BOARD GAMES: New Rochelle Goes Over the Fiscal Cliff

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Cutting the Meat

The preliminary 2013-14 School District budget presented to the community includes a 4.5% tax increase and a reduction of 56 staff positions. The staffing cuts include 33 regular education teachers, 4 special education teaching assistants, 5 special education aides and 1 nurse. There are reductions to co-curricular activities and athletics. Student Assistant Services are being eliminated entirely.

We are now cutting into the meat of the school system.

Last year I was invited to participate in a new committee formed by the Board of Education to assist them with finding cost savings and making the budget more transparent to the community. It was called the Citizens Advisory Committee. We wrote a report that we presented to the Board, the Administration and the community with suggestions to reduce costs in the near term and long term. Some of the suggestions would have been easy to follow, such as budgeting to real historical spending levels and consolidation of Department Chairs. Other suggestions would have been more difficult to carry out because they called into question issues of fairness and social responsibility, such as reducing the wages of hourly workers to match those paid by the surrounding school systems.

The Administration took none of our cost savings suggestions - not one - although the Assistant Superintendent of Business Administration will claim that shaving $100,000 of bogus slush fund budgeting from the section on outside contractors counts as heeding our advice.

If all of the suggestions were taken to maximum effect I believe they would have saved 24 positions.

We have a fundamental structural problem that needs to be dealt with: the base costs of the system are rising faster than the 2% tax cap. Governor Cuomo signed the tax cap into law because he hoped it would force school districts to be disciplined in their spending. In the case of New Rochelle, our School Board has turned a blind eye to the hard work needed and simply wished things would get better. They are not getting better; they are getting worse. If we don’t seek to cut the fat, then we will be forced to cut the meat. And cut the meat we have.

“We’ll look into it...”

At the March 15th Budget Review meeting, Vice President Deirdre Polow asked a very good question: if we are in a period of austerity, why not shut all the buildings down at 6pm except for the High School and move all evening functions there? Ms. Polow recalled that this had been done before, in the early 1990s.

Assistant Superintendent John Quinn said he would look into it. But this exact question was already posed to the Administration back in 2011 with the same response: “we’ll look into it”. I don’t know if they looked into it or not, but they certainly never did anything about it and 2 years have passed with no savings. And that is the problem: years and years of ignoring run away spending and the growing bureaucracy that accompanies it.

The Budget Imbalance and What It Means

The proposed budget is $238 million dollars. Roughly $192 million of that is paid for by property taxes. The rest is state aid and other hidden taxes and fees that, in aggregate, are not growing. So here’s the math: 80% of the budget is property taxes that are capped at 2% growth every year. That means total revenues can only grow 1.6% every year if the other pieces continue to flat-line. The only way to grow revenues faster than 1.6% is to vote to break the tax cap. But after years of run-away tax hikes, the community is not likely to support that. Am I exaggerating by calling prior year tax increases “run away”? You decide. Over the past 5 years the school district tax rate has increased 20% and over the past 10 years the tax rate has increased 80%. I bought my house in December 2001 and my school taxes have increased 109%.

Now let’s look at how the money is spent. 52% of the budget is salaries. Due to the annual wage increases contractually promised in our union contract, those salaries go up 3% every year. By itself, salary growth eats up the entire 1.6% increase in revenues calculated above. Healthcare insurance is 8% of the budget. Those costs are rising 8% this year but I believe they will grow 10% or more going forward. By themselves, healthcare and salaries would cause the total budget to grow by 2.2%, faster than the 1.6% increase in revenues noted above. Then there are pensions. Pension contributions are growing at an astronomical rate: 35% in the upcoming year. Governor Cuomo lets some of the growth in pension contributions come outside of the tax cap. That is a big reason why the budgeted tax increase for next year is 4.5% instead of 2.0%. But even the increase in pension costs that falls within the tax cap increases our total rate of spending growth to 3.7%.

So the baseline case, to sum this all up, is revenues growing 1.6% and expenses growing 3.7%. Obviously we need to cut costs every single year to balance the budget. This is why we are looking at position cuts as far as the eye can see: we have gone over the fiscal cliff.

Of course, we have also made things harder for ourselves. When I first started looking at this in 2011, I saw these alarming trends in front of us and reached out to various members of the Board of Education and the Mayor for help. I was particularly concerned about the union contract negotiations, then in progress, fearing that continued wage increases would send us over the edge. For the most part my concerns fell on deaf ears and the School Board passed a contract that increased wages 0% in the first year, 2.1% in the second and 2.6% for next year. These increases come in addition to the 3% salary increases mentioned above. So wage growth across the district for next year is 5.6%. That means for the upcoming school year, wage increases plus healthcare plus pensions equals a 4.6% increase in spending against the 1.6% increase in revenues under the tax cap. That difference is 3% which $7 million dollars more than we have to spend. Voila! You have 50+ position cuts.

I have heard from parents that some class sizes at the Albert Leonard Middle School already exceed 30 students. This year’s budget for Albert Leonard shows a 4% increase in student population and a 4% reduction in instructional salaries. Since wages are due to rise 5.6% from the contract, we will need to cut staff 10% in order to meet these budgeted spending figures.

Let us not forget that there is far more to the school system than teachers. We have an enormous estate of facilities that need to be maintained and kept clean. If you visit the elementary schools you will find playgrounds in various states of disrepair. They are only going to get worse. One play set at the Davis School desperately needs new matting. Buildings & Grounds tells me that alone would cost $30,000, yet we have budgeted just $22,000 for “playground/gym inspection repair” for the entire district. Custodial services will be under continued pressure which potentially presents health issues for students and staff. We are also trying to improve security and safety, something that has long been ignored by the Board of Education but now has come to the forefront due to the horrors of Sandy Hook.

We Need an Engaged Board of Education

There is a ton of work to be done to stem the bleeding. Among other things, we need to flex our work hours, reallocate responsibilities among staff, implement controls around time and inventory management and start working with our union leadership to structure the next contract in a way that enhances flexibility and preserves jobs. Unfortunately, our Board of Education remains asleep at the switch.

Consider this: the annual school survey consistently reveals class size to be the number one priority for parents and yet the Board does not require the Administration to give us class size information. There are at least 16 Westchester County school districts that have limits or guidelines for class sizes. New Rochelle is not one of them. Neighboring communities like Mamaroneck and Scarsdale include class size information in their budgets so the community knows what they’re getting for their money. New Rochelle does not.

If the Board of Education pays no mind to the parents’ number one priority, and the Board remains disengaged on the general budgeting process, then what exactly are they doing?

We are already past the tipping point and are in desperate need for leadership and fresh thinking at the Board of Education. Without that, our situation will go from very bad to far worse.

Adam D. Egelberg, CFA

Commenting on this Blog entry is closed.

Tara on Sun, 03/17/2013 - 20:00

You have done a great service to our city and I hope people start listening. For too long people have been lulled by the administraiton.

Dennis Orzo on Sun, 03/17/2013 - 13:56
Title: Board Games

Thank you for such a detailed report and your interest in helping to save our school system. Your math is so easy to understand. It is too bad those responsible for teaching math don’t understand.

Andrew Newman on Sun, 03/17/2013 - 13:23

Adam,

Thank you for this excellent analysis. This would suggest that at current pace the NRSD budget would be approximately $330 mn in 2022-23 (10 years from now) verse a baseline of $275 mn. This would translate to a 40% increase in school property taxes and most certainly would put downward pressure on home values.