Saturday, October 03, 2009

Time to talk cost

For those who have a hard time understanding my assertion that the district spends $1 million on PR each year (and the true value is likely much higher), here is a real world example to help explain the difference between cost and expenditure.

I just received my September electric bill. At first I was shocked by the high amount, especially considering that September was not a warm month. But then I remembered my wife is pregnant.

You see, when she is pregnant, my wife likes to set the temperature low in order to compensate for her elevated metabolism. So while she sleeps with a light blanket, I spend summer nights wrapped and clothed as if it were the middle of winter.

It is true that my general fund expenditure for electricity is high, but some of the cost is correctly attributed to her pregnancy -- likely half of my expenditure on electricity in September was due to the September weather, with the other half due to wife's pregnancy.

If I didn't attribute costs as closely to their source as possible, I would not have a clear understanding of the true cost of pregnancy versus the true cost of AC.

The same holds for all entities: costs need to be attributed to their source in order to understand the drivers of those costs.

Olentangy recently hired Wade Lucas. Initially, Wade agreed to the salary set by the board. After receiving an offer, Wade then renegotiated a much better contract.

Yes, Wade snookered Dimon McFerson -- the supposed great negotiator -- and ended up being the winner of hundreds of thousands of tax dollars.

Why did the board agree to the new, more expensive contract? The answer is simple: Since the board had been burned in its previous closed-door superintendent search, it believed that it had to save face and accept whatever Wade demanded.


The expenditure for Wade's new contract came out of the general fund and is reported as an administrative expense. Yet the true cost of his new contract should be attributed to a PR stunt to cover up the foolishness of McFerson and the super majority of the board.

The expenditure is not a function of the administration of the district, it is a function of PR in order to save an inept board from more embarrassment.

There are many examples where the district expends money simply to look good before the public. All of these dollars are correctly attributed to PR. To pin those dollars on any other cost center incorrectly attributes costs.

12 comments:

Anonymous said...

Are you just an idiot? Saying that Lucas' contract is a PR expense? That is absurd. Dumb...one might say. You are a fact finder most of the time, Jim, but sometimes you say things that are just downright crazy. This is one of those times.

Jim Fedako said...

An idiot? Ouch.

9:21 --

You must be right, Wade's contract is all about the kids so the additional expense (the amount that exceeds his original contract) must be an instructional cost.

Thanks for the obvious catch. You are on top of your game today, let me tell you.

Anonymous said...

Did I say it was "all about the kids?" No. His contract is a joke, but it cannot be lumped in as a item of PR.

Anonymous said...

8:33,

Morris is the director and she has staff. So together, do you know how much they make? Do yourself a favor and ask your own questions and prove US wrong. We have the data, we know the truth. Coming here to say "Prove your statement" time and time again is getting pretty old.

Do your own work in defending the district. Stop acting like Julie Feasel, Scott Galloway, and Dimon McFerson in the board room asking Jennifer Smith for her numbers. Come prepared with your own or stay home.

If you can't develop your own facts, then you automatically lose the debate.

Jim Fedako said...

7:11 --

This is getting tiresome. You obviously do not understand the concept of economic (or accounting) costs -- yet you continue to speak nonsense as if you do understand.

So, here's the question: Where would you assign the cost of Wade's increases contract? Hmmm?

Anonymous said...

Let me take a stab at this:

Morris makes around $80K. With STRS/PU, Medicare reimbursement, etc. we're up to $102K. Add on cadillac healthcare benefits and that's another $15K. Add in a few thousand more for incidentals (have to add) and we're at $120K. She has an assistant. I be that assistant makes $60K. Outfitted with the same benefits, accoutrements and incidentals she costs the district $100K. Then there's Kathy Pierce the webmaster. I have no idea what her cost is--I'll say $40K (adjust downward if correct amount is presented). Total headcount costs of the districts spin machine is $260K.

Then there is various consulting. The district must throw Avakian, Fallon, etc a good $80K a year. So, now we're at $340K annually in direct expenses.

Add in the indirect costs--and Fedako's assertion of the fiasco of the board HIRING Lucas prior to having a contract hammered out IS an indirect cost the district ("us") incurred in that bait-n-switch (Was this Dimon's back door way of giving Lucas his "blank check"? Sure looks like it to me).

When you add up these direct and indirect costs you approach $1MM. And I haven't even scratched other indirect costs--and opportunity costs--of the district's spin machine. Shrouding our shameful remediation rates by spinning endlessly on the state rating and blue ribbons is also a cost to the taxpayers when they have to spend many, many thousands of dollars paying for their kids' college professors to re-teach them high school math and English. It also impacts our kids' earnings potential when they cannot compete against better educated peers or because they failed out of college. The rate of remedial students dropping out of college is many times what it is for non remedial students.

Factor all of that--and the district's spin machine has directly impacted (or facilitated) all of this--and one can argue that $1MM in cost is actually very low.

The ball is in your court now, administration lackeys. Argue intelligently against what I just put up.

Anonymous said...

I'll correct myself: the direct headcount costs, and the incremental cost of our superintendent to negate the board embarrassing the district again with another superintendent foul-up is around $400K--not $1MM.

Factor in the indirect and opportunity cost-impacts of the district's spin machine and the cost of the districts' image to the taxpayers easily exceeds $1MM.

Are there opportunity offsets? Yes. Housing values could be one. But the incremental value proposition that the district image machine boosts our housing values by evaporated with the economy tanking.

The bottom line to all of this is, "Is student unpreparedness an acceptable offset to higher relative property values?". I would imagine that most district residents would say "No".

Anonymous said...

Don't forget the Davis buyout/blackmail! That's good for another $250,000 plus $2k a month health insurance reimbursement. Shouldn't that be covered through STRS Disability Retirement....oh...that and $10k a month ++?

Anybody have those exact figures?

Anonymous said...

What was that--$5,300 per month for four years...health benefits...miscellaneous other giveaways...an iMac...

Anonymous said...

I"m sure this won't get published, but the "published" remediation rates only consider state schools, not private ones or out-of-state schools, many of which Olentangy students attend, so the remediation rate is likely lower that you want people to believe and is thus misleading at best.

In addition, just because students have to take the freshman entry-level math or English doesn't mean it is remedial. Some schools just don't accept AP scores or testing out-- they want all students to take the courses because they make more money that way. So... the supposed remediation rates aren't exactly accurate.

Jim Fedako said...

9:53 --

Get your facts straight.

1. The remediation rate is what is it. It serves (inter alia)as a comparison between districts. And Olentangy ranks low by comparison to peer districts.

2. The rate is based on remedial courses taken, not freshman-level courses taken.

Anonymous said...

I say the contract his a joke all the way. When Mr. Lucas can contact the Delaware County Sheriff's department and have two deputies dispatched to my house at 9:00 p.m. after I am no longer an employee of the district and ironically on the same night my son's matter of ineligible transportation and by "verbal" addendum that night my resignation matter is insane. Why were they dispatched to inform me that I was at the Board meeting which I was NOT and to tell me I could no longer be on any school property. Where is due process here. Yes I called the squad too as it is known with my former employees that I have high blood pressure, controlled my meds. Yes it was elevated that night. My special needs son was humiliated as well as myself. Now I ask how does my son get to interact with any of his friends, go to sports events, how do I review public records (I guess through expense of attorney perhaps), how do I ever attempt to get a job within the district. I have yet to receive written verification as to the merits to this. In addition, I learned that possibly buildings were searched and additional patrol was placed. Also a transportation supervisor followed my former bus that had two drivers already on it. Supposedly evaluating that driver on the first day of school. Right that is not how evaluations are done. Trust me I have done nothing to deserve this except dig up the truth and have the written documents to prove it all.

Joy Piper