Monthly Archives: January 2010

How do you cut a budget anyway?

Make sure you have something left after the cut

Not to worry — I am not on the bandwagon to abandon cuts– but I am in the corner of those who need to understand just exactly what our school system costs us — and to make sure that cutting doesn’t end up with the proverbial “throw out the baby with the bathwater” issue. 

I have now uploaded the CLR data on the companion website to this blog schoolspending.info  Here’s the summary but go there if you want to see the data that generates it.
The cost of a house includes the mortgage, taxes and insurance.  Well, I’ll let the market declare the mortgage and insurance — and presume that you do your research on those two independent of school districts.  The taxes, however, are something that the buyer can consider.  To be able to consider a district’s relative costs, here is the MODEL:
The house sells for $500,000.   I don’t care where you buy it — but based on your own savings and income, you have a mortgage you can afford.  Now — given the CLR for PA counties, set annually by the State Tax Equalization Board (this takes type of property, sales, location, etc into the mix to create a single percentage of 100 that represents the percent of fair market value that equals your assessment.) 
Given the CLR (see previous posting), this $500,000 house would assess as follows:
54.0  Montgomery County   $270,000
53.0  Chester County  $265,000
61.3  Delaware County $306,500
9.7   Bucks County $48,500
 
Using the property tax millage for school districts with these assessed values on our $500,000 purchase house, your property-based school taxes would be as follows:
T-E  $4,629.55
Great Valley  $4,828.30
Radnor  $5,979.82
Lower Merion  $5,786.24
West Chester  $4,730.25 plus .5 earned income tax
Unionville- CF  $6,248.70
Central Bucks  $5,567.80 plus .5 earned income tax
Council Rock  $5,236.06 plus .5 earned income tax
Upper Merion  $4,114.80
So — homeowners — this is how people decide to move here.  What to you think influences the choice? 
Here’s a site designed for real estate searches — but it rates school districts.  http://www.schooldigger.com/ 
Before we “cut” a budget, let’s be sure we know what we want, what we are willing to pay for, and what we are expecting to charge when we sell our homes.  The School Board has voted to limit next year’s budget to Act 1 limits — which means it can only go up a maximum of 2.9%.  That will mean cuts — maybe some big ones.  I think we need to watch the process and understand the decisions.  Questions?  Feel free to ask. 
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Blogging — Don’t let Vitriol substitute for opinion

I’ve been posting on Community….Matters in an effort to share school board information with the multitudes who are seeking it.  Pattye Benson is doing a fabulous job moderating discussions — but I occasionally will continue here because much of what I share is rather tedious.  I think the discussion in the community is well served there.

If you want to comment here,   I’ll say up front that I won’t approve any post from anyone who wants to spend energy talking about who should be fired and who doesn’t deserve to be elected.  I had a particularly difficult time early in my first term on the school board. A resident stayed after a meeting and approached me one night and told me he didn’t agree with me and would make it his personal mission to see that I wasn’t re-elected.  I asked him for his card, as I told him I was sure my family would join his group — since volunteering and enduring a campaign  to be on  a school board is one of the more thankless jobs one can imagine holding.  Even the Supervisors earn $3,000 a year.  School board members earn the longing for anonymity — as it’s so easy to take shots at them — much easier than actually taking the time to understand the issues.

The job of school board director is VERY HARD and the answers are absolutely NEVER black and white.  Everyone went to school during a portion of their life.  Everyone is a stakeholder in property values and educational programs.  So everyone cares.  And money is PERSONAL . Earning it and Spending it.   People moving into TESD  come with great expectations and pay top dollar.  People who have lived here forever are done with the school system and in many cases could not afford to buy the house they live in today. (the odd reality to the finances  is that it takes about 30 years of paying taxes here per child to pay for a K-12 education in TE — in today’s dollars – so you are never done paying if you were ever a user.) So — how do you fund the schools?  Multiple tax study commissions have ruled against any tax based on income, so property taxes are it.  In a time when foreclosures are a real issue, taking more from the homeowner is hard to justify, but deciding to put an artificial ceiling on expenditures in a contract-based environment will take a huge effort.  Anonymous posting to blogs certainly makes taking shots easy — (though attribution doesn’t seem to clean it up either). 

I think blogs offer a genuine opportunity to  make a strong contribution if they encourage and promote an honest and productive dialogue.  Pattye Benson has worked very hard to encourage dialogue and I commend her on her regular updates and comment approvals.  I believe questions and opinions are worthy of sharing, whatever they are. 

I stand by the headline here though –when viotriol substitutes as opinion, the context and the value of the exchange only alienates open conversation.   I don’t deny anyone’s right to express an opinion, but I don’t want to open a forum for vitriol.  Hence “Mean Spirits. 

This blog was not meant to be JUST about TESD school spending. This is such a crazy budget time in Pennsylvania that it’s a very large question everywhere.  I started the blog as a former school board member who knows a great deal more about the process than is typically discussed/revealed during the budget process.  It’s tedious.   I will comment on TESD when it’s germane to the topic, but please visit Community…Matters (link in blog roll) if you want to continue the discussion on the TE 2010 budget.  You can come here for an explanation of  facts (that I often introduce there — and try to give background here) — and my companion website schoolspending.info for numbers .

  I’m not around every day to approve comments, so this cannot be the “back and forth” that goes on in Community…Matters.  It is a valuable site — and I encourage you to stick with it and enjoy the exchange.  If you have any questions, please ask me.  I believe we are all better served when we not only have information and opinions, but when we understand the issues.

FLES redux in TESD

I want to formally alter my comments about FLES and the fact that nothing has changed since its introduction except the retirement of Drs. Foot, Slobojan and Folts.  In fact, something has changed, and it’s my error not to know it. 

Anyway — I spent some time on the PDE website — specifically about Annual Yearly progress for the PSSAs.  One thing has seriously changed since FLES was introduced — and that is the testing of elementary aged kids on content knowledge by the State.  I had no idea that Pennsylvania has undertaken PSSA testing for SCIENCE in the 4th grade.   I don’t know about you, but I think science until 7th grade was rock collections, bug collections, and enviromental knowledge. 

 TREDYFFRIN-EASTTOWN SD Grade 4

 All Students    # scored  473

%  Advanced   68.7

% Proficient   27.5

% Basic   3.2

% Below Basic  0.6

  • Below Basic – seldom demonstrates grade-level appropriate concepts/skills for a particular subject/task.
  • Basic – at times demonstrates some grade-level appropriate concepts/skills for a particular subject/task.
  • Proficient – routinely demonstrates a variety of grade-level appropriate concepts/skills for a particular subject/task.
  • Advanced – consistently demonstrates an in-depth understanding of the grade-level appropriate concepts/skills and uses sophisticated strategies to solve a task

NICE DESCRIPTION OF A 9-YEAR old…what??? And they get this in Reading, Math and Writing too through their K-4 experience.  Again in 5th grade for some subjects, and 8th and 11th grade to evaluate the districts’ Annual Yearly Progress.  We better be comfortable with the tests, because we are absolutely going to have to teach to it.  Does ANYONE remember anything that age except “Iowa” achievement tests?  (and air raids?)

You can go to the state’s website to see the results and the tests that our kids take…HERE

You should also visit the TE District’s website and read about the elementary curriculum.  FLES still shows because it has not officially been cancelled, but reading the curricular objectives, and knowing that the state of PA has learning outcomes mandated by testing….I’m glad I have my college degree and my kids are done.  I thought high school was stressful…actually — high school IS stressful.  Now I guess I’m learning just how much more we have forced downwards to the elementary program.   Just my opinion — but it’s clear there is no time for instruction in a foreign language that would result in meaningful learning because there is simply not enough time.

Thoughts?

PSEA goal of avoiding “excise tax” on benefits almost succeeds

The PSEA website has been encouraging members to write their congressmen to protect their health care plans from the excise tax promises in Obamacare on “cadillac” plans (yes — this is the same idea that John McCain put forth and was profoundly damaged by).   Nationally, a deal has been cut — read for the details…

 the excise tax was one of the bigger ones. Union leaders were able to soften the tax’s impact a bit: It won’t take effect until 2013; it will affect plans that cost more than $24,000 per family or $8,900 for individuals, up slightly from the levels in the Senate bill; those levels will be adjusted annually for inflation and adjusted additionally for plans that are expensive because they cover inherently expensive groups, and they won’t include the cost of dental or vision plans after 2015; plans worked out through collective bargaining will be exempt from the tax altogether until 2018; and by then, unions in collective bargaining agreements would be able to buy insurance through a new exchange system the legislation would set up, instead of going through employers. (In the years in between, unions could try to renegotiate their contracts to get higher wages instead of so-called Cadillac healthcare plans.) The changes mean the tax won’t raise as much money to offset the costs of the bill — the tax would raise $90 billion over 10 years, instead of $150 billion as the Senate bill had it.

By the way — just two years ago… June 2008

Providing tax credits of $2,500 to individuals and $5,000 to families as an incentive to buy health coverage.

This provision is not unlike the proposal first made by President Bush at last year’s State of the Union Address. The President called for ending the longstanding tax exemption consumers get on any health insurance benefits paid for by their employer. The President would replace that with a standard $7,500 deduction for individuals and a $15,000 deduction for families.

McCain would also end the employer tax exemption—meaning that if an employer spends the average $12,000 a year on family health insurance, the worker would now have a tax bill on the portion of the $12,000 of benefits paid for by the employer.

Like Bush, McCain would offer a personal tax offset, but he would do the new offset a bit differently than Bush.

McCain would give each single person a $2,500 tax credit and a $5,000 tax credit for a family who had health insurance. A tax credit means that when taxpayers calculate their taxes, instead of taking a deduction, as Bush would do, under McCain’s plan they would subtract the tax credit ($5,000 for a family) from their final tax bill (and they would likely be able to take advantage of the credit during the course of the year to pay their monthly premiums).

Assessment appeals and their role in tax issues

At the risk of creating more controversy that has nothing to do with solutions —I responded to a post on Community….Matters from John Peterson who denounced the “GOP” lead school board driven by GOP issues. I will stand by each and every budget decision made during my time on the board, and I can assure you that the largest component of tax increases related to staffing were a direct result of a community study we undertook in response to KIDS COUNT, an extremely well-funded group that pushed for and achieved class size targets well below anything we had ever experienced. During times of lucrative transfer tax revenues, and new development with a rising tax base, these costs were absorbed. Kevin Grewell was elected to the board as a Republican after switching parties to get the TTRC endorsement, presumably because there was no organized process for running as a democrat. In defeating an incumbent Republican for the seat (Rick Zagol), Kevin ran on a platform of spending more for smaller class sizes. MUCH smaller in some cases. There were several board members who had previously been associated with the Democratic party but switched to Republican registration absent any benefit to a Democratic affiliation.

There was a claim made on the blog comments that TESD services since 1996-2000 have been degraded, with lost of activity ….the size of the population has simply grown exponentially. And the cost of housing in this community has risen to levels that new residents who choose to purchase here come with many, many expectations.
Can we please talk about the realities and not the theories. The issues on the table absolutely were predictable. The health care increases are easy to point to — but it has happened before and is the reason the district has a fund balance. $4M of fund balance right now is designated for “retirement obligations” which means severance and other issues for sitting and retired administrators. When I attempted last year to look at the contracts of these people, I was met with anger and changes in policy as to how to look at these numbers.

It’s fine to understand the reasons behind the increase, but not okay to suggest that they were surprises. Assessment appeals are quite typical in a down market. Countywide reassessment was done in 1998 — the CLR since that time has gone from the goal of 100 (meaning market value would equal assessed value) down to 53. Actually 2008 showed a rise to 53 from earlier levels — but since the CLR reflects the percentage of market value that the assessment should reflect, a steadily decreasing value ultimately predicts that the effort of reassessment is now worthwhile as the outcome would be significant enough to undertake it.

1998 93.4
1999 89.8
2000 85.2
2001 80.5
2002 74.0
2003 68.0
2004 60.8
2005 54.9
2006 51.8
2007 51.7
2008 53.0

I apologize that these are not “sound bite” comments, but as you know from previous postings, I have a great deal of information to share and would like us to all understand the implications of our current tax level.

One other response, however, is that the teachers’ contracts rarely try to work around economic predictions — and the PSEA (if you read their website right now) advocate for growing the starting salary so that there is a shorter time to reach “career” earnings (the top step) and less “percentage increase” required per year….the local salary schedules reflect a competitive look at neighboring districts along with a formidable staff of PSEA staff running numbers and making offers or responding to district offers — all the while knowing that the elephant in the room is a strike. Board members know the damages of a strike — so the abililty to influence the outcome is severely limited and is only likely to come out less in the union’s favor with a willingness not to blink. Where would the community come down if our schools were closed for two weeks? (I have referred to this before, but due to some legal conclusions reached at the state level, teachers do not lose any salary or benefits during a strike…I can explain if you have any questions about it).

Thanks.

Buy a house for $500,000 What else do you pay?

I am a numbers person and have been for as long as I was associated with the school board. Earlier I posted the revenue per student in several neighboring districts — but that left a gaping hole in the information because some expressed the reality that commercial/residential mix affects enrollment numbers so tax revenue per student could be misleading. We agreed to disagree. But I do have some other figures to contribute here to keep the discussion focused on what seems to be the consensus primary issue: Yes, we can find some ways to reduce costs in the district, and I wholeheartedly agree that the salary schedule has lost its way under the direction of a local union that takes its marching orders from Harrisburg — but I truly believe that TESD cannot and should not attempt to redesign its curriculum and the program of studies to respond to this. We need to look at the truly BIG picture of living in this community — and our local effort to producing the educational program which clearly plays a role in property values in this community.

Here’s some information on property values and taxes that gives you (hopefully) a clearer understanding of our level of taxes for schools:
Let’s buy a $500,000 house — in any of several neighboring districts. When we buy that house in Tredyffrin, the school district gets 1/2 % and the township gets 1% (most townships, including Easttown, only get 1/2 %). That income is the epitome of variable revenues — it only comes in when properties change hands.

Now — the State Tax Equalization board annually reviews assessed values relating to market values in every tax community (county based for the most part) and standarizes the values statistically. They produce a ratio known as the CLR – common level ratio — that reflects the percentage that your equitably assessed value is of the market value. Assessment appeals use this number in decision making.

Without bogging down here, you can go to the steb website to see these CLRs. They are done by county. Chester County’s CLR is 53. 0 Delaware County is 61.3 Montgomery County is 54.0 and Bucks County is 9.7 . In each case, the predetermined ratio for these jurisdictions is 100 — which means they would like to think assessments are at full value. The CLR fixes that annually to be sure new properties are assessed correctly.

So, our house that has a fair market value (sells for) $500,000 in the above four counties would be assessed as follows: (fair market value x CLR%)

TE, Great Valley, Unionville — $265,000
Radnor – $306,500
Lower Merion, Upper Merion $270,000
Council Rock, Central Bucks – $48,500

Knowing these assessed values on our $500,000 purchase house, (make it new construction for the sake of understanding how the assessed value is reached), school taxes on this house based on this fair assessment would be as follows:

TE – 17.47 mills – $4,629.55
GV – 18.22 mills $4,828.30
Radnor – 20.2731 mills $6,213.71
Lower Merion 21.4015 mills $5,778.41
West Chester 17.85 mills $4,730.25 plus EIT
Council Rock 107.96 mills $5,236.06 plus EIT
Upper Merion 15.24 mills $4,114.80

The mills I use come from the most recent (2009) county tax roles. If you find an error, please advise as I am relying on the information publicly available.

So — you can ignore any effort at comparing revenue and mills and revenue per student. These figures are the school property taxes paid by a resident in a $500,000 market value house across these districts. If you bought your house a long time ago, thedifficult fact is that the economy may have given you lots of equity, but not necessarily income to support your property’s value. You made a good investment but you may not be able to keep it unless you are willing to tap into your equity.

TE can and will make cuts, but families moving here are  investing in homes here to send kids to our schoolsare thinking about educating kids today and into the future. You have been rewarded for the district’s achievements in the value of your home. We need to find a balance between income (which has nothing to do with the way we tax for schools locally) and the value of your property. The issues of teacher compensation are a state wide issue — collective bargaining when combined with the power to strike (and teachers do not lose one dollar of income if they strike) does not serve an ideal purpose. PA has the highest percentages of teachers strikes in the country. Many states do not allow teachers to shut down an education system.
So, let us continue.I apologize for being long-winded, but it’s a fairly complicated topic and deserves more than sounds bites. In 3 terms on the school board, the only budget hearing that ever had a crowd was when we discussed the options of an income tax — presuming that income reflects more reliably a resident’s ability to afford schools — and we all know how those studies end up. NO MORE TAXES is a general rant — how we generate those taxes isn’t even open for debate because the immediate presumption was always to fear any additional source of revenue (income) because it would open another pocket to governmental seizure.  Maybe now with all the comments about what people can afford, there will be some discussion about using income as ONE of the ways we determine how to fund our schools. 

More on the sources and options later.  In the meantime, TESD is going quietly about changing programs to fix budget problems.  My kids are graduated — one lifer from our schools even went to Harvard without any athletic ability — so I don’t want to see the system taken apart on the altar of fiscal conservativism.  I don’t think our schools are expensive — though I do believe the teachers will need to pay for health care in future contracts.  Until they do, they will never understand that they are health care consumers — not benefit recipients.

Learning about property values and assessed values

I’m under the weather from a continuing virus, so I was unable to attend TESD’s education meeting this morning — which is not good.  Right now the whole process of running a school district is being justifiably scrutinized because there is a strong public concern that we cannot afford to pay for the school system we have.  While the Finance meeting is where we learn about the numbers, the Education committee meetings are where we learn about the programs.  If we only look at the numbers, it’s absolutely the tail wagging the dog.  So I will look forward to a review of this morning’s meeting and I hope someone will post it here or on Community Matters (post there anyway — there has been some concern I am trying to reroute traffic here — when in factI think what I have to say here is pretty boring and is only read by hard-core numbers people).

 Ray Clarke posted an extensive commentary on this subject on the Benson blog recently, noting that school taxes have risen dramatically in relation to the income of our residents.  “At some point soon that limit will be reached. After five years of 10% union total compensation increases and 2% inflation, the percentage of pre-tax income paid in school property taxes by a household earning $100,000 living in a median T/E house assessed at $252,000 will have risen from 4% to 6%, after ten years, to 9%”  See Community Matters for the full text — Ray Clarke 1/11/10 on Continuing Budget Discussion for TE…

Mr. Clarke and I have discussed the nature of school funding on the blog and at the most recent school board finance meeting– and I posted data relating to the property tax revenue per enrolled student in several neighboring districts.  TE’s property tax revenue per enrolled student (the rate the district must set annually) is lower than many/most neighboring districts except those with earned income taxes.  That’s not to suggest (though it certainly does not disprove) that TE spends its income effectively compared to those districts — but it does illustrate a perspective I want us to consider.

I include info from these districts in response to another post who wanted PSSA scores included.  I am focused on revenue sources, not spending.  That’s the next piece once we identify what we can afford.

The local tax revenue from property taxes only per enrolled student is as follows:

TESD 13,359.45
GVSD 15,263.00
Radnor 16,376.43
Lower Merion 24,464.21
West Chester 12,497.04 plus EIT
U-CFSD 13,409.22 estimated on CC values
Central Bucks 9,675.55 plus EIT
Council Rock 10,767.00 plus EIT
Upper Merion 16,387.19

This most recent recession (I still think it’s more like a depression, but fortunately my background is in business, not economics so what do I know?) has badly damaged the incomes of many, many residents.  Unemployment is up, cost of services is up, taxes are up, ….yada yada yada.  Property values are no longer rising at the same steep level of the prior ten years, and could be called flat for the most part. 

Before I go into the specific details that trouble me in TE, here’s some background on how values are determined and therefore why there is evidence to consider millage comparison between districts as a legitimate tool in the discussion.

First, I take you to the State Tax Equalization Board  www.steb.state.pa.us

Here’s their job:

CERTIFICATION OF MARKET VALUE
The primary function of the Board is to determine annually the aggregate market value of taxable real property in each political subdivision and school district throughout the Commonwealth of Pennsylvania. Legislative restrictions as stipulated in Section 7 (3) and Section 14 of Act 447, determine the computation procedure to be used in an odd or even year.The market values are certified annually to the Department of Education and the respective school districts on or before July 1 of each year. These market values are used by the Department of Education as one factor in a legislative formula for the distribution of the state subsidies to each school district.
COMMON LEVEL RATIO
This function of the Board is to establish a common level ratio of assessed value to market value for each county for the prior calendar year.
Act 267 of 1982 requires the State Tax Equalization Board to use statistically-acceptable techniques, to make the methodology for computing ratios public, and to certify the ratio of the chief assessor of each county each year.

The most recent (2008) common level ratio for several neighboring counties is as follows:

Chester  53.0

Delaware:  61.3

Montgomery: 54.0

Bucks: 9.7

Now, if you are a taxing authority concerned with how accurate your assessments are, that’s not too good.  The intended ratio for these four counties is 100.00  – it’s officially called “the predetermined ratio.”  Not every county has  full market value (100)as the goal, so automatically comparing millage rates can be misleading. You need to see the full range of numbers for the county/district.

As a taxpayer, however, the lower the number, the lower the ratio of assessed value to market value – and  you are being taxed on a property whose market value is higher than the assessed value.At 53.0, Chester County is lower than Delaware by a wide margin and comparable to Montgomery.  I’m not a statistician and won’t bother to work on the variability, but I will be content to say that the CLR is a statistically significant calculation certified annually, and it is what it is.

To understand how these numbers are used, I take you to this site for definitions:  http://www.assesslaw.com/terminologyanddefinitions.html

The short answer here is that the CLR is the ratio you can and will be required to use when evaluating your market value assessment.  (you use this ratio if it is more than 15% off the predetermined ratio).   It does create apples to apples across the state because PA has uniformity in property assessments — i.e., it’s not about equipment or what is produced on the property.  So the CLR equalizes values.

Now I take you to Testing the Fairness of your Assessment http://www.assesslaw.com/testingthefairness.html

All this stuff will hopefully lead you to accept the premise that the 3 counties and districts within them that I am using for comparison to TESD are comparable when looking at tax rates.  It’s not about the amount you pay — it’s about the relative amount of your property market value that you pay. 

Note:  You can test your own assessment value by multiplying the fair market value of your property (which is obviously opinion absent any legal appraisal)  by the CLR — that is the fair assessment for your property.

Assessments are done by county. SO, consider a house that sells for $500,000 in Tredyffrin township (fair market value).  If it was assessed correctly, the assessment value would be .53 x 500,000 or $265,000 .

The same sale price in Radnor (Delaware Co) would be assessed at 306,500; Lower Merion and Upper Merion (Montgomery county) at $270,000; Bucks County at $48,500.  I refer you to my next posting for the information on taxes relating to these assessed values.  I invite your comments in the meantime.