I can scarcely begin today’s post because I don’t know which item to tackle first. For those who don’ t have the paper or haven’t seen it yet — here are my choices:
- Documents in Right-to-Know case released – page 1
- Tredyffrin Republicans will have a new look – page 1
- Editorial: “We Need to do things a little different around here” page 2
- Chester County employees put on notice that pay raises may be eliminated – page 23
I think what I would like to tackle today (in light of the fact that tonight is TE’s Finance Committee meeting) is the 4th one — which is sort of back there in the paper and might not get noticed. It’s online from the Feb 15th Daily Local. http://www.dailylocal.com/articles/2009/02/15/news/srv0000004699694.txt
The purpose of the article is to outline budget planning for 2010 — “Chester County finance officials have told department heads and elected officials they should plan to reduce their operating budgets 2 to 4 percent for next year.” (Note: The Chester County Finance Director is Denny Bolton, who was a long-time business manager for Owen J Roberts School District — so he knows the ins and outs of school spending as well as government spending). It is unlikely that any school district would plan for a spending decrease (which is where the editorial about doing things different (sic) comes in),
Key comments from article:
…the department heads and elected officials were urged to prepare two sets of preliminary budgets. One option should be for a 2 percent reduction, another for a 4 percent reduction …”This may be accomplished by eliminating nonmandated programs that do not align with the strategic goals or identifying operational savings…In either case, (2 or 4% decrease) officials may need to eliminate any annual salary increase for employees in 2010.
As the article continues, some speculate that they do this worrying often and don’t believe anything will come of it. There are some sounds of indignation that county employees would not get the 3.75% raises that (apparently) some feel they are entitled to. But there is also the comment by County Controller DiGiorgio
“The vast majority of the over 2,500 county employees who work for our government do a great job,” DiGiorgio said at that meeting. “They deserve to be treated with respect. However, we need to consider whether it is prudent to provide them with a raise of 3.75 percent while recession-hit Chester County taxpayers will be seeing very little in the way of salary increases in 2009 and, in some cases, may lose their jobs in these hard economic times.”
Citizens of our community need to engage in the budget process. T-E (and many districts across the state) see the state-mandated “cap” as the floor to their tax plans — not the ceiling. A 4.1% increase does not have to be voted on by the public (beyond that increase, there are only specific reasons to increase taxes without triggering a referendum–so the “secret” is to stay at or below the cap line). So instead of worrying about what to spend, boards are more concerned with how much they can increase without scrutiny. How about a rebate?
Many school districts (and TE is certainly a leader in this) have significant “fund balances” — reserve money that has accumulated in the good times of real estate transfer tax growth and investment interest. T-E’s fund balance exceeds $50 million. So with a budget of $100+ million, and no plans to reduce spending, they are planning a 4.1% tax increase AND to use approximately $4 M from the fund balance to offset spending increases.
Taxes are a funny thing — people don’t talk about the tax bill — only the increase. Hey — you pay the whole thing. Has anyone thought about using fund balance to pay half the taxes? Give today’s residents our own school tax holiday? Sure that means next year (or maybe not until the year after) taxes would “double”, but it’s our money they are sitting on and not spending on these increases or costs. Future residents are not stuck with our debt — they are spending our savings.
There are lots of reasons this would be complicated — and would require some serious “out of the box” thinking. ( I live by the notion that if I have an idea — it can happen. It just takes effort.) But as our teachers sit in negotiations and see our reserves piling up, why would they ever step up and participate in the real economy — the one that doesn’t have annual raises OR tenure OR lucrative employee benefit plans OR pensions OR collective bargaining with the right to strike and shut down a community education program? (That sounds like a knock at OUR teachers, but as I have stated previously, and will talk about again — our local organization (TEEA) is strongly encouraged [read: pressured] by the state organization PSEA….you know — the one whose goal is a starting salary statewide for BRAND NEW TEACHERS right out of college, no experience — of $50,000 — accumulating 2.5% a year toward a pension with 10 years to the top salary).
More later. Tonight (Thursday) is the TE Finance Meeting. Maybe some of us should plan to be there? Check out the TESD.net website for time and place. In the meantime, please share your thoughts about these topics and any you want to talk about.
Understanding School $pending 
TESD has a fund balance equal to roughly 50% of its annual budget? The word for that would be “malfeasance.”
Why? Because the tax base that supports the school is the district’s real estate (property). That is the most reliable tax base known — buildings and land can’t walk away, and if their owners fail to pay their taxes then the district can simply seize and sell the property.
Some states keep a small (i.e., a few percent of annual budget) “rainy day fund,” but that is only justified because income and sales taxes can be more volatile than property taxes.
There is no justification for TESD to keep a 50% cash reserve. It encourages inefficiency within the school system and, as the most recent contract seems to prove, makes it impossible to say no to union raises. My guess is that some stupid administrator has said that we need to start saving for a new school or something like that. Wrong! The correct mechanism for funding new infrastructure is to sell bonds with a duration equal to the expected life of the infrastructure. That way the infrastructure is paid for by the taxpayers who actually use it, not those who come before (or after).
As you note, with a positive fund balance, “Future residents are not stuck with our debt — they are spending our savings.” It is right neither to encumber future residents with our current obligations, nor to take from current residents to ease the burden of future residents.
If TESD has taxed more than what is necessary to support the efficient operations of the public schools it has a fiduciary duty to return that excess revenue to the taxpayers as promptly as possible.
Therefore, TESD taxpayers should see a significant cut in their property taxes this year!
The fund balance is well beyond $50M….that’s the part that isn’t in capital reserve or other designations….Taxpayers need to care before it matters. The townships in this area aim for similar reserves.