Thursday, October 10, 2013

Tuition Misinformation Abounds

Event note:  The superintendent will present yet another proposal for elementary school reconfiguration at the next ORCSD board meeting, 7pm October 16, 2013, ORHS. I'm thinking about bringing a "JUST REDRAW THE LINE ALREADY!" sign.

Newmarket had a town meeting and Foster's ran an editorial (then oddly recast it as a news article the next day) about tuitioning into ORHS.  The result: the citizenry is now more misinformed.  One new piece of information is that the deadlines have been extended so now the Oyster River board is expected to decide on November 20.

I'll just quote some of the misstatements and make the corrections.  For sources of the corrections I cite my past post (which links to NHDOE) and the actual "tuition framework" documents approved by the Oyster River school board and sent to Newmarket and Barrington.
Oyster River school officials got some potentially bad news this week with the announcement that the Dover School Board has approved some attractive tuition rates with Barrington for the 2013-2014 school year.
This isn't bad news so much as weird news.  We're already six weeks into the 2013-2014 school year (which I refer to as FY14, the fiscal year ending June 30, 2014).  Didn't these guys have a rate negotiated already?   It's probably Foster's getting the date wrong, but who knows.  The current agreement between Dover and Barrington will expire June 2014.  In that agreement special education was included in the tuition.   The new agreement, while it may nominally offer about the same tuition as before, presumably will not include special education so likely represents a substantial increase to Barrington taxpayers.
With its high school enrollment sliding and the number of empty chairs increasing at Oyster River High School, the School Board has been looking to stave off deep cuts in programs and personnel. The answer which up until recently seemed a sure thing was to accept tuition students from one of three high schools.
The LRPC doesn't predict enrollment will decrease at ORHS (status quo scenario) for eight years. The seats are available due to a past enrollment decline.  There's really very little stopping us from continuing in the current manner for the next decade or so.  And tuition has always been up in the air.
That number does not bode well for any long-term arrangement with Oyster River which is looking for $14,500 per head.
The ORCSD tuition discussion is about FY16, the school year that starts a little less than two years from now.  It is for a deal to send a large number of students and for ORHS be the school of record.  It includes some special education.  It's not clear at all how this number will compare to Dover's two years hence.  Historically our Barrington "choice" tuition has always been higher than Dover's.  Barrington taxpayers pay the Dover rate, and Barrington parents make up the difference.
With Deerfield off the table and Barrington pretty much out the door, Newmarket is last man standing, so to speak.
My view is that it's pretty much always been a choice of (A) Newmarket students or (B) status quo (some Barrington students), with (C) Deerfield,  (D) big Barrington increase or (E) stop taking tuition students (perhaps eventually closing a building) being the much less likely outcomes.   This really hasn't changed, except the longshot Deerfield is out for sure now.
At $14,500 Newmarket still has to pony up the money to bus students to Oyster River. With that addition, Newmarket’s total bill is expected to quickly climb to last year’s per student cost of $16,193.62. And according to numbers assembled by the Newmarket Superintendent James Hayes, it won’t be but a handful of years down the road that any early cost savings will be gone when compared to building a new $47 million school.
Wow, that's quite a load of misinformation in a single paragraph.  Newmarket is getting a great deal from Oyster River.   As I've previously argued, the NH DOE Cost Per Pupil (CPP) numbers serve as an apples-to-apples comparison for tuition.   CPP has no transportation costs included, and no outplacement costs included.

According to NH DOE, in FY08 Newmarket High School's Cost Per Pupil was $12,140.  Inflation has been pretty constant at 2.4% since the turn of the century, so I estimate this as $14,667 in 2016 dollars.  In other words, if Newmarket accepts the Oyster River tuition deal, they will be paying what they paid eight years earlier to educate a high school student, and trading up to an Oyster River education in the deal.  The FY08 $12,140 mentioned didn't include transportation, just like the $14,500 tuition.

The idea that "it won’t be but a handful of years down the road that any early cost savings will be gone" is totally crazy.  The proposal is to maintain a constant discount to Oyster River's cost over the life of the contract. Oyster River is giving Newmarket about 20% off its costs, probably (we don't really know what FY15 costs will be yet, much less FY16 costs, which get complicated by the addition of new students, see below.  For reference, in FY12, the latest year available,  Newmarket HS CPP was $16,194, ORHS was $16,304, about the same.)

Newmarket's alternative, an expensive renovation to a condemned building while constructing a new building, will cost much more.  If we estimate the renovation cost at $500K per year and the new building cost at $2M per year, that is adding $10,000 per high school student (assuming 250 students), or $5,700 per when you include middle school students, or $3,300 each spread over every Newmarket student.  Any way you count it, building a new school is an enormous new expense, adding around 20% to school taxes over there.  Taking the Oyster River offer is getting a discount that takes eight years off the price, around 20% per student (7% off Newmarket's school tax).  So Newmarket can turn down Oyster River and pay 27% more -- seems silly of them.

Another way to think about Newmarket's problems is their superintendent's statement that it will cost 60% as much as before to keep Newmarket High open to serve just the middle schoolers.  (Assuming equal grades) the cost to Newmarket for a middle schooler just went up 40% (.6*7/3).  The Oyster River taxpayers are helping to soften the blow by lowering Newmarket's cost to educate a high schooler by an estimated 20%.
According to a Power Point ( presentation earlier this year, Oyster River expected an enrollment for the current year of approximately 600 students, declining to 555 by 2022-23. Assuming an agreement was already in place, and with Newmarket included, those overall numbers would range from 846 for 2013-14 to 836 for 2022-23.
I already talked about how the status-quo enrollment is not predicted to decline for eight years at the high school.  There's already some indication enrollment is shrinking slower than predicted.  The newspaper numbers do not include the Barrington and other tuition students we currently have (around 70).
While the addition of Newmarket would require some increase in staffing, OR officials calculate the fees garnered from a tuition agreement would quickly recoup that cost, leaving a profit to be returned to taxpayers — $400,000 a year by one estimate.
Foster's has made this error a couple of times, which is odd as the real truth reinforces their point.  They corrected it in the "news" version of the editorial.  Actually the promised return to taxpayers is 25% of gross tuition, around $900K or 2.25% of the current budget (so about that much off your school tax bill).   This doesn't include 10% of tuition dedicated to capital improvements, $360K, which will save taxpayers another 0.9% when spent on things that otherwise would be bought using taxpayer funds.  The savings to taxpayers could be even greater if we tightened up the needed staffing (currently estimated at $2M total, regular and special education) and omitted the fund for new projects, which I've been calling the slush fund, instead returning all the excess to taxpayers.

The idea of a win-win deal is to have something for everyone.  Newmarket gets a place to send their kids and a huge discount.  The students get more programs.  Oyster River taxpayers get a bit of a break.  Almost everybody is happier than if no deal takes place.

What's especially odd is Foster's apparent disgust that the deal may be in the citizens of Oyster River's interest, i.e. that they may actually turn a profit.  I thought Foster's was conservative -- profit is good, is it not?  The weird thing is their implied argument is that Oyster River is being greedy because we are not charging $8,000 per student ($2M new costs / 250 new students) even when ORHS's CPP is currently over $16,000 per student.   Sometimes I think Foster's couldn't care less how they make their arguments, as long as the conclusions degrade Durham or Democrats.
But without Newmarket or another school district, the numbers head in the other direction, meaning staff layoffs and program cuts which the Oyster River School Board has been told will be significant.
Again, the enrollment contraction is a wave of low birth rate years, just now hitting the elementary schools, with the decline not hitting the high school for 8 years.   The Oyster River school district can continue along the way it's been going, which has been to keep a tight rein on costs lately as enrollment declines, and the burden on the taxpayers will stay about the same, without much in program loss.    If we don't tuition in a large number of students in FY16 we still have time to consider what to do about declining enrollment.
The threat of these cuts and the loss of programs appears to be a driving factor in public support for accepting tuition students from other districts on a long-term basis. A poll, conducted by the University of New Hampshire, showed strong support for a tuition agreement and very little opposition among Oyster River School District residents. 
We will be curious to see if that support holds up now that Newmarket has a better bargaining position at the negotiating table — one which might allow Oyster River to maintain class sizes and programs, but not turn a profit on the deal.
It pretty much has always been a choice between Newmarket or status quo, so their bargaining position hasn't changed much.   I will advise taxpayers of Oyster River not to take the deal if there's no tax relief in it for them.  Why should they?   80% of them don't have kids in the schools.  It already seems unfair to Oyster River taxpayers that the tuition is less than their local cost per pupil.  The profit, as Foster's derides it here, at least makes the deal a win-win, if still unfair. The deal will likely hurt their property values without the tax relief.  Test scores on average will go down.

Newmarket was being offered a lifeline that it would have been a mistake for them to decline when the tuition was $16,324. At $14,500 this is just a no-brainer for them. If nothing else, it gives them a place to put their kids while they build a high school.  But if they can't appreciate what a good deal they're getting, it may be best just for us to pass and see what comes down the pike.
Approximately 35 people, representing a “real cross-section of the community” showed up to say they would like to tuition the high school students somewhere else, to support building a new school and to learn about other options, Hayes said.
Some people in Newmarket could really use an Oyster River education. Apparently if the superintendent has his way they're going to be too pig-headed to accept one for their children.  My source says 25 people showed up for this meeting, and much of the aforementioned misinformation and more was relayed.

A 2% annual tuition increase was again brought up at the Newmarket meeting.  This is misleading.  The actual rate of increase proposed is the growth of the ORHS High School CPP figure.   The exact language from the framework is:  
Each subsequent year the tuition rate will change by the percentage of the actual change in the appropriated operating cost of Oyster River High School based on the prior fiscal year.
There's a helpful spreadsheet included in the framework that illustrates a big problem I have with this clause.   In particular, the calculation gives Newmarket yet another huge discount!

The problem is in the adjustment for the first year, which is "Percent change in appropriated budgets from FY15 to FY16."  Our CPP will spike down in FY16 -- this gain in efficiency is one reason we're taking tuition students.   We want to retain it for Oyster River and not just transfer it to Newmarket. 

Let's be concrete.  Suppose our FY15 HS CPP is $17,000 for 700 high schoolers.  To keep it simple, let's say we get 250 additional Newmarket students at a cost of $2M.   Assuming a lately typical 2% growth of costs for our kids, our FY16 HS CPP would be (1.02*17000*700+2000000)/(700+250) =  $14,882, a 12% reduction.   According to our formula, we would then lower Newmarket's tuition another 12%!   We definitely should not do that.  One fix would be a minimum tuition increase of 2% or the CPI or even 0%.

The other problem is that the discount compared to ORHS CPP remains constant.   I would like this gap to close over time because otherwise Newmarket will have no incentive to join the cooperative, as they can get the seats more cheaply though tuition.

I also don't like the very long period before the agreement can be cancelled.   I would add options at 3 years and 6 years (or even more frequently) for either side to give their 5 year notice.

See you all at the next meeting!

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