Commentary

Gerry Silverstein: South Burlington school budget vote

Editor’s note: This commentary is by Gerry Silverstein, a professional educator who lives in South Burlington and has interests in individual, community and global health.

On June 6, voters in South Burlington will go to the polls for the third time in an attempt to pass a school budget for FY 2017-18. The proposed school budget was defeated by a significant margin the first two times it was presented to the public (56-57 percent of voters voted no both times; although only about 25 percent of registered voters actually voted). Voters were not simply in a ‘”no” voting mood, as they passed the general city budget on the first try.

South Burlington has an outstanding public school system, respected both locally and statewide. Why then would voters say no to the first two budget proposals?

The first budget proposal brought to the voters asked for a 7.6 percent overall increase in spending compared to the previous year (although the net cost increase to the community would be less; see below). Student enrollment in FY 2017-18 is expected to be stable, although the stability of the South Burlington student population (and the school budget) is dependent upon 190 tuition-paying students from communities outside South Burlington. Many voters felt the large increase in overall spending could not be justified.

Increasing budgets with stable or decreasing student enrollment profiles statewide spending on public school education where enrollment has declined by 20 percent over the past 20 years while spending goes up every year. By any measure, this discordant duality is not sustainable over the long term.

The second budget vote brought to the voters asked for a 5.7 percent overall increase in spending compared to the previous year. This proposal was likely voted down for at least three reasons.

First the school mascot Rebel name change became a divisive issue in the community, and it is clear that an unknown number of voters said no to the second proposed school budget (which included money for the name change) to protest what they saw as a serious violation of the foundational democratic principles of one person-one vote and majority rule (see “South Burlington’s Mascot Name Change”).

Second, after the first no vote, the superintendent of schools presented to the school board a revised proposal that made minor reductions in personnel and program spending.

The third reason was the current position of the South Burlington teachers union (SBEA) in contract negotiations for three years beginning with the FY 2017-18 school year.

These negotiations (currently at an impasse) are a flashing red light not only for residents in the South Burlington community but more generally for all of Vermont.

On health care, the position of the SBEA is: South Burlington residents and the state of Vermont (the latter is a co-employer of all salaried employees in the South Burlington school system via the income sensitivity prebates that the state provides to community residents with income less than $141,000) will pay 100 percent of health care insurance premiums and cover all out-of-pocket expenses for all teachers. In other words, South Burlington teachers will not pay one penny for any and all aspects of their health care for three years beginning July 1, 2017.

On salary, the SBEA has asked for an average of 4.89 percent increase for each of the next three years, more than twice the current rate of inflation.

The SBEA has also proposed: (1) that taxpayers (and the state of Vermont as co-employer) contribute to a 403(b)-retirement plan for each teacher. This would be in addition to the pension and health insurance that teachers receive from the state of Vermont when they retire, and (2) that salaried employees receive an additional floating holiday, in addition to the multiple holidays they already receive, their two-month summer break, and the multiple week-long vacations when school is not in session (teachers in the school system work about 180 days per year).

Many voters looked at the position of the SBEA and concluded it was not only unreasonable, but insulting to the people who were actually paying for the teachers’ compensation. The SBEA position was a declaration that public school teachers deserved a compensation package that other members of the community who paid their salaries and benefits could only dream of. Many members of the community disagreed with the SBEA position and voted accordingly.

After the second no vote, the superintendent presented a revised third school budget proposal that reduced the overall FY 2017-18 increase from 5.7 percent to 4.89 percent. As with the first revised budget, the second revision also involved minor reductions in personnel and programs, but the proposed budget maintains all classes and all extracurricular activities at all five schools in the district.

Moreover, the third budget proposal continues to include two new teaching positions in the elementary schools, as well as funding for a third contingent position should enrollment be higher than expected. Current student to teacher ratio in South Burlington is 9.7-to-1, while the ratio of students to salaried employees in the school system is 5-to-1. These are very low ratios.

It is important to detail that the net increase in spending with the latest budget proposal is only 1.7 percent compared to the previous year. Much of the 4.89 percent overall increase in spending in the third proposed budget is offset by reimbursements for special education expenses and external income from tuition-paying students. The cost per equalized pupil, a state mandated calculation, would increase by 2.3 percent to $15,401 in the latest proposal compared to the previous year.

Spending levels must be addressed at local, state and especially federal levels, or the students currently in the school system will face a doomsday level of debt when they are in the prime income-producing years of their lives.

 

A net spending increase of 1.7 percent seems reasonable for a school system with an excellent reputation. However, the results of negotiations with the SBEA will not be known until well after the June 6 budget vote, and those results could have a significant impact on school budgets in years two and three of the contract. Additionally, the issue of long-term sustainability of the school budget must be considered. To understand this issue requires understanding “dependency” and fiscal realities at the state and federal levels.

South Burlington is heavily dependent on external sources of funding for its school budget. Tuition-paying students (190) from outside South Burlington contribute $2.76 million to the $49.3 million (latest proposal) school budget. Although the number of tuition-paying students appears stable currently, that could change (three years ago there were only 120 tuition-paying students, a difference in income of about $1 million).

South Burlington depends heavily on funding from the state of Vermont, primarily from income sensitivity prebates to the majority of South Burlington taxpayers, but also from reimbursements for mandated programs that aim to maximize the learning potential of every student. South Burlington also depends on the federal government via Medicaid allocations to cover some of the expenses associated with students who require assistance from individuals with expertise in mental health.

Just as South Burlington depends upon the state of Vermont to pay for a large part of the school budget, the state of Vermont depends upon the federal government for 35 percent of its budget. The major dependency is in the public welfare arena (primarily Medicaid), where more than 70 percent of spending (in 2015) was provided by the federal government (federal contribution of $1.27 billion). However, the federal government also provides between $125-250 million towards public school education expenses in Vermont (2015-16 amounts).

If South Burlington depends upon the state of Vermont for a significant portion of its budget, and the state of Vermont depends upon the federal government for its basic operations, the next obvious question is what is the fiscal state of the federal government today and going forward.

The aggregate debt of the federal government is now about $20 trillion, and the amount of federal debt “held by the public” is about $14.5 trillion. Economists often say it is not the actual amount of debt that matters, but something called the debt held by the public to gross domestic product (GDP) ratio. The GDP is the value of all services and goods in the economy. Current GDP in the U.S. is between $18-19 trillion. If government debt held by the public was $1.8-1.9 trillion, then the debt held by the public to GDP ratio would be about 10 percent, and economists would say that is just fine as the economy is generating more than enough income to cover the borrowing needs of the government. But the current ratio is most certainly not 10 percent.

In 2005, the debt held by the public to GDP ratio was 35 percent. Today the ratio is 77 percent, a more than doubling in 12 years. Economists are “concerned” with that debt level. According to the Congressional Budget Office (CBO), in 2027 if current spending trends continue, the ratio will rise to 89 percent. Economists would be “extremely concerned” with that ratio as debt held by the public was approaching the total value of all goods and services in the economy. In 2047, if current spending trends continue, the CBO recently (2017) estimated that debt held by the public to GDP ratio will be 150 percent. Most economists view such a debt level as “dangerous and not sustainable.” No less an individual than Ben Bernanke, former Federal Reserve chair, said in 2011, “Creditors will not lend to a government whose debt, relative to national income, is rising without limit.”

In the FY 2018 proposed federal budget, social welfare programs (Social Security, Medicare, Medicaid, SNAP, EITC, etc.) comprise about 63 percent of spending, interest on the federal debt is about 8 percent, and military spending is about 15 percent. That leaves 14 percent for everything else the government spends money on, including education. Of even greater concern, the 14 percent portion will decrease significantly in the years to come as social welfare program spending balloons with the aging of the population and increased costs of health care, and interest on the federal debt explodes as interest rates rise and government aggregate debt increases by an additional $10 trillion during the next decade. In 2027, 10 years from now, the CBO estimates that the government will pay $760 billion of interest on its aggregate debt (Note: estimates for additional debt and interest payments in 2027 do not include impacts of Trump administration budget proposals).

How does this all relate to the South Burlington school budget? At some point, either voluntarily or forced by fiscal realities, the federal government will have to decrease spending (and likely raise taxes as well). States like Vermont, which depend upon the federal government for 35 percent of its spending, will be told they have to make due with less. The state of Vermont will in turn have little choice but to reduce spending and that will likely mean that programs like income sensitivity will be reduced, putting more of the burden of funding public schools directly onto resident taxpayers. Individuals like senior citizens living on fixed incomes may have trouble paying their property taxes.

From a long-term perspective, communities like South Burlington are currently spending at levels that ignore or minimize major drivers of sustainability (stable or decreasing student enrollments with yearly increasing budgets, and increasing dependency on external sources of funding). So, essential questions must be asked:

• Is everything the school system doing absolutely necessary?

• Is the very low ratio of five students to one salaried employee absolutely necessary to achieve educational excellence in the school system?

• Are all offered courses essential? Courses currently offered in the South Burlington school system include Yoga, Bowling, Arena Football, Badminton, 3D Studio, Advanced 3D Studio, Character and Game Design, Fashion and Apparel Design, Sports and Entertainment Broadcasting, Robotics and Engineering, Fine Metals, six semesters of Spanish and six semesters of French, four semesters of German and four semesters of Japanese. These courses and the many Advanced Placement courses offered require a significant number of educators and it is salaries and benefits that are the single largest cost of school budgets (80 percent of school budgets go towards compensation).

Finally, what level of compensation for salaried employees is fair and sustainable? The current position of the SBEA asks for a compensation package that would be harmful (if not destructive) in the long-term to school budget sustainability.

Those who are advocating for a yes vote on June 6 have distilled the decision analysis to a single question: Do residents want to maintain a great school system? But reflecting on what has been presented above, the decision is not that simple. Spending levels must be addressed at local, state and especially federal levels, or the students currently in the school system will face a doomsday level of debt when they are in the prime income-producing years of their lives. The default position all too often is we will fix the problem “tomorrow.” But “kicking the can down the road” is not a plan; never is and never will be. If the school budget passes on June 6, the underlying problem of long-term sustainability will still remain.

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  • Edward Letourneau

    Social Security and Medicare are paid for by people who work. They are not funded by other taxes. Social Security was added to Federal budget in the 1960s, when military spending for the war in Vietnam and the cold war raising. Adding social security spending to the budget made the war spending look like a smaller amount compared to the overall budget. It was gimmick then, and is now.

    • Nachman Avruch

      The gimmick is that these programs are ‘funded by people who work’ as if that were somehow different than everything else. FICA taxes are just taxes; any excess money collected on the Social Security portion goes right back into federal spending through treasury bonds. Medicare taxes literally feed into the general treasury fund and expenses come right back out of it.

      • Jason Brisson

        I have been paying social security for 23 years since my first job at the age of 16.
        The “gimmick” is that the government takes this money out of my paycheck regularly without my consent, but calls it an “entitlement” when its time to give it back.
        I will have paid in all my life, and do I have any confidence that there will be any social security available when I retire in another 25-30 years? No, I don’t.

      • Edward Letourneau

        “… Social Security portion goes right back into federal spending through treasury bonds.” And the bonds are or will drawn when needed to pay the benefits. So what was the point you were trying to make?

    • Daniel Carver

      Edward,
      President LBJ took what had been a monetary reserve, the Social Security Trust Fund, and used those funds to pay for (a.) escalation of the Vietnam conflict and (b.) his Great Society programs. His leadership transitioned Social Security funding to the current pay-as we-go process and promised to “end poverty in our life time.”
      Of course, poverty, the way government measure it, is as prevalent now as it was in 1965, yet we’ve added many trillions of dollars to the national debt and the Social Security Trust fund is funded with Congressional IOUs.

  • Paul Richards

    Good article, thank you Gerry.
    “However, the results of negotiations with the SBEA will not be known until well after the June 6 budget vote, and those results could have a significant impact on school budgets in years two and three of the contract.” This folly is one of many woven in the corrupt pay to play system between the democrats and the public sector unions. The results of the “negotiations” will not be known until after the vote so about 80% of the budget is unknown to the voters before they vote. So what are they actually voting on? They have absolutely No say in the “negotiations” that take place in a closed room full of professional lawyers paid by union dues and the board and their lawyer. The outcome of this lopsided contest will determine 80% of the budget and is non negotiable once ratified. As a voter I will alway vote no on a budget that I have no input on and on one that locks down 80% of it as non negotiable. Regardless of what the overall budget is the union’s contract will stand. If anything gets cut it’s things like field trips, books, building maintenance and other items that impact the students. Nothing that impacts the teachers compensation package will be touched. But it’s all about the kids?
    Wake up people! This is no way to treat generation after generation of our children. Get the public sector unions out of this nasty game, put the power of management in the hands of the managers and put the power of the purse in the hands of the taxpayers and open up competition and choice for every American parent. A lot of things would change for the good. Public sector unions have no place in a constitutional republic.

    • Sheldon Katz

      Paul. I think as a first step if we had an open shop for public employees, it would work wonders. In Wisconsin, union membership is down to less than half of what it had been and many locals have been decertified. Costs are under better control and I have not heard that the sky has fallen on government-run schools.

      • Paul Richards

        “….if we had an open shop for public employees…”
        Agreed but how do we get there with the current monopolistic, corrupt system? Between the democrats and the unions they have created an airtight system for themselves. That is why I maintain that the only way we will actually get real change is if public sector unions are relegated back to illegal status where they belong and the education field is opened up to fair competition. The unions and the democrats will fight those efforts to their death. Neither can stand on their own without the backing of each other or the protection of their corrupt system. They remain in a bubble protected from reality and locked into a money train that is paid forcibly by all of the taxpayers. There is little to nothing we can do about it. The train keeps on rolling.

  • Sheldon Katz

    Gerry, while your analysis is outstanding, even you have been fooled by the board’s numbers. SBSD spends not $15,401 per student (which is the amount raised by SB residential property taxes), but rather $19,609 per student. That is 67 % higher than than the national average. That is not only unsustainable, as you say, but unjustifiable. I don’t have SB test scores, but Vermont test scores compare unfavorably to numerous states that spend less (almost all states spend less). Also, to the extent you imply that tuition students are a financial contributor, that is wrong. Those students come with a cost. I believe you were present when David Young admitted he did not know the cost of tuition students or whether the tuition they bring covers their cost.

    • Gerry Silverstein

      The $15,401 figure I provide in the Commentary is an amount the School Board presents that follows State guidelines for determination of per pupil cost. I, like you, do not necessarily agree with that amount, but in order to have my perspective viewed as “worthy of consideration”, I cannot ignore determinations made by the School Board who follow State guidelines.

      With regard to tuition-paying students, my perspective is that they are a net gain because 250 teachers in the school system divided by 190 tuition paying students means (on average) one additional student per educator (and an even smaller ratio if all salaried employees are included).

      My major concern with the tuition paying students is if their numbers suddenly decline, that could blow a big hole in the school budget because the tuition from 190 (2017) students has been structurally built into the budget.

      • Moshe Braner

        If there were 190 fewer students in total, they wouldn’t hire as many teachers. (Or so you’d hope.) So you can’t say the tuition students don’t cost anything. It’s like saying getting on a jetliner does not cause any carbon emissions, since “the plane would fly even if I didn’t show up”.

        • Grant Reynolds

          The $15,401 figure is the “Educational Cost” – the amount paid out of the Education Fund per student. The amount does not include grants for special Ed, from Medicaid, or any other source the school can find – including tuition. It is not the actual cost of educating one student.
          The tuition figure is a crude division of the number of equalized students divided by the Educational Cost. (It doesn’t include tuition students) It is not the marginal cost of educating an additional student, which is often zero. A school budget is based on the desired program, not on the number of heads in seats. Adding an additional student to a French class, or 50 students spread out over 100 classes, won’t require hiring many additional staff members – and for $2.76 million the school could add quite a number of staff members.

          • Sheldon Katz

            Grant, if the MC is zero, and the tuition payment is roughly $15K, then by enrolling a few thousand tuition students, SB could virtual eliminate the local residential property tax? I don’t think so. Superintendent David Young said he didn’t know the MC of a tuition student but it was not zero.

      • Sheldon Katz

        Gerry, thanks for taking the time to respond. while you may not ignore what the board says, you also should not ignore reality — SBSD spend $19,409 vs national avg of $11,600. Act 60 is having the intended (but unspoken) effect.
        As for tuition students, David Young himself was not certain whether the tuition cover their costs. Moreover, when enrollment increases, the board uses that as a basis for a higher budget. When enrollment declines, all costs are suddenly fixed and the budget cannot be level or decline. I am just extending the board’s own reasoning. Certainly, tuition students do not have zero marginal cost. Further, and the number of tuition students can decline for reasons having nothing to do with the chaos the board has created.
        I appreciate the conversation, which is more than I get from the board members.

        • Gerry Silverstein

          Sheldon I am sure both David Young and the School Board realize the danger of structurally increasing the budget (more programs, more personnel, etc) as tuition paying students increase the amount of money available “to spend”.

          Obviously if the number of tuition paying student declines, that would be a serious problem as the budget has become “dependent” on their contributions.

          What concerned citizens must do is continually remind David and the Board that they must exercise great care in putting together and approving budgets that become more and more dependent upon external funding (note the same advice should be offered to the State of Vermont and the federal government).

          Only time will tell.

          • Sheldon Katz

            They should take care spending OPM, but they should also take care spending the money of the taxpayers in our fair city, which to them is also OPM. Heed Maggie’s warning. Frankly, I doubt they do.

  • Jason Brisson

    Hi Gerry–good in-depth info here, question about this:
    “Tuition-paying students (190) from outside South Burlington contribute $2.76 million”
    If Grand Isle County and the town of Georgia contracted with Essex or Colchester in the future, to send 100% of their tuition paying students to them (in hopes of tuition reduction)–any idea if this would this be more likely to result in layoffs at SBHS, or would South Burlington raise taxes to close the gap?
    Act 60 is a bit of a pickle, towns that tuition out have no say over the cost drivers affecting the tuition they pay. It makes sense, their community/school. But it also means the only way for five rural communities to lower their property tax exposure, is to steer their students toward lesser tuition schools…and hope the kids are afforded a similar education.

    • Gerry Silverstein

      Hi Jason

      I am sure the SB school superintendent and the SB School Board are always concerned about the possibility that the tuition paying students who attend SB schools might choose another school system for their education. If large numbers of students went elsewhere that would certainly force the Superintendent and School Board to either ask the community for more money or to cut programs. Both choices would be difficult.

      The fact the SB school system is so dependent upon multiple sources of external funding is one of my greatest concerns… because such funding could change in a short period of time… with significant consequences.

      As I say in my Commentary, Jason, at the top of the funding pyramid is the federal government…. and the fiscal state of that entity is just plain awful… and getting worse by the day.