SPLOST justifications the first time around

The front page of the school system’s website (www.fcboe.org) prominently displays a logo for citizens to click if they wish to see a presentation on SPLOST. That seems to be all the information readily available from the school system.

The current presentation replaced (without notice or warning), in early September, another one which I believe the school board would like us to forget. Let me tell you what the previous one showed. You may find it interesting.

The old presentation consisted of 20 slides. It is the one the school board looked at when it ordered a SPLOST vote. It may have been intended mostly for use at PTA meetings.

Note first that our school system will spend roughly $200 million this school year, not counting school construction, and that $100 million will come from the state. We have about 22,000 students.

The old presentation had essentially three parts, which one could call (1) complaints, (2) threats, and (3) inducements.

The new presentation, which is slicker, added one part (10 slides), at the beginning, which might be captioned “boasts” or self-praise. In only one of them are the parents given credit for their involvement.

The first five of the old slides seemed to display a list of complaints, mainly about the state’s parsimony in doling out money to our school system in recent years.

One odd complaint, on Slide 2, was that the state had given the county less money when we had fewer students. When we have fewer students, don’t we need fewer teachers and thus less money?

Slide 3 seemed to prove the opposite of what the school board would have had us believe, as it was showing the state had made smaller and smaller austerity cuts since 2005.

Slide 5 complained of increased costs for salaries and benefits (88.2 percent of the budget), fuel for bus routes, electricity and natural gas, and “commodities such as trash can liners, paper towels/toilet tissue, and copy paper.”

The school board seemed to argue there that these costs are rising and that it has no way to control them. Some people would dispute that, as Citizen Online bloggers who saw this old presentation presented ingenious ways that would reduce school bus fuel costs and electricity consumption.

Slide 6 referred to reductions in the 2008-09 budget from the previous year’s. We were told staff was reduced by 58.49 positions, but of course ultimately staff depends on how many students show up, so the ultra precise figure of 58.49 is delusive.

There was also an item called “repurposing of East Fayette.” I think this refers to using the old East Fayette Elementary School for something else, now that it has been closed. Of course a closed school ought to cost less than an open one. So you budget less.

In the list of potential cuts, Slide 12 suggested salaries might be reduced across the board by $3 million (about 1.7 percent). Slide 6 also informed us there has been no “level increase” given to employees on the unified scale for four years in a row. We need to talk about this.

The level increase bit is obvious school jargon not intended for ordinary taxpayers. I don’t know who’s on the “unified scale” and who’s not, and I don’t know how sorry I am supposed to feel for these employees. Apparently some employees are on a certain level and they didn’t get a raise unless they rose to a higher level.

But did they get no raises?

The latest school system Financial Report, for 2006-07, shows (page 22) that the employees on the unified scale received a 4 percent cost-of-living raise. The Financial Report for 2005-06 shows (page 18) that these same employees got a 2 percent cost-of-living raise in July and an extra 3 percent level increase in January.

So they did get raises fairly recently, after all, and perhaps the four years in a row were a long time ago.

All that detailed information is missing from the new presentation.

In none of these slides can one see a reference to a reduction, or even freeze, in the school superintendent’s compensation. The Georgia Department of Audits and Accounts website shows his 2006-07 pay as $190,029.92 (.04 mill) with an extra $1,820 for travel.

One citizen (Vic Remeneski) who thought the superintendent made only $180,000 observed publicly at a board meeting on Aug. 21 that our school superintendent’s pay is more than the governor made ($133,381.20 — but he gets housing). It also happens to be more than state School Superintendent Kathy Cox made ($125,560.31 — no housing).

In reporting on this incident on Aug. 22, the Atlanta Journal Constitution stated that Mr. Remeneski, who had himself taken pay cuts as an airline worker, challenged the superintendent to forsake some of his own salary to help ease the school system’s financial crunch. The paper then stated that the two of them spoke privately after the meeting.

Keep in mind that the board minutes of Aug. 4 (evening) show it’s the superintendent himself who recommended the SPLOST, after showing to the board the slides I am describing. He approved these slides and bears responsibility for them.

Whatever the unified scale is, the superintendent does not seem to be on it. It may not be fair to concentrate on his salary, which does not appear grossly out of line with what superintendents in other counties make, but observing that his pay went up 15.4 percent between 2004 and 2007, it is fair to say that he did not share in the austerity cuts allegedly imposed on others.

Whether the board minutes for the Aug. 21 meeting will ever report this incident remains to be seen.

Old slide 8 alluded to replacement schedules for school buses and computers and to maintenance expenses for school facilities.

Let’s talk about school buses for a moment. The school system buys some of its buses and leases others. Its website indicates it has 181 buses, with an average age of 5.7 years, that are used by 63 percent of the students. Ninety-five buses are funded by the state, and local taxpayers pay for the other 86.

New slide 14 gives us a glimpse at what’s bothering the school board, as it states that it had to lease some buses rather than purchase them because it had limited funds.

Most everybody has limited funds. A bus can cost $60,000 or more, depending on size and amenities. Buying buses outright requires more tax money up front, just as paying cash for an automobile requires more money up front. Buying buses causes this year’s taxpayers to prepay for the benefit of future years’ taxpayers. Leasing buses means pay-as-you-use, which can be fairer.

In fact, the school system has bought some buses outright. Its Financial Report for 2006-07 (pages 20 and 25) shows a purchase of eight new buses for $500,000.

The previous year’s Financial Report (page 23) shows purchases of 36 new buses for $2.5 million, though these were said to be funded with capital leases. A capital lease is like an auto loan which shows the payments without showing any interest. It’s actually a purchase on the installment plan, and to do that in more difficult economic times is not unreasonable at all.

When we get to look at the remaining old slides that tried to justify the SPLOST, next week, we’ll take a look at what the school system said was its most critical need for next year.

[Claude Y. Paquin, a Fayette County resident, is a retired lawyer and actuary.]

Footnote on SPLOST justifications article

Submitted by Claude Y Paquin on Thu, 09/18/2008 - 9:19am.

There has to be a practical limit to the length of my articles. After all, people have only so much time to read them, and the editor can devote only so much newsprint to the subject. Newsprint uses up trees, in an age where we ought to be environmentally responsible, and it costs money.

While my explanations are usually fairly decent, I am sometimes forced to keep them short. If I could give more complete explanations, they might prove more satisfying to some readers.

Thus I thought I’d provide electronic “footnotes” like this one to my articles, for —hold on for a little humor here— inquiring minds who want to know.

As most readers already know, the Fayette school system’s website can be accessed at www.fcboe.org. As soon as that is opened, a logo will be seen leading to a presentation on SPLOST in either PowerPoint form or PDF form.

The old presentation (with unnumbered slides) can be seen by accessing the school system’s website and opening the window under School Board (on the right, close to the top) and clicking Board Meeting Agendas, then 8/4/2008 6:45:00 PM Agenda, then 4. Presentation of ESPLOST proposal, and finally SPLOST Information updated 8-15-08.ppt.

A Microsoft PowerPoint software reader is needed to view this file, and for people who have not bought PowerPoint software, a free reader can be had at www.microsoft.com/downloads to view this file. An alternative is to go to www.openoffice.org to download free software that also does the job.

The old slides show they were updated on August 15, and I currently do not know the location of the slides actually shown the school board at its August 4 meeting, before the update.

To facilitate understanding of the school system’s situation, I have stated that our school system will spend roughly $200 million this school year, not counting school construction, and that $100 million will come from the state. Another handy piece of information one can keep in mind is that one mill, our unit of property taxation, represents $5 million in income for the school system and a $100 property tax for someone with a property worth $250,000. Thus 20 mills is $100 million for the school system and $2000 for that property owner.

These are round figures but they are substantially correct this year, and using them will help you understand the situation a lot better.

In my article, I refer to the latest school system Financial Report, for 2006-07. This report can be found by going to the school system website, and then clicking on Finance, under the heading System Departments, in the left column.

When the Finance Department window opens, you can scroll down to Audit Reports, in the center, and click on Comprehensive Annual Financial Report Ending June 2007, to get a PDF download of that report.

Our school system is proud of its financial reports and even displays awards it has received for them.

The school system operates on a fiscal year basis, from July 1 in one year to June 30 in the next calendar year. The comprehensive financial reports are not published until December. Thus the report for the 2007-08 year (ended on June 30, 2008) is not yet available to the public. The report for 2006-07, prepared by CPA Laura Brock, the school system comptroller, is the latest we can look at.

Most public corporations (think Coca-Cola, Home Depot, etc.) generally publish financial reports within a month of their year-end, so I cannot explain why the school system keeps us waiting over five months, though I concede it does not have the staff and resources of public corporations.

You have already noticed that I give you the page numbers in the financial reports where some of the information I discuss is located, so you can check it out for yourselves.

I might expand a bit on the purchase or lease of school buses.

One minute, the school system will talk about purchasing buses, and the next it might talk about leasing them. There is a reason for that.

With a lease, you have a lessor (owner of the property) and a lessee (user of the property). The property user makes periodic payments to the owner for an agreed period, and then surrenders the property to the owner.

But let us suppose that the lease agreement provides that the lease is to last ten years and that at the end of the lease the property user (lessee) can buy the property for one dollar. Isn’t that like a purchase in disguise?

The accounting profession thinks so, and accounting rules thus require that the lease be called a capital lease and treated like a purchase. For all practical purposes, you have a purchase with payments on the instalment plan.

If you had a real instalment plan, you would have a purchase and a loan, and the interest rate would be indicated as well as the payment. When it’s a capital lease, only the payment is shown. Of course, a person who knows what the upfront cost would have been can look at the series of payments and calculate the percentage of implied interest in the transaction. At least an actuary could, and an accountant should be able to do it too.

In an earlier article, I stated that the Koran forbids the charging of interest and therefore that banks and other lenders operating under Islamic Law (the Shariah) find ways of making loans where interest is called something else. These capital lease arrangements would do the job nicely.

Needless to say, if the implied interest is higher than could be had through a transaction structured some other way, then it would be smart to use the other way. The school system financial reports do not provide us sufficient information to analyze the wisdom of its school bus procurement policies, but what the school board has to say about interest in its pro-SPLOST materials certainly betrays an astounding lack of financial knowledge. Future articles will touch upon that.

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Thank you for posting this...

Submitted by alittlebirdietoldme on Tue, 09/16/2008 - 8:48pm.

It is interesting reading to say the least. Do you happen to know what Fayette County's 2nd superintendent makes?

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reply to alittlebirdietoldme

Submitted by Claude Y Paquin on Wed, 09/17/2008 - 4:48pm.

To obtain the information you want, please go to https://www.audits.state.ga.us.

Then click on Salary and Travel Supplement (on the left).

Then click on “I Understand…” (at the bottom).

Then insert a dot in the button for Local Boards of Education.

In the drop-down window under Select an Organization, pick Fayette County Board of Education.

Then fill in the title or position, or the name, in the appropriate space at the bottom.

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