Saturday, February 23, 2008

Olentangy Levy: True costs

Annually, school districts in Ohio create a Comprehensive Annual Financial Report (CAFR), an audited document that provides different views of costs, expenditures, and revenue. Olentangy's latest CAFR -- found here on the state auditor website -- provides a simply way to get beyond the spin and into true district expenses.

The administration and Olentangy for Kids have been touting the district's costs per pupil as if their number details the total cost of running district operations. But, the Ohio Deparment of Education figure being used does not include real costs that any business would consider in its financial reports; namely interest, depreciation, etc.

Using accrual-based accounting, district costs per pupil soar from the advertised $8,507 per pupil to the true cost of $11,111. Shocked?

Well, you shouldn't be. Note that, despite the spin coming out of the district and levy committee, you are taxed for both operating and capital expenses. [1]

Consider this contrived example: Ask the manager of the local Burger King what the cost is to produce one hamburger. He thinks, and then states (say) 50 cents. You question him on that number and he says that salaries, benefits, beef, bun, etc, total only 50 cents, as if there are no capital costs associated with his store. The manager has understated his costs, just as the district understates its costs.

Read the CAFR and learn the true cost of education in Olentangy, your taxes paid for it.

[1] The district is ranked 31st highest for bond millage rate out of the 614 districts in Ohio.


Anonymous said...


I'm a product of public education, but also hold a BS and MBA, yet I can't figure out how you came up with $11K / student.

Any chance you can identify the line items that make up the "total cost" and the actual student enrollment numbers that were utilized to calculate $11K?

One thing I've learned is that numbers are numbers... they can look like anything we want them to look like. With that in mind, I'm trying to validate OFK and your numbers in an effort to determine how I will vote on 3/4.

Please educate us on how the "total cost" is calculated in your mind. A good comparison would be to utilize that same equation against the Dublin and Buckey Valley School District's CAFR to see how we really stack up.

Of course, this is an optional request for more clarity/information. When I tried to do this myself, I came up with $9K / student, which doesn't match either OFK or Fedako numbers.


Confused in Powell

Jim Fedako said...

Confused in Powell,

Fair question.

Use the Statement of Activities as this includes operating costs, interest, depreciation, etc.

Or, you can start with the Statement of Revenues, Expenditures and Changes in Fund Balances. Only include General and Other Governmental funds.

Add in depreciation, interest, etc. Use the Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities to assist.

Every district's CAFR is slightly different, as Olentangy does not specify depreciation on it Reconciliation. You have to decide the effect of other reconciliation adjustments ... or simply use the Statement of ACtivities.

Keep in mind that OFK numbers are valid for operating expenses as reported to the state. I do not say those numbers are invalid, just that they do not tell the true picture of expenses. We are back to the Burger King example.

The CAFR is created to produce figures that mimic business accounting.

Note: I divide by the SF3 ADM (number of students). You can find this on the Ohio Department of Education site. You have to use the adjusted enrollment as this counts Kindergarten students as 1/2 student. This is correct since 2 Kindergarteners consume the same resources as 2 regular students (OK, they may use more Kleenex's, but that's beyond this analysis.).

Jim Fedako said...

Clarification ... Kindergarten students in Olentangy go 1/2 time, so it takes two Kindergarten students to equal one fulltime student.