Friday, November 28, 2014

Asw. Simon's folklore tales of school consolidation & property taxes

Size doesn't necessarily matter

With some of the highest property taxes in the nation, every discussion about reducing them invariably turns to consolidating some of New Jersey's 565 municipalities and 590 school districts. Senate President Steve Sweeney has been an outspoken advocate for the former, and Asw. Donna Simon (R-16) presents her case for the latter in this op-ed.

Unnecessary administrative costs are among the reasons we continue to have the highest property taxes in the country. On average, more than 50 percent of our annual property taxes go toward schools. Taxpayers pay outrageous property-tax bills for the salaries and benefits of the duplicative layers of administrators in our 590 school districts.

As we've seen time and again since Gov. Christie started his assault on public education, it's all too easy to blame the high cost of living in NJ on our excellent public schools. While consolidation sounds logical on the surface, the real reason NJ property taxes are so high is due to cuts in municipal and school aid. In their recent study, Size May Not Be The Issue, Rutgers University Professor Dr. Ralph J. Caprio and Assistant Director and Senior Policy Fellow Marc H. Pfeiffer, present municipal evidence that must be taken into account when discussing school consolidation as a means to offset property taxes, as reported in NJ Spotlight :

With 15.6 government units per 10,000 population, New Jersey actually has about half as much government as the national average, and lags just behind New York (17.7 government units per 10,000 residents) and far behind both Pennsylvania (38.5) and Delaware (37.2). 
In fact, New Jersey ranks just 34th in the nation in the number of general governments per capita... 
[R]ural communities with low populations that are often considered prime targets for municipal consolidation have the lowest-cost municipal government services per person in the state — directly countering the assumption that “consolidation of small, inefficient municipalities” would lower property taxes, the study said. “We may need to rethink the conventional wisdom that forcing municipalities into larger organizations will be more effective, more efficient, and/or less costly,” Caprio and Pfeiffer concluded. “It should also give pause as to whether we should be advocating with uncompromising vigor that consolidation of municipalities is a solution to the state’s high property-tax problem.”

"We may need to rethink the conventional wisdom that forcing municipalities into larger organizations will be more effective, more efficient, and/or less costly."


[T]he Rutgers policy experts contended that too little attention has been paid to one of the biggest drivers of local property tax increases — namely, cuts in state aid to municipalities. 
In the wake of the Great Recession of 2007-2009, New Jersey’s cash-strapped state government cut unrestricted aid to municipalities from $1.727 billion in 2007 to $1.303 billion in 2010, reducing state aid from 15.4 percent to 10.6 percent of municipal budget revenue. 
Of the $1.36 billion increase in property taxes over that three-year period, $423.7 million was needed just to make up for the cuts in state aid. As a result of those state aid cuts, property taxes rose from 51.7 percent to 58.3 percent of local municipal budget revenue. 
“In effect, close to one-third of the statewide property tax increases experienced between 2007 and 2010 could be attributed to simply offsetting revenue loss from aid the state itself could not provide,” policymakers should stop pursuing the “folk hypothesis” of “consolidating our way to savings” and focus instead on solutions to the underlying problem. They called for an in-depth analysis of the impact of the 2011 pension and health benefits law, the municipal budget-cap laws, and the overhaul of the interest arbitration statute for police and firefighters to “determine their actual impact beyond the superficial attention they have received.” (emphasis mine)

"Policymakers should stop pursuing the
'folk hypothesis' of 'consolidating our
way to savings' and focus instead on
solutions to the underlying problem."

Lifestyles of the not-so-rich-and-famous

Simon omits these facts with her assertion that property taxpayers are supporting the lavish ‘lifestyles of the rich and famous’ school administrators. Rutgers University Professor Dr. Bruce Baker had this to say when I asked him about her presumption:

Administrative costs are relatively trivial, and there's just not that much savings there, and they certainly aren't the cause of our relatively high (by no means highest as a percent of household income) property taxes. That's due to relatively low state share of funding for schools. (emphasis mine)

NJ Spotlight reports on those lavish perks:

"[T]he average New Jersey government employee is paying more for individual health insurance coverage than government workers in any other state and the 10th-highest average premium for family coverage in the country.

"Further, state and local government workers are paying a much higher percentage of the cost of their individual health insurance policies than private-sector employees in New Jersey have been paying, and not much less than the percentage paid by the state’s private-sector workers for family coverage." (emphasis mine)
All this has been happening while property taxes were accelerating at break-neck pace. NJ Spotlight spelled it out two years ago:
"Property taxes are eating up a larger share of family income under Gov. Chris Christie than under previous governors, primarily due to a sharp reduction in direct property tax relief over the past two years."

The great brain drain and charter school hanky panky

Simon’s criticism of NJ’s school administrators is based on a study by the Center for American Progress that shows financial inefficiencies in school districts across the country. (I urge you to take a look—especially at the interactive chart for New Jersey. Lots of terrific information in there about cost per pupil, poverty and student outcomes.) When Gov. Christie capped superintendents’ salaries at $175,000, lest any of them earn more than the state’s chief executive (but perfectly ok if you work at the Port Authority) it launched a ‘brain drain’ as superintendents left for NY, PA and other states that don’t have punitive salary caps and reductions. As the Wall St. Journal reported earlier this year:

10 of the 43 districts in New York's Westchester County are now run by former New Jersey superintendents who left after Gov. Chris Christie imposed the salary cap in February 2011, saying it would help limit sky-high property taxes.

The superintendent cap did nothing to reduce property taxes, but it sure did a lot to hurt public education:

Nearly 100 New Jersey superintendents who had left their jobs as of February 2014 cited the salary cap as a factor, according to a survey of districts conducted this year by the New Jersey School Board’s Association. 

The article states that even the NJSBA—the governing body of local boards of ed, which sit on the opposite side of the bargaining table of all those pesky unions—opposes the salary cap. It has compromised their ability to find quality candidates and offer them a competitive salary.

"The superintendent salary cap did
nothing to reduce property taxes."

But—amazingly—charter school administrator salaries weren’t included in the cap. Charters are funded with up to 90% of the per-pupil funding from the sending district of every child they enroll. Almost 4 years ago, The Associated Press reported on the double standard in administrator pay:

[S]ome heads of small charter schools earn far more than the limits proposed for public school administrators by Gov. Chris Christie. For example, the director of Teaneck's Community Charter School, which has about 300 students, made more than $200,000 in 2009-2010 when salary, bonuses and reimbursement of unused time are factored in. That's more than the town's interim public schools superintendent receives for overseeing seven schools with about 4,500 students. 

"It seems somewhat unfair that you're asking charters and (traditional) publics to compete for the same funds, but the rules are different," Ardie Walser, president of the township school board, told the newspaper... At Englewood on the Palisades [Charter School], school director Anthony Barckett testified at a court hearing that he earned over $152,000 in 2009-2010 for what amounted to part-time work. (emphasis mine)

If Simon is so concerned about the financial inefficiencies of small school districts, she should start with charters. Dr. Baker continues:

If consolidation is such a great idea, whether to promote integration, remove administrative redundancy, etc., then it would seem utterly foolish that we continue to expand charter schools. These schools tend to operate at inefficiently small size, further segregate our students, and when they do grow to a size where they operate as districts within our districts, they create significant administrative redundancy — a whole layer of "management corporation" siphoning district funds passed on to charters.  

We know, for example, from IRS 990 filings, that the administrative structure of Uncommon Schools has plenty of well paid admins—including their "managing director" for Newark Uncommon at about $200k in 2012. No doubt much higher now in 2014. So, in addition to Newark Public Schools, we've added, through this structure, additional governing layers that siphon resources, but don't show up on the traditional books. (emphasis mine)

"If consolidation is such a great idea,
then it would seem utterly foolish that we
continue to expand charter schools."

So, Newark has a superintendent with a $240k salary, but now has districts within it which use funds generated by management fees skimmed from the charter allocation (which passed through the district) to pay several entire additional administrative teams. (emphasis mine)

Charter school financial malfeasance and inequity is widespread and well documented. A recent study by Rutgers University Professor Dr. Julia Sass-Rubin and doctoral candidate, Mark Weber (aka Jersey Jazzman), proves New Jersey's charter schools, which are undergoing rapid expansion, "do not serve nearly as many children in economic disadvantage, have special educational needs, or are English language learners as their host districts' schools." These additional links, which are just the tip of the iceberg, offer more compelling evidence: 

South Hunterdon: A work in progress

Enrollment numbers from NJDOE website
The South Hunterdon consolidation worked because, as Simon stated, there was overwhelming community buy-in. Just take a look at the 2012-2013 enrollment numbers. They are on par with many charter schools around the state. While it's terrific that the district saved $170,000, it won't make a dent in property taxes.

But take a look at the district's per-pupil cost calculations. Overall they've grown. In addition to some maintenance expenses, that $170K was most likely realized through the loss of one superintendent, but they've increased in every other category.

The new South Hunterdon school district is still very small. Mergers that push student populations close to the magic number of 3,000 could see their costs increase instead of decrease. More students means more services—not less. Consolidation can have other drawbacks as well: longer commutes for students, less community involvement and support, and less —not more—opportunities for students in certain extracurricular activities such as sports, theatre and musical performance—activities that many students want on their college application resumes, and many parents expect for their tax dollars.

The essential questions

  • How can Simon's primary focus be further reductions in our public schools, which are free, open and accessible to every child, while charters—notorious for fiscal mismanagement and student segregation—remain untouched
  • How can Simon place the blame squarely on the shoulders of public school administrators when their salaries and benefits have been drastically cut while charter school administrators, who oversee much smaller schools, earn much more? 
  • How can Simon push so hard for consolidation into K-12 regional districts when the NJDOE's own data shows that on average our K-6 school districts spend less per pupil than our K-8 or K-12 districts respectively? 
  • Why isn't Simon pushing for restoration of the almost $5 billion Gov. Christie has cut from public education since he was first elected, or the hundreds of millions in state aid to municipalities that has been cut since the Great Recession—both of which are proven causes of increased property taxes?

In conclusion

While school districts, municipalities and elected officials must continually look for ways to control costs to taxpayers, it is essential that they make choices that will not diminish the delivery of goods and services. NJ has one of the best public education systems in the country and a charter school system that has been proven to segregate and has questionable financial practices. The massive cuts to public education over the past few years combined with the rapid expansion of charter schools and massive spending to gear up for PARCC testing, have left it battered and bruised, but still managing to provide an overall exceptionally high level of service. If Asw. Simon is looking to cut costs in public education, she needs to start with the charter schools. As a member of the Assembly education committee, she should know better.

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