A fair amount has happened since school started so I thought I'd do an update.
We're Newsworthy
Foster's, September 19, 2013 Plans for cafeteria at Moharimet School discussed
Foster's, September 20, 2013 If OR tuitions more students, taxpayers could realize $400g
Jeff McMenemy of SeacoastOnline is also on the beat:
SeacoastOnline, September 18, 2013 Oyster River H.S. lowers tuition price for Newmarket, other towns
You can always watch old school board meetings on YouTube (9/18/13, 9/4/13). But you don't have to because I sit through them and report back to you here.
Mohariment Cafeteria, $500,000
The initial enrollment figures for the two elementary schools were startling. Mast Way began with 287 students, Moharimet with 409. That's 122 students, 43% more, at Moharimet if you're counting.
Moharimet has an official functional capacity of 388, so it's a little tight in there. The pain is most acutely felt in the multipurpose room, which serves as a cafeteria when not a gym or auditorium. And sometimes, we found out, at the same time that it is a gym.
This leads to the first of our half-million dollar items alluded to in the title. The board gave Superintendent Morse approval to explore building a cafeteria at Moharimet. The intended capacity is 360, the expected price tag is $500,000 and the size is 10 feet longer than Mast Way's (inequity?). It would be sited near the kitchen, either in the parking lot or toward the church.
The superintendent wants to begin construction this April, so the cafeteria is ready by September. This means spending money in the current fiscal year. This is possible due to some found money (more about that next). This district plans to seek approval for the Moharimet cafeteria from the voters in the March election before proceeding.
$500,000 is 1.25% of the $40M budget. Found money or not, if the board decides to build a cafeteria at Moharimet your FY15 school tax will be about 1.25% more than if they decide not to.
The superintendent preemptively defended himself against the implied charge that it's only the overcrowding from the imbalance that's moved the Moharimet cafeteria to the top of the priority list.
Local Government Center Fraud Payout, $500,000
From what I can tell, despite the name, Local Government Center (LGC) is a private, for-profit company. LGC is an insurance agency. It was rather dubiously formed by merging non-profits that were administering insurance for municipal employees. It got in trouble for mixing pools, which is a fancy way of saying LGC didn't return excess health insurance premiums to the towns and school districts who paid them that it was required to by law.
The district's share of the settlement is $688,555. Since employees pitch in a certain percentage of their heath insurance premiums, some of this money belongs to them. The superintendent speculated that the district would retain around $500,000.
ORCSD is getting the settlement in the form of what I think was called a premium holiday. Basically, LGC is giving us a discount of $688,555 on our health insurance this year. Seemingly sensible local governments (including Durham) that sought insurance elsewhere in the wake of the scandal are crying foul, as only current customers are in a position to take the premium holiday.
LGC was also in the news recently as the conflict of interest that ended the NH Senate Presidency of Peter Bragdon. NHPR has been covering LGC well for a long time.
My main concern is that every time there's some revenue that comes into the district it becomes an excuse to spend with "minimal impact on District taxpayers" (agenda). New projects add to taxes whether or not they are offset through found money or tuition profit or spread over the years through financing. Instead of a minimal impact on the taxpayers, we should aim for a positive impact: lower taxes.
Oyster River Cuts Proposed Tuition $500,000 per year
The prospects for a tuition deal improved after we lowered the proposed tuition for Newmarket from our cost per pupil (CPP) ($16,324) to $14,500. As before, this tuition deal does not include transportation and places a ceiling on special education support. Dr. Morse proposed a plan where the board approves a single proposal that it offers to each of the interested districts.
The Newmarket Perspective
There's been a somewhat odd dynamic to the negotiation with Newmarket. It was announced last spring that Newmarket was willing to pay our cost per pupil. Somehow it only occurred to Newmarket in September to ask for a lower rate, which we gave them.
There is some drivel going around that Newmarket could actually save money by building a high school rather than tuitioning out to Oyster River, given the high rate. That seems ludicrous to me, but let's do the math to be sure. [In a comment below, Mike M. reports that it has been admitted that there was a math error by the Newmarket folks.]
NH DOE has Newmarket FY12 CPP at $15,159 and Oyster River at $16,502. DOE also provides CPP for high school only: Newmarket $16,194, OR $16,304. Let's make a guess (probably a lowball) that a new high school costs $30M. [MM says $53M.] If we believe the high school DOE numbers, at the initial high rate the extra tuition Newmarket would pay to Oyster River would pay for a new High School in 30M/((16324-16194)*250)) = 923 years! Let's say we compare to Newmarket's lower district-wide CPP -- then Newmarket's increase would pay for a new High School in only 30M/((16324-15159)*250)) = 103 years.
As a matter a fact, the new deal saves Newmarket so much money that in 30M/((16194-14500)*250) = 71 years the taxpayers of Newmarket would have saved enough to buy a new High School, courtesy of the taxpayers of Oyster River. (It's actually much faster than this when you consider the inflation adjustment discussed below.)
Now, I like the idea of a tuition agreement and despite some trepidation I want to help our neighbors over in Newmarket. I just don't see why we need to be so generous we save their taxpayers over $400,000 the first year and an increasing amount in the years beyond.
The Oyster River Perspective
The discount just offered amounts to 16,324 - 14,500 = $1,824 per student, or $456,000 per year for the expected 250 students.
The superintendent promised 25% of the tuition to taxpayer relief, down from the 40% promised when Newmarket was willing to pay up. Let's see, 25% * 14,500 * 250 is around $900,000,
a bit more than 2% percent off your taxes. The old figure, 40% * 16,324 * 250 is around $1,600,000, around a 4% tax break.
From the district's point of view, they were retaining around $2.46M (60% * 16,324 * 250) in the old deal and around $2.72M (75% * 14,500 * 250) in the new one. Look at that -- another quarter million dollars of found money. Time for free all day K.
[MM reports that Foster's made an error reporting "400g". I've indented my original commentary which was based on taking Foster's at its word.]
But Foster's reports that the taxpayers can realize $400K annually in the new tuition deal. (If it was up to me, the headline would say "only $400g.") This is much less than the $900K I calculated. There appears to be some slight-of-hand going on here.
Where it was previously reported that 40% of the gross tuition would be returned to the taxpayers, $400K seems to be 25% of the tuition profit of $1.6M, not of the total tuition revenue of $3.6M (14,500 * 250). The costs are expected to be $2M, mostly for staff.
What of the 75% of the profit not returned to taxpayers? That's $1.2M more of found money. That's plenty to get a football program going, along with a bunch of girls' sports to avoid Title IX troubles.
One important thing to note is that the tuition deal should help our cost per pupil. (The renegotiation didn't affect the costs, just the revenue.) Back of the envelope, assuming 250 additional tuition students at a $2M cost, our CPP of $16,502 would change to ((16,502*2,000+2,000,000) / (2,000+250)) = $15,557, a 6% reduction.
Inflation
I didn't tell you the worst part of the proposed deal. There is a 2% nominal increase in the tuition we charge over each of the first 8 years. This is very likely a ridiculously low number. It is below the broad inflation rate (CPI), and seriously below the observed inflation in school costs.
From 2001 to 2012 (the latest year available), the NH Cost Per Pupil has increased at an annual rate of 6.27%. (That's the nominal increase -- it's 3.81% after inflation.) Over the same period, Oyster River CPP grew at 7.31% a year. If that continued, the nominal 2% increase would mean Newmarket pays $16,656 in the 8th year, while our cost grows to $26,749. Their 12% discount becomes a 38% discount, perilously close to not even covering the cost of the additional staff.
Since the financial crash, nominal cost per pupil has grown more slowly. The state CPP grew at an annual rate of 3.86%, while Oyster River's grew at 1.95%, actually below the rate of inflation (which remained at 2.4% in the period) and below the proposed 2%. As just mentioned, we should get a dip in CPP after we take additional tuition students. But it's unlikely we will be able to maintain the austerity of nominally growing less than 2% a year for another eight years.
Balance
So the Oyster River taxpayers are expected to go along with a tuition deal that will reduce their taxes an anemic 1% 2%. The students get to maintain and increase their programming. The administration gets its slush funds. The Newmarket taxpayers start out paying 10% less per student for a better high school, and that discount grows over time.
The tuitioning deal needs to be a balance between the needs of the students and the desires of the taxpayers of both Oyster River and the other district, most likely Newmarket. My feeling about the current proposal is it tilts too heavily in favor of the students and Newmarket taxpayers at the expense of district taxpayers.
I would be in favor of a tuition deal where the tuition rate would rise at a rate equal to the rise in NH cost per pupil. Or, if we wanted to tie the rate to our own costs, we would need to be careful about the expected CPP reduction when we get a new influx of tuition students. We could solve it with a minimum increase (say 2%, or the CPI) if our CPP happens to grow more slowly. We might also want a formula that closes the discount over time.
The other concern I have with the tuition arrangement is not the deal per se, but the proposed staffing. Tuitioning is perhaps our only opportunity to get our class sizes toward the high end of our policy (18-22) without morale-sapping layoffs. To do this, we have to hire the minimum number of teachers. We need to be similarly tightfisted on new non-teaching staff. I haven't seen any evidence that this analysis was done by the administration. Or if it has, they haven't shared it.
The third concern is the profit -- the difference between the tuition charged and the cost to provide the extra staff and programs. The administration is essentially proposing to split the profit, now estimated at $1.6M annually, with the taxpayers. The latest proposal seems to be 75% 45% to the administration, 25% 55% to the taxpayers [corrected $400K->$900K]. I'd like to see 100% to the taxpayers.
$500,000 to Reserve Fund
There is an item in the 9/4/13 minutes that Sue Caswell reported that the total FY13 fund balance is $1,097,714 and that "they will retain $500,000." I think what this is trying to say is that the new reserve fund, approved by the voters last March, will be initially funded with $500,000 that would normally be returned to the taxpayers. Congratulations district property taxpayers -- your taxes just went up another 1.25% next year.
I personally don't think it's right that Sue gets to decide how much the Reserve Fund is funded. Nothing against Sue -- we'd probably all be better off if we always did what Sue suggests. But Sue isn't one of the people we elected to make decisions like this. I thought that a board vote would be required to approve this transfer, but I'm too lazy to try and decipher RSA 198(4)b to find out for sure.
Loophole in Budget Goals may cost $500,000
The budget goals were approved as modified. My concern is the loophole in goal 1:
The ORCSD 2014-15 Budget will not exceed the cost of living as establishedNow, if I was a superintendent I would want to write the goals with as many loopholes as possible, so I could claim victory no matter where the budget ended up. However as a taxpayer, I would prefer the goals be loophole free. If we're unable to negotiate a good contract, or the state shifts more costs onto us we might not be able to achieve our goal. But we'd have tried, and we'd have reasons, possibly good ones, for our failure. Life happens and one doesn't always achieve one's goals. I guess I'd make a lousy superintendent.
by U.S. Government for 2013. Health Insurance, negotiated contracts and
State cost shifts/mandate not subject to COLA.
I have no idea if the cost of this loophole will be a $500,000 -- it's just a guess keeping with the theme of this post. A half a million here, a half a million there and pretty soon we're talking about real money. But the real real money is in the tuition deal, where it currently looks like the taxpayers of Oyster River are being given the short straw, where their meager 1% savings over the first year may grow into a substantial tax increase by the eighth year.
"Somehow it only occurred to Newmarket in September to ask for a lower rate, which we gave them."
ReplyDeleteDean, could you clarify who the "we" is in the above statement. I do not recall Newmarket's request for lowered tuition rates coming before the ORSD School Board.
Thanks for the clarification, Dean.
DeleteThis plan to increase the HS student numbers by adding Newmarket to the ORSD is predicated upon the speculated projection of a decline in student population. I simply do not buy into those projections. I believe there is a sizable demographic both desiring to move to the NH coastal area and demanding to provide a top quality education for their children. Would a more suitable plan be to encourage more volunteer tuition students from neighboring towns, especially Barrington, so ORSD can control its own numbers?
Deb, thanks for the question. The declining enrollment forecast has indeed been used as justification for tuitioning. That has never really made that much sense as if you look closely at the HS enrollment forecast you see it doesn't really decrease for 8 years. And that's if you believe the projections, which seriously underestimated enrollment this year.
DeleteIt's more the past enrollment decline (2400->2000 for the district) that's left the HS in the 2/3rds full state (even using the current roomy policy of max 22 students per section to calculate capacity) with around 300 seats available for tuition students. My argument for tuitioning is we can expand programming for the kids, make the school more efficient by using those empty seats, actually fill our classes to our class size policy, get some relief for the taxpayers and help out our neighbors in Newmarket. But if the deal doesn't shape up the way I hope, I'm not going to support it.
In a few years the low birth rates will work their way into high school and enrollment will probably decline. That may put us into a position to take Barrington students again. But Barrington's insistence on choice makes them a less reliable source of students for the near future.
Hi Deborah. Thanks for your question.
ReplyDeleteWe're pretty promiscuous here with the first person plural pronoun -- sorry about the confusion.
In this case, it was the negotiating committee, which I believe is made up of Superintendent Morse and board members Al Howland and Tom Newkirk, that agreed to the new terms. Nothing is solid until the board as a whole approves. That vote will be soon, so now is the time for complaining. Nothing is really final until the boards of the two districts, and then the voters of the two districts all approve a final agreement.
- Dean
I recently confirmed with Oyster River Superintendent Jim Morse that 25% of gross tuition revenue will be set aside for OR taxpayers. All the papers have gotten it wrong, using net tuition revenue instead of gross tuition revenue. It won't be $400,000 but more like $900,000 for taxpayers. Money left over after the taxpayer set-aside and direct expense for the 254 Newmarket students ($2 mln) will be about $700,000 for new and enhanced programs at ORCSD. Overall, this seems like a good deal for the students, teachers, staff and citizens of Oyster River.
ReplyDeleteI also believe that the contracted tuition rate will increase each year at the rate of increase of Oyster River High Schools actual costs, not at a fixed 2% per year. That seems fair to me. The Cost Per Pupil for ORHS has increased at 4%/yr from 2006-2013, though it increased at less than 2%/yr for the past three years.
Finally, I agree that something has been odd about the numbers that Newmarket presented to their school board on August 15. Newmarket was claiming that it made better financial sense for them to build a new Jr/Sr HS at $53 mln rather than tuition their grades 9-12 to ORHS. The actual total bonded cost for that new school would be about $87 million over 25 years.
Many in the community thought this was absurd on its face. It turns out that at a recent Sept. 9 Newmarket town budget committee meeting, Newmarket Superintendent Jim Hayes admitted that he had made some errors in his financial numbers. He'd forgotten to include any Newmarket SAU overall allocations when estimating his costs, to the tune of about $620,000 per year for just Newmarket grades 9-12. After correcting this, and other errors, it now appears that many Newmarket citizens favor a tuition deal with Oyster River.
Mike, thank you so much for commenting here. Thanks for the clarification on the newspaper error -- I'll correct the post. I didn't know the about the admission of a math error either.
ReplyDeleteYou verify much of what I said above, so thanks for that too. Please allow me to make a few points to continue our discussion.
In my opinion, any new programs should be subsumed under the proposed $2M cost to accommodate the new students, We're hiring a bunch of new faculty with new skills who can do new things -- that sounds like new programs to me. Why another $700,000 which leaves the taxpayers with a relatively meager $900,000 return for taking a fair amount of risk?
And I don't have any evidence that spending $2M on staff does anything to help our overstaffed condition. This is pretty much our one chance to actually live by our 18-22 students per section policy so let's take a hard look at those numbers. Do we have any idea what fraction of sections have only a handful of kids? This is our chance to fix that.
On the inflation/CPP adjustment, my concern about tying increases to our CPP is that our CPP will go down around 6% once we take tuition students. Are we going to lower the rate we charge because of that?
Then there's the issue of the base charge. Newmarket's 2012 CPP overall was $15,159. They really have nothing to complain about if we charge this rate -- why go to $14,500? Let's say the taxpayers of Oyster River want to help them out because we're nice neighbors and they are in trouble over there -- they have to keep the crumbling school open to serve 3/7ths the kids at 60% the cost. Why give them this help in perpetuity? If we're going to start at $14.5K why not close the discount over time?
- Dean
Thanks for your reply, Dean. But I won't be having anything to do with the ORCSD or the tuition issue in the future. Keep an eye on the web sites of both the Town of Newmarket and the Newmarket school district, and double-check Newmarket numbers when you can find them. The Newmarket school board and administration appear to have a significant problem with competency and/or honesty.
ReplyDelete