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.