Amherst Property Taxes and Inflation

One of the questions I was asked after yesterday’s post on property tax growth was on how inflation factors into the picture.  My original intent was to measure the actual change in property tax bills, but it is instructive to add the inflation perspective.  There are a handful of inflation rate calculators available online that will let you make adjustments for constant dollars.  Since my property tax information starts in FY 2001, I’ll use constant 2001 dollars here.

Inflation essentially measures the change in buying power of a currency over time.  That is, if something cost $1 in 2001, because of inflation it will cost a few cents more in 2002, and so on.  You’re probably already made the observation that things cost more at the store, this is generally due to inflation.  How it impacts you depends on whether your income has kept pace with inflation or not.  The easiest way to look at this is to put together a table of multipliers for each year, referenced to 2001 (graphed below).  This will allow us to recalculate the tax data from yesterday in terms of constant 2001 dollars.

Inflation multipliers to determine constant 2001 dollars in US currency.

Inflation multipliers to determine constant 2001 dollars in US currency.

The overall effect of taking inflation into account, particularly when it is increasing as we see above, is to shrink the value of the dollars being spent in time.  What it allows us to see is whether the changes in the numbers come from changes in the value of the dollar, or whether actual spending has changed.  Given what we know about health insurance costs in our school district, we should not be surprised to see that actual spending increases here.

Last time I broke out the education dollars for the towns that were raised by local property taxes and we looked at how they changed over time.  Below is that information replotted in constant 2001 dollars.  Amherst has a growth factor of about 1.7, Bedford hits 2.4, and Merrimack 2.2.

Locally raised education spending by town in constant 2001 dollars.

Locally raised education spending by town in constant 2001 dollars.

Likewise, here is the total property tax growth of the towns in constant 2001 dollars.  Again, very similar to yesterday’s plot.  Amherst comes in at a real growth factor of just under 1.4, Bedford at 1.7, and Merrimack at just over 1.4.

Changes in the total property tax burdens of Amherst, Bedford, and Merrimack in constant 2001 dollars.

Changes in the total property tax burdens of Amherst, Bedford, and Merrimack in constant 2001 dollars.

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Budget Review Slides Submitted to Administration and School Board

With all the work I’ve done to better understand how and where we spend money in Amherst School District, it was time to do something with it and press for some changes.  My intention is to refocus the budgeting process before it happens, rather than respond to it once it comes out.  I’m hoping the proactive approach is the more effective one. That in mind, I summarized my budget evaluation (which I’ve done in bits and pieces here) and questions/recommendations in some slides and met on Wednesday (7/17/13) with the Superintendent (Peter Warburton), the Business Administrator (Betty Shankel), and the ASD School Board Chair (Peg Bennett) to review them.

It was a good meeting, the contents were well received, and once they have fully digested them, we will meet again with a larger group to review them and their responses to the questions and recommendations. I think I got my point across that I was there for a cooperative meeting and that I wanted to drive the discussion on where W&M sees issues that need to be addressed earlier in the process than has been typical.  We are supposed to be the check/balance in this process and the points made were, I think, well received (we were encouraged to push them on spending issues).  I openly invited them to suggest other metrics to judge value if they feel I have selected incorrect ones (mostly because last year’s W&M committee meetings did not produce any metrics I was looking for).  And in general, that if they feel that the numbers for certain spending areas are justified (special education and teaching coaches come to mind)  in how they deviate from state averages or other town numbers, that the case needs to be made for them.

These are the slides.  I talked over them quite a bit in the meeting, but hopefully the messages are clear.

Amherst School District – Per-Student Spending and Special Education Budget Comparison

Recently I was preparing some charts to go over at the beginning of this year’s Amherst School District Ways and Means budget meetings.  I’ve gone through our budgets quite extensively trying to understand what our costs are and how we can control them.  One thing I look at is per-student spending, which we’ve gone over before.  What I really wanted to understand is how we compare with some of our neighboring towns.

Luckily, the state Department of Education puts their numbers online.  The state does the calculation somewhat different than you might expect as they remove certain budget areas like transportation and food service from the calculation.  With that in mind, these are the state’s cost per student numbers for elementary school education in Amherst, Bedford, Merrimack, and the state average as reported by the NH DOE from 2001-2012.

Per Student Costs by Fiscal Year For Amherst, Bedford, Merrimack, and the State Averages, by Fiscal Year.

Per Student Costs for Elementary Education by Fiscal Year For Amherst, Bedford, Merrimack, and the State Averages.

So according to the state, in FY 2012 we outspent the state average by $4533/student, Bedford by $6378/student, and Merrimack by $4745 in elementary school education.  Go back and read that again.  I found this to be remarkable.  And a little surprising.  We need to understand why Amherst’s numbers are so very different from our neighboring towns.  Those other New Hampshire towns have the same health insurance and NH Teachers Retirement fund constraints that we do, so those probably aren’t the drivers.

For the record, here are the middle school numbers.  We’re high there too.

Per Student Costs (Middle School) by Fiscal Year For Amherst, Bedford, Merrimack, and the State Averages, by Fiscal Year.

Per Student Costs for Middle School by Fiscal Year For Amherst, Bedford, Merrimack, and the State Averages, by Fiscal Year.

The table below has these cost/student numbers for just FY2012, and includes the numbers for the total district.  Keep in mind that Bedford and Merrimack don’t have multiple districts in their towns like we do, so their district numbers include high school (for the record, our Souhegan HS district comes in at $18,456.28/student in FY2012 according to the state).

Elementary Middle School District
Amherst $17,946.34 $15,536.66 $16,569.40
Bedford $11,567.85 $11,855.69 $11,385.20
Merrimack $13,201.02 $13,521.11 $13,157.54
State Average $13,413.70 $12,605.50 $13,159.15

I was pleasantly surprised to find that both Bedford and Merrimack school districts have their FY14 school budgets available online.  I have not yet done a thorough analysis to see how they compare with things we’ve already looked at, like health insurance.  But to try to understand how they spend so much less per student than we do, I took a quick look at their education spending and found something remarkable.  Amherst School District’s budget is heavily weighted in Special Education.  Considerably more than neighboring towns.  Here are the numbers, including the percentage of the budget spent on Special Education.

School FY14 Total Budget FY14 Special Education Budget % Special Education
Amherst $24,278,572.00 $5,073,488.00 20.9%
Bedford $62,660,875.00 $9,882,992 15.7%
Merrimack $67,291,503.00 $10,171,841.00 15.1%

Now these are telling numbers.  In Amherst we are spending between 4 and 5 percentage points more of our budget on Special Education than our neighboring towns. This is a lot of money.  Why these numbers are so different needs to be understood.

Now what would our budget and cost/student look like if we had the the Special Education budget percentages of Merrimack or Bedford this upcoming school year?  I ran the numbers using Merrimack’s spending:

  SPED @ 20.9% SPED @ 15.1%  
Special Education: $5,073,488.00 $3,415,745.21  
Total Budget: $24,278,572.00 $22,620,829.21  
Cost/student: $17,984.13 $16,756.17  

That is to say, if our special education spending was in line with neighboring towns, we would shave about $1.5 million off of our bottom line budget and reducing our spending/student by around $1200.  What I take from this is that we are extravagant in several areas in Amherst School District, Special Education being only one of them.

Amherst School District – Value and Trends in Standardized Testing (Part 2)

Value is a word that we should probably use more when it comes to the school district.  We talked before about the black box approach to understanding complicated things.  We take something complex, like an electronic circuit or a whole school district, and put it into a big black box and simply look at what goes into it and what comes out of it, and use those to learn what it does without having to be too concerned with the details of how it all actually happens (for now, at least).  This is a great way of getting an overall look at how something behaves, and we can use it to look at its effectiveness, or value.

A useful way to think about value is to look at input/output ratios.  You do this all the time, even if you don’t realize it.  Into your car you put gas, out of your car comes miles of travel, divide the two and you get your miles/gallon ratio.  In this case, a higher number means greater value – more miles out of a gallon of gas is greater output for every unit of input and therefore more value.  We can use this same approach with our black box model of the school district.  Into our school district go money, students, and staff, and out come educated students.  The measure of the amount of education the students have is currently done, for better or for worse, with standardized tests, which is a reasonably good way to look at groups as a whole.

Previously we looked at NECAP test scores over time.  But the word value often refers to comparisons made with money – how much of something do we get for our dollar spent.  So lets look at one of the measurements of education that we can make, average NECAP scores and proficiency numbers, and compare them with the dollars it took to get those scores.  In order to do this we have to get rid of the silly NECAP convention of adding the grade level in the hundreds place of the scaled score, and just use the actual test score numbers which go from 0-80.  I don’t have budget numbers for all of the years that I have NECAP scores, so there are a few less years on these graphs than there were on the ones you saw with just NECAP results before.  And because we usually like to look at large numbers instead of lots of decimal points and zeroes all over the place, we will flip the ratio so that the output is on the bottom of the fraction.  This means that instead of points/dollar, we’re looking at dollars/point, and value goes up as the numbers go down.  With all of that in mind, here are the dollars per student-NECAP score numbers for Amherst School District from grades 3-8 for 2008-2012 in reading and math.  We get these by taking the $/student numbers and dividing them by the mean scores for each year.

Amherst School District spending per student  per NECAP test score for reading and math for grades 3-8.

Amherst School District spending per student per NECAP test score for reading and math for grades 3-8.

2009 was the year we had a one-time $2 million bump in the budget.  What we see here is that over time, in general, more dollars are required for every point scored in math and reading.  In other words, value is going down as the years go by.

We can look at these in a slightly different way.  Rather than the cost/point each year, we can look at the test scores and how much we spent per student in the teaching year.  It is the same idea as above, but now we don’t necessarily care which year it is, only what the spending per student number was that year.  Per-student total spending was gone over in a previous post if you want to look at those numbers and how we get them.

This look gives us a sort of price elasticity curve, if you’re familiar with economics.  That is, looking at the numbers this way we see how the amount of education changes as the cost of educating a student changes.  First the NECAP average scaled scores, grades 3-8, math and reading.

ASD NECAP Math and Reading score as a function of per student spending.

ASD NECAP Math and Reading score as a function of per student spending.

NECAP reading and math scores don’t seem to be very elastic. That is, they don’t change much regardless of how much money we spend.  What about the percentage of students who test proficient or above?

ASD NECAP student proficiency as a function of per student total spending.

ASD NECAP student proficiency as a function of per student total spending.

No matter how we look at the numbers, it is clear that the increases in spending haven’t given us any increase in educational value.

The key to understanding why this is so is to look at how the money was spent.  So we have to dig a little bit into the budget.

There is a good reason why the extra spending we do each year doesn’t give us a bump in education – it isn’t spent on education.  Since  2008, the average annual budget increase is $417k.  The average increase on insurance and NH Retirement is $395k.  That is, the spending increases each year go overwhelmingly into health insurance premiums and the NH Teachers Retirement fund.

Insurance and retirement costs for Amherst School District.  The major drivers here are health insurance and the contributions to the New Hampshire Retirement System for teachers.

Insurance and retirement costs for Amherst School District.

What this means to me is that the top priority this year is to get control over these costs.  I am certain that the school board and the administration have plenty of programs they would like to implement, but can’t because of budget constraints.  I know from talking with people in town that they want tax relief.  Making this happen will take creativity and leadership.  I have high hopes that we are up to the challenge.

Amherst School District Budget History

Last year I served my first term on the Ways and Means committee for the Amherst School District.  During budget season, the committee reviews a very complicated budget and scrutinizes it, submitting questions to the administration, meeting with various district employees responsible for budget areas, and reviewing spending plans for efficiency and value.

As I begin to prepare for budget season this year, I thought it would be a good exercise to review some information from previous budget years to understand how the budgets have changed.  This is important to understand as the Ways and Means committee is somewhat dynamic in its makeup.  That is, appointments are for three year terms, and so information has a way of quickly becoming lost as people cycle through their turns on the committee.  It makes sense to me to share this information publicly.

A little bit of background.  The district annually publishes a summary of its proposed budget and revenue assumptions.   This is its “MS-26” file, and they are published online on the district’s finance page for each fiscal year.  This document gives a very high level overview and breaks spending down into coarse categories.  Things like “regular programs,” and “special programs.”  These are the totals for all of the spending categories inside of the  regular and special education programs in the full budget, and they’re the two largest categories in the budget.

So let’s have a look at the six largest budget areas (in 2008) and see how they change over time.  These areas are regular education, special education, support, operation & maintenance, administration, and SAU management services.  The graph below shows these numbers, as taken from the MS-26 forms mentioned previously.  Now each year when these forms are published, they show the actual spending numbers from the previous fiscal year, the appropriated numbers in the current budget, and the requested numbers for the budget to be voted on.  The numbers in the graph below are actual numbers with the exception of the last two years, which fall into the “appropriated,” and “requested” categories.  Go ahead and click on it for a larger version.

Spending in Amherst School District for the top 5 categories (in FY08)

Spending in Amherst School District for the top 6 categories (in FY08)

Here are the individual categories shown separately each year.

Budet category spending in Amherst School District for the top 5 categories (in FY08)

Budet category spending in Amherst School District for the top 5 categories (in FY08)

It would seem that in 2009 much of the money that was previously in the “support” budget was shifted into “regular” and “special” education budgets, and so after 2008, support is a relatively minor budget area.  That would explain the large percentage changes in those education spending  budgets.  Other than that, these combined budget areas show an average total of a few hundred thousand dollars per year annual growth in spending, with single digit percentage changes in each budget per year.  There isn’t anything else huge that jumps out at me.

Total spending, seen below, increases at about the same rate, with the outlier being 2009.   I’m not sure what happened this year, but we spent a few million dollars more than the trend would otherwise lead you to expect.  Large contributions to the increases in total spending each year come from uncontrolled health insurance expenses (something I addressed during my campaign for school board last year, but I digress) and the state of NH’s downshifting teacher retirement expenses to the districts.  I plan to dig into these budgets to get these numbers (it isn’t as easy as you might think), but I don’t have that done yet.  (Note:  It is done now.)

Total spending numbers for Amherst School District since FY08.

Total spending numbers for Amherst School District since FY08.

So spending is one thing, but there’s something else we haven’t thought about yet.  When we think about something as complicated as a school district, it can be instructive to think about it as something simpler – a black box.  Into the box go things like students, staff, and money (all easy to quantify), and out of it comes something somewhat less easy to measure – education (a topic for another time).  This sort of simplification can let us more easily think about efficiency in terms of output as a function of input; efficiency being a word too infrequently used when we consider publicly funded enterprises.

We just looked at the money input, now let’s consider the student input.

Below is a graph of the enrollment in the Amherst School District since 2002.  These numbers come from the New Hampshire Department of Education.  Notice that enrollment has dropped every single year since 2005.  Now go back and look at that spending graph above.  Sure, education spending has been relatively flat, but what does that mean when you have a decreasing enrollment?  This graph gets bigger with a click as well.  It is instructive to have a good look at it as it is what is happening in our schools right now.

Total enrollment at Amherst School District by fiscal year.

Total enrollment at Amherst School District by fiscal year.

I want to take a small aside here and try to understand why this enrollment decline might be happening.  There are likely to be a number of factors behind it, but it would seem to me that the birth rate should be a sensible thing to look at as an enrollment predictor.  It would be nice to have more enrollment data to do a correlation study with, but I just don’t have them.  Birth rate data, on the other hand, is somewhat easier to get.  Not for the state, of course, that would be too convenient.  Plotted below are the US birth rates (live births per 1000 people) since 1960, and plotted along with them are US economic recession years (in red).  It isn’t too surprising to mee to see that all of the significant drops in birth rate coincide with recession years.

Take note of something interesting.  You would expect a 5 year lag between birth rate changes and their impact on enrollment.  2000-2001 was the last recession drop, which is in line with our 2006 enrollment decrease.  Both data sets are roughly flat the few years prior to the drop as well.  If this means anything, it should allow us to make plans for future enrollments in the public schools.

US Birth Rates since 1960.  Recession eras are shown in red.

US Birth Rates since 1960. Recession eras are shown in red.

Now since we have both spending numbers and enrollment numbers, let’s take a look at the all important “total spending per student” number.  The school administration officials don’t really seem to like this number.  It is true that the Dept. of Education uses a different algorithm to calculate per student spending.  This is because they only use education spending, as opposed to total spending, in their calculation, which allows them to compare districts based on education costs alone.

That’s all fine and good, but our per student cost is our per student cost.  Pretending it is something other than what it is doesn’t benefit anyone.  Below is a graph of our per student costs since FY08.  These are total expenditures divided by enrollment for the year.  Yes, we have reached $18,000/student in K-8 spending.

The total spending per student for the Amherst School District.

The total spending per student for the Amherst School District.

The District has not managed to control costs.  That’s about a 30% increase from 2008 to 2013.  Granted, things like teacher retirement costs are out of their control. And for the first time in many years, next year’s ASD budget (FY14) did not increase.

My question is what actions can be taken to get the primary budget increase drivers under control?  And the most important question that needs to be answered, have we realized any additional educational value for those increased costs?