Friday, April 04, 2008

Why Contracting, and Why Now?

Why is the Board of the Birmingham School District turning to contracting, and why are they doing it now? As a member of that board I can only share my thoughts on this question, other board members have their own reasons so don't take my comments for those of other members.

The short and honest answer is public education funding in Michigan is now a ZERO SUM exercise. Find that phrase in Wikipedia and you'll understand what our district (and every other district in the state) faces. There is no money in any budget to sustain the continued growth in outside pension, health care, and teacher "step and lane" salary obligations. To preserve and fund classroom operations, we have to find money someplace else in the budget because we're getting ZERO new money from the state.

Costs are increasing by over 3% annually, and the state is proposing (not promising or guaranteeing) an increase of 1/2 of 1%; that increase will not cover the mandated increase in contributions to the state pension fund. The district is now hitting a large financial brick wall. Birmingham has cut nearly $16 million of costs over the last 5 years. Now we are left to face the prospect of cutting enrichment programs, media support, and eventually non-core programs like music, art, language, and sports. Faced with these choices I prioritize EVERYTHING in the budget, and have been doing so for years. My foremost priority is, and always will be, keeping programs and teachers in the classroom because that is the heart of our mission.

Contracting custodial and transportation services will save this district nearly $3 million dollars a year, each and every year. Yes, these are good people that work hard, but we can no longer carry the rich pension and health care plans provided to them. The $3 million saved (mostly associated with health care and pension costs) will help push off the draconian class room cuts and service reductions by preserving nearly 30 teaching positions. These are the choices I face when funding does not even come close to keeping pace with simple inflation, or with state mandated payments to a structurally bankrupt pension system - payments which are killing the budget of every school district in the state.

In a state that places public education funding below funding for prisons, local school boards are left to make the hard choices, because our "leaders" in Lansing have abdicated that responsibility. So we make the choices necessary to preserve the primary mission of our schools and keep excellence in education. Lansing is making that mission harder every year.


Judson Bradway said...

Congratulations on making the right move to privatize and save the district $3 million annually despite the public outcry. I do of course have a small bone to pick about the privatizing decision.

Since, I think the late nineties, I heard the monotoned “Mr. Perry” tell us this day was coming. So why did you wait? By my reckoning you could have save $3 million for 10 years. Instead you dithered until you had to. You would have taken the same amount of guff from the public/staff then as now. I know I am being somewhat unfair, I don’t think you were involved as early as that. Hard decisions are by their nature hard to make. But what begs the question now is how many other hard cuts are you postponing until the last gasp? Follow the corporate example, take all the bad news now and look good later.

As long as I have keyboard in hand I have another issue. I believe the district accepts tuition students for about $11,000 a year. A figure that is roughly the operating cost divided by enrollment. Surely, an organization which wanted to increase revenues and hold costs constant would use a difference pricing model. It seems to me to be lunacy to set pricing at a fully loaded capital cost. A more logical approach would be to charge the desired additional revenue per pupil plus the marginal cost of having that student. For example, the district has say 8100 students, which is about 40 classes of 20 kids each. So if you added 1 student per class, it seems to be this could be accomplished without increasing your costs for teachers etc. If you charged say $5500 per student you would be looking at an additional $2.2 million annually.

Now I know things are never quite that simple. But if the school system is as good as you say it is, given the current private school costs, it seems to me that you could accomplish these kinds of numbers. I do know it would cost very little to find out. (Assuming you can do a pilot without 2 vice principal, 3 course co-coordinators, 5 key communicators, and consultant)


Judson Bradway

Rob Lawrence said...

Great to hear from a historical father of Birmingham!

In fact, Mr. Perry did see the ultimate fate of the funding
mechanism at the early stages of the Proposal A reform. Even with that, no one could have foreseen just how dark the economic climate would become in Michigan. Chide us for the past but understand - this board member (as do most others) do not see any light at the end of the tunnel. We started the process of looking at all costs years ago, and we make decisions after careful analysis to ensure structural support designed to enhance the success of implemented changes - the same as in the corporate world.

As to the tuition example - I find it hard to support subsidizing tuition for out of district residents when our funding formula is so disproportionately supported by local tax revenue ($3,877/student via the local "hold harmless" millage). And you're correct, the issue is much more complex due to foundation allowance release issues, compliance with the State school aid act, and disparities between the costs associated with elementary, middle school, and high school programs.

And Mr. Bradway - if you're interested - our tuition rate of $12,188 for high school is FAR below competitive costs in the area. People choose private schools for many different reasons, cost is only one metric. Thanks for your well considered comment.