPSS of 1993 to 2009, a tidy bookend view of the Proposal A era.

Here’s some things that catch my attention:

  • Enrollment is higher now than 16 years ago. Not by much, but higher nonetheless. Despite that, our elementary class sizes are smaller.  This is good data to reflect upon under the shadow of the growing trend to close schools.
  • Our per pupil revenue was 14th highest in the state and 16 years later we rank 49th – evidence of Prop A’s design to smooth per pupil funding differences among school districts.
  • Our average teacher salary in 1993 much more closely aligned with our revenue ranking – 12th in average salary to our 14th ranking in revenue.  Despite our drop to 49th in revenue per pupil, we now rank 1st in average teacher salary.
  • Our administrative costs per pupil ranking has dropped precipitously, down from 56th to 387th in the state.  So not all employee categories have enjoyed the same benefits as others. 
  • Despite being ranked #1 in average teacher salary, in inflation adjusted dollars, our average teachers salaries are 0.9% less than in 1993.  But…
  • In the same inflation adjusted dollars, teacher benefit costs (namely retirement and health care) have exploded by a staggering 76% and 28% respectively.  Prop A shifted the retirement burden to local school districts, a benefit employees enjoy but that comes at a price not always recognized for what it is – a very expensive compensation vehicle.
  • Teacher total compensation in inflation adjusted dollars has increased by 7.6%.
  • Factoring a more favorable student to teacher ratio, the GPPSS total inflation adjusted teacher compensation costs increased by 18.4%, outpacing the inflation adjusted 14.8% increase in General Fund budget.  This also means that other expenditures have dropped substantially to support this imbalance.
  • Teacher and Teacher Assistant staffing increased by 14.5%, a 3.5 multiple of our 4.1% increase in student enrollment.
  • Meanwhile all other employee staff levels decreased by 32.5% with secretaries, custodial/cafeteria, and other non-instructional staff taking the biggest hits.  Amazingly, the total number of employees is essentially identical to 16 years ago (with more students), but the distribution shifted more in the favor of direct instructional employees.
  • Local property tax millage revenues in inflation adjusted dollars have decreased 71%.  This was one of the primary objectives of Proposal A.

Like a gentle breeze at our backs for most of its existence, Proposal A has delivered substantial benefits to most parties – but now the breeze has shifted.

The data shows that no teachers in Michigan have fared better than Grosse Pointe teachers in the Proposal A era in regards to salaries, which in our case have basically kept pace with inflation. 

With no associated compensation reduction to offset the massive increases in other benefits, the compensation package is clearly more rich. In 1993 as now, teachers make no contribution to their health care premiums, despite its substantial cost increase.  By state law teachers do contribute more to their retirement, but this has done little to soften its 76% cost increase to the district.  Throw in more favorable student:teacher ratio and the working conditions, like compensation, have also improved in the Proposal A era.

From 1993 to 2009 no employee category added more jobs to their ranks than teachers.  In the same period of time staffing levels of many other employee categories were reduced dramatically.  Secretaries and plant/cafeteria staff are down 38% and 30% respectively from 1993 levels.  Yes, we will lay off teachers in 2010, but a greater percentage of other employees will lose their jobs as well.

What about taxpayers?  We can’t very well isolate the cost increases from higher sales and income taxes brought about by Prop A, but undeniably property tax burden has been massively reduced.  Meanwhile SEV’s have kept pace with inflation.  Generally these should be viewed as favorable outcomes by taxpayers.

What other reasonable outcomes might the teachers and taxpayers of Grosse Pointe have preferred?  Is it reasonable that teachers should want to be compensated at levels even higher than their current #1 ranking, particularly in light of our drop in our per pupil revenue ranking?  Is it reasonable that taxpayers could want tax relief even greater than what Proposal A delivered?  There’s a pretty good argument here that Proposal A has been a fair and effective piece of legislation…when times were good.

So why has Prop A become the scapegoat for the current K-12 funding crisis?

The Proposal A dilemma is this:  What happens when the same economic forces that enabled increases in revenue per pupil which in turn drove increases in total compensation begin to stall or even reverse?

That’s where we are now. 

Our per pupil revenue has declined yet we have structural expense commitments predicated on the revenue increases that were the norm for most of the Proposal A era.  Gov. Granholm’s renege on 20J funds, a core component of Prop A, only further disrupted the delicate balance.  That’s the problem in a nutshell. 

Proposal A wasn’t particularly maligned as compensation increased and property taxes decreased.  But it’s clear now that the revenue model is not able to keep pace with the established expense pattern, a direct result of the state’s well-documented loss of wealth.  As state wealth rose so did compensation.  State wealth has dropped, but no one wants to acknowledge that perhaps compensation (of varying forms) must shadow state wealth in both directions. 

The potential decrease in income is an unfortunate prospect, but we enjoyed the fruits of Prop A and now we don’t want to taste its vinegar.

The Frank Ford’s of today probably feel much as he did then.  In Mr. Ford’s day the school boards could (and did) go back to taxpayers for property tax increases.  Today we do not have that option.  Mr. Ford probably didn’t like Governor Engler, but at least that governor and legislature had the political courage to bring about sweeping change in 1993’s time of crisis.  And history has proven that Grosse Pointe teachers had more reason to be optimistic than Mr. Ford was.

In 2010, political courage is nowhere to be found in Lansing, tempered in no small part by the well known sentiment of the voters’ distatste for higher tax burdens.  The voters in the state of Michigan have essentially said “we like Proposal A just the way it is.  Thank you very much. Figure out how to make it work with what it delivers.”

The data comparison from 1993 to 2009 shows what Proposal A delivers under good to normal economic conditions.  2010 gives us a glimpse as to what happens when that which had been able to giveth now begins to taketh away.

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MEA Admits It: Spending Fund Equity is a “Band Aid”

The Michigan Education Association’s official position on spending Fund Equity in response to the K-12 funding challenge says it better than I could.  They acknowledge it is a “band-aid.”  The leadership of the Grosse Pointe Education Association would be well served by not cherry picking the position of the MEA and taking a long-term view for the well-being of the Grosse Pointe Public School System.

I’ve written about Fund Equity previously and we need to revisit the topic now.

The topic got statewide attention last week when the House Education Committee Chairman, Rep. Tim Melton, sponsored legislation that would not allow K-12 school districts to maintain fund equity levels greater than 15% of their budget.

To provide some context for Grosse Pointe Public Schools, our Fund Equity is about 17% of our $105,000,000 General Fund budget.  So this bill would require us to spend $2,500,000.  To put THAT into context, our projected budget shortfall for next year is about $7,500,000.  So this would amount to Lansing “helping us solve” 1/3 of our problem.

So in the grand scheme of things, is this that significant?  After all, we DID spend $2,600,000 of our fund equity in October 2009.  Did our problem go away?  Of course not.  Spending more to mask rising salary, health care, and retirement costs never solves the problem.  But here is the significance of these discussions:

  1. By taking this action, Lansing is acknowledging that 15% is an appropriate level of Fund Equity.  The leadership of the Grosse Pointe teachers union, the GPEA, disagrees.  They have publicly advocated that Grosse Pointe’s Fund Equity levels should be reduced to 7%.  This provides their justification to fund additional annual raises (on top of the standard steps and lanes) of nearly 6% over the next three years.  Why would they think this way?
  2. The GPEA is an affiliate of the Michigan Education Association (the MEA).  The MEA’s lead economist, Ruth Beier, testified in Lansing in support of this bill.  This is no surprise.  But what is more significant? The MEA thinks 15% is too high. They believe 5% is the right amount.  So the leadership of the GPEA is more fiscally conservative than the MEA…by2%.  So we’ve got that going for us.
  3. Of greatest significance is that the MEA acknowledged that even spending fund equity is not a long term solution.  The direct quote from Ms. Beier is, “While we (the MEA) support this bill, we know that this is a short term solution.  It is a band-aid rather than a cure.  We caution against relying on this one time fix, and urge the legislature to come up with a way to close the structural deficit in the School Aid Fund.”  Ms. Beier, you and I could not agree more on that point.

So the GPEA leadership is dutifully singing from the MEA hymnal locally, but conveniently ignoring the second leg of their proposed “strategy” – one that is dependent on Lansing  to solve the long-term problem.  The leadership of the GPEA wants the taxpayers of Grosse Pointe to fund nearly 6% of additional raises to those on the top end of the salary scale by using fund equity when the leadership of the MEA acknowledges that without other structural change from Lansing, spending Fund Equity is nothing but a band-aid.  How many taxpayers in Grosse Pointe want to buy a $10,000,000 band-aid?

Lansing politicians haven’t shown the skill, will, or resolve to address the K-12 budget problem.  The politically convenient solution for them is to kick the can down the road, as they’ve been doing for years.  I’m not willing to bet the future of the Grosse Pointe Public School System on a sudden transformation in Lansing.

I’ve asked before and I will ask again.  How many of the taxpayers of Grosse Pointe have any faith that Lansing will address the structural deficit in the School Aid Fund that the MEA acknowledges exists?  The fact is they either don’t know how to do it, don’t have the will to do it, or are content to let the local school districts solve it on their own.  Until I see a shred of evidence to the contrary, I’m betting we need to solve this on our own.

I’ve been saying this for my nearly five years on the Board.  This problem is real and it is all ours.  There is no back door.  There is no way to avoid it.  Ignoring it only makes it worse.  The responsible school board takes a long-term approach to this problem.  Spending $10,000,000 of fund equity to fuel escalating salary, retirement, and health care costs without a pre-identified and agreed upon long-term solution would be nothing short of irresponsible.  I believe the taxpayers of Grosse Pointe want the school board to take the long-term view. I’ve written about it before.  This is the New Normal. We had better be able to deal with that.

Kudos to my friend and Birmingham Public School’s school board trustee Rob Lawrence for raising this issue in his blog.  Rob was able to get the documented testimony on this bill and posted it online.  You can see it below with Rob’s comments typed in red within it.

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Filed under Contract Negotiations, Current Events, State of Michigan Policy

Retirement Rate Increase: Granholm’s Back Door Cut

Things are starting to look eerily and sadly familiar in Lansing.  In the spirit of March Madness, Governor Granholm is attempting a back door cut that would make legendary North Carolina coach Dean Smith smile, but local school districts frown.  Let the political games began.  It’s Budget Madness.

A few weeks ago Governor Granholm unveiled her rough budget proposal.  As it related to the School Aid Fund, the source of 65% of GPPSS’ revenues, Granholm eagerly proclaimed that she would veto any budget recommendation that reduced per pupil funding.  Some estimates have the required per pupil reduction nearly at $268.  It doesn’t sound like much, but to our district that would reduce our revenue by $2.7 million.

So yeah for Granholm?  Hardly.  The beleaguered lame duck gov was less bold in her proposed increase to the school employee retirement system (MPSERS, discussed in detail here).  In her proposal, the MPSERS rate would increase from 16.9% to 19.4%.  For reference, this is the percentage of salaries paid to employees that the district must contribute on their behalf to their retirement pension and benefit fund.

Since there is NO discussion of an increase in the Foundation Allowance next year, translated into next year’s budget, that increase from 16.9% to 19.4% represents a loss of almost $1.4 million.  So net/net, this is the equivalent of a cut of about $175 per pupil.  Governor Granholm, spare the spin job. A cut’s a cut.

Meanwhile, those dastardly fiends in the Michigan Senate revealed their plan the other day.  They are holding fast to their “cuts only” approach to the budget and call for a per pupil reduction of $118, or about a $1 million loss for GPPSS.  However, in the proposal they call for a retirement rate increase far below that of Gov. Granholm – moving from 16.9% to 17.08% – an increase of a more meager $80,000 to district expenses.

It will be curious how the various stakeholders react to these proposals.  I have a pretty good sense.  Granholm’s plan puts lipstick on the pig because she knows most people don’t know the nuances of the economic implications of her proposal.  But in the background, it aims to preserve a rapidly deteriorating, and perhaps terminally ill, defined benefit program at the continued expense of local school budgets – the mother-lode of unfunded mandates.  This is precisely how individual employee costs increase and why we can afford fewer and fewer every year.

The Senate can claim they are staying true to their word with more cuts, and perhaps further their plan of forcing reform on the retirement system.  But oddly, in a role reversal, the Senate’s plan is actually better economically for local school budgets – not by a huge margin, but certainly better.

To paraphrase Gertrude Stein, “A raise is a raise is a raise.”

These are the subtleties of Michigan K-12 finances.  How many school employees recognize increases in district contributions to their retirement plans for what they are?  All too often, only salary increases are recognized as raises.  Make no mistake about it.  It is a raise, plain and simple.  When an employer spends more money for an employee’s personal benefit, regardless of whether the money goes to salary, health care, or retirement, that constitutes a raise.

Despite their different means, the proposals are fairly similar.  Neither are good news for local school budgets, but neither are as bad as what others are calling for.  As was the case last year, the worst choice Lansing could make would be to sandbag the local districts again by bringing forth these options only to drop the hammer well after budget decisions are made (ala the October 2009 cuts).

This is why prudent school districts budget conservatively.  The district carries all the risk in these scenarios.  Salaries are locked in.  So are health care costs and retirement rates, but our funding remains in doubt.  Not a good combination.  Yet when we spend within or below our budgets, certain parties claim we are “hoarding” funds.  But if the cuts of October 2009 taught us one thing it is this:  The Lansing politicians have no regard for the local school district budget.  It is solely up to us to mitigate that risk.

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GPPSS Budget Challenge in 5 Minutes

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.

  1. 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. 
  2. 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.
  3. 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.

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It’s Time GPPSS Moved Forward With No-Fee All Day Kindergarten

A loophole in how Michigan distributes per pupil revenue has long allowed public schools to get twice what they really deserved for half-day kindergarten students.  But charging for extended day kindergarten amounts to taxing residents twice.  For this and other reasons I am advocating a district-wide switch to a no-fee All Day Kindergarten program for 2010-11.

In my last post and at the Board of Education meeting on January 25th I spent a great deal of time emphasizing that Michigan public schools derive their revenue on a per pupil basis.  The per pupil funding is known as the Foundation Allowance.  The Foundation Allowance does not distinguish between between a half-day student and a regular, full-day student.  This has been a pretty good deal for school districts.

Why?  Simple.  If we receive full per pupil funding for half-day kindergarten students it means that we essentially educate them at half the cost of most of our other students.  This is good for the district and, arguably, the other district services subsidized by the business model.

But it’s not so good if you are among the ever growing group of families who prefer their son or daughter go for more than half a day of kindergarten.  In response to this demand school districts have created programs called Extended Day Kindergarten (EDK).  But many districts, including GPPSS, charge a fee for EDK.

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Filed under Current Events, GPPS Academics, GPPS Budget Decisions, GPPS Policy, Meeting or Agenda Announcement