Overreliance on property taxes? Always!

William Phillis of the Ohio Coalition for Equity and Adequacy of School Funding -- the group of over 500 Ohio school districts fighting for more state tax revenue -- loves to bring up the "overreliance on property taxes" issue. Yet, given the insatiable appetite for spending of public school districts, increases in the reliance on local property taxes will always exceed increases in state formula aid. Why is that so?

Consider this: Even if the state resets its funding formula so that the split between state and local revenue becomes 60%/40%, the state share would quickly reduce over time. You see, the state increases its share at a rate that is close to inflation while local districts tend to increase their costs at a rate that is close to twice inflation.

So, in five years, the split becomes 52%/48% since school districts refuse to address rising costs. And, because local districts would likely, given an influx of new state dollars, allow their costs to increase by an even higher rate, the split would tilt closer to the current 50%/50%.

The only means to slow the rise of public education in Ohio is at levy time. Giving districts more state aid will lead to quickly rising local costs. This will result in the need for new local tax dollars as costs quickly exceed the additional state aid.

So, you get stuck twice: from the state through increased statewide taxes; and, from the district through increased local property taxes. Not much of a solution, is it?

To: Superintendents, Principals and Treasurers & others
From: William L. Phillis
Re: No change in reliance on property tax


In DeRolph I (1997), the Ohio Supreme Court stated, “Emphasis of Ohio’s school funding system on property tax is a factor that contributes to the unworkability of the system and must be eliminated”. Three years after the first DeRolph decision, the Ohio Supreme Court opined, “The most glaring weakness in the state’s attempt to put in place a thorough and efficient system of education is the failure to specifically address the overreliance on property taxes. If this problem is not rectified, it will be virtually impossible for the revised school-funding system to be characterized as thorough and efficient.”

Reliance on property tax has not diminished since 1997. In fact, from FY 1997 to FY 2007 total state revenue for public K-12 schools increased 158% while local revenue increased 166%; thus, there has been no appreciable change. Therefore, the “glaring weakness” continues.

With the State GRF Budget shortfall looming in FY 2009, the overreliance on property taxes will worsen. The school funding amendment crafted by the major education organizations is the solution to the school-funding problem. Send completed petitions to E & A Coalition, 100 S. 3rd Street, Columbus, OH 43215 or OSBA, 8050 N. High Street, Columbus, OH 43235.

The Coalition's laughable solution to Ohio's economic woes

For the past 18 years, the Ohio Coalition for Equity & Adequacy of School Funding (representing over 500 Ohio public school districts) has been fighting for more tax dollars for public education; a lot more tax dollars ... actually, an unlimited amount ... OK, limited by the Coalition's imagination, but you get the idea.

Coalition executive director, Willim L, Phillis, acting in his role of Don Quixote, has done just about everything save "takin' it to the streets."

In today's memo, Phillis equates additional taxes directed toward public education with an economic turn-around for Ohio. According to Phillis:

"Ohio’s economy and demographics continue on the downward spiral relative to other states. The nexus between high quality education and a strong economy is irrefutable. Perhaps a generation of Ohioans will rise up and demand that state officials secure high quality educational opportunities for all students as the Court ordered eleven years ago this day, March 24. Then and only then will Ohio’s economic condition improve."

Phillis, who is all rhetoric and no economic theory, has his causations backwards; the mark of the truly self-deceived.

When he was superintendent of Morgan County Local Schools, Olentangy's Scott Davis was also a big advocate of unlimited tax dollars for schools -- wait, he still is a proponent of unlimited funding. Somethings never change.

Let's let Phillis speak:

To: Superintendents, Principals and Treasurers & others
From: William L. Phillis
Re: Eleven years ago today: School-funding system ruled unconstitutional
Date: March 24, 2008


In the landmark DeRolph decision, the Ohio Supreme Court ruled the system of school funding unconstitutional eleven years ago today. Although the decision spurred the $23 billion school facilities program and an impressive increase in the portion of the State General Revenue Budget allotted to public K-12 education (34.5 in FY 1992 to 39.8, currently), the “complete systematic overhaul” of the school funding system ordered by the Court has been essentially ignored. The school funding system is still unconstitutional!

Ohioans often ask, “How can state officials brush aside this decision without redress?” The answer to this has implications far beyond the school funding issue. When legislatures and governors brush aside a court decision and the court ultimately waffles and gives them a pass, the rule of law breaks down. When elected officials defy the court and are elected again and again, the sanctity of the rule of law is diminished. When the state’s dominant, influential media fails to hold state officials accountable and rails against the court decision, the efficacious principle of the rule of law is greatly compromised.

Ohio’s economy and demographics continue on the downward spiral relative to other states. The nexus between high quality education and a strong economy is irrefutable. Perhaps a generation of Ohioans will rise up and demand that state officials secure high quality educational opportunities for all students as the Court ordered eleven years ago this day, March 24. Then and only then will Ohio’s economic condition improve.

Enough said. Yet, watch out for these folks. They already have one hand on your wallet.

Olentangy Levy: Closing schools and rewriting law

Let me visit this one more time.

A comment was posted implying that the district can close buildings. Keep in mind that an opinion from a school-paid attorney is worthless.

If the superintendent was looking to be truthful, he would have asked the county prosecuting attorney for an opinion. Yost -- county prosecutor --- likely would have asked for a state attorney general's opinion. That is the proper way to obtain a legal opinion.

Ironically, that is the manner that was used in Morgan County when Davis was superintendent there (refer to the AG opinion noted below).

So, Davis knows the right way to get an opinion yet he games the system in order to have a worthless opinion in hand. Davis played Olentangy for Kids as well as district residents and churches.

I call that dishonest, but standard for this administration and this campaign.

But it's important to understand the level of deceit used to pass this levy. It also calls into question other "fact" being stated by the schools. I suggest that you read additional posts on this blog to get the facts.


Olentangy Levy: Closing schools and rewriting law
or, how Scott Davis spun a tale and Pat Schmitz opined nonsense

The Law

The Olentangy district and the Olentangy for Kids levy committee state that, should the levy fail and the proposed cuts be enacted, the district can close its buildings to the public next year. Never mind that Ohio law and opinions from the state attorney general have a completely different view, the district and its paid attorney have reinterpreted state law to their benefit.

I have previously posted that the district cannot close its schools to the public. This is the straightforward read of 3313.76 of the Ohio Revised Code:

3313.76 Schoolhouses available for educational and recreational purposes.
Upon application of any responsible organization, or of a group of at least seven citizens, all school grounds and schoolhouses, as well as all other buildings under the supervision and control of the state, or buildings maintained by taxation under the laws of this state, shall be available for use as social centers for the entertainment and education of the people, including the adult and youthful population, and for the discussion of all topics tending to the development of personal character and of civic welfare, and for religious exercises. Such occupation should not seriously infringe upon the original and necessary uses of such properties. The public officials in charge of such buildings shall prescribe such rules and regulations for their occupancy and use as will secure a fair, reasonable, and impartial use of the same.

Effective Date: 10-01-1953

District buildings must be available to the public as long as the activity does not "seriously infringe upon the original and necessary uses of (the buildings)." (emphasis added) Of course, the district must "prescribe rules and regulations for their occupancy and use as will secure a fair, reasonable, and impartial use of the same." It's all plain and simple.

The Opinion

When challenged, the district sought an opinion from its attorney, Pat Schmitz of the Scott, Scriven, and Wayhoff. The opinion reads:

Scott,

I am responding to your question about the use of school buildings by outside organizations. You indicated that the Board of Education has proposed closing its buildings after the school day as a cost-saving measure if the March ballot issue fails. An individual has claimed that Ohio Revised Code Section 3313.76 compels the Board to keep its buildings open for public use. You asked whether the Board may limit public use of its buildings after the school day. Based upon the information that you have provided to us, we believe the Board may do so.

Ohio Revised Code Section 3313.76 states, "Upon application of any responsible organization, or of a group of at least seven citizens, all school grounds and schoolhouses, as well as all other buildings under the supervision and control of the state, or buildings maintained by taxation under the laws of this state, shall be available for use as social centers for the entertainment and education of the people, including the adult and youthful population, and for the discussion of all topics tending to the development of personal character and of civic welfare, and for religious exercises. Such occupation should not seriously infringe upon the original and necessary uses of such properties. The public officials in charge of such buildings shall prescribe such rules and regulations for their occupancy and use as will secure a fair, reasonable, and impartial use of the same." (Emphasis added.)

The Ohio Attorney General has opined on several occasions that Ohio Revised Code 3313.76 does not give any organization a vested right to use school buildings. (See, e.g., Ohio Attorney General Opinion No. 2004-002 and opinions cited therein.) The Board of Education retains its discretion and authority to establish policies that limit building use, and the statute expressly allows the Board to limit any use that would infringe upon the "original and necessary uses" of its buildings. You indicated the Board has concluded that if the ballot issue fails it would be compelled to make a series of budget cuts to reduce expenses, and that limiting the public's use of its buildings outside of the school day would be one of many reductions made to pay for the School District's essential programs.

Boards are permitted to charge a "reasonable fee" for building use, but the fee typically cannot cover all the costs of usage, which include labor, utilities and other expenses. As such, the Board's proposal is consistent with Ohio Revised Code Section 3313.76 and the Board's broad discretionary authority to manage, control and make necessary rules for the government of its schools pursuant to Ohio Revised Code Sections 3313.20 and .47. Please note that if the Board limits public use of its buildings as part of its reduction package, the Board should amend its building use policy to reflect this decision.

In sum, for the reasons stated above, we believe the Board may limit public use of its buildings after the school day if the March ballot issue fails. If you have any other questions about this issue, please contact me at your convenience.

Pat
--
Patrick J. Schmitz
Scott, Scriven & Wahoff LLP
50 West Broad Street, Suite 2600
Columbus, OH 43215

Schmitz opined that the district can close its buildings to the public based on its fiscal condition next year should the levy fail; he reinterpreted the law. Very interesting.

In his opinion, Schmitz references Ohio Attorney General Opinion No. 2004-002. What does this opinion state?

The language of R.C. 3313.76 provides that certain public buildings must be made available to responsible organizations and groups for educational and recreational purposes, under reasonable rules and regulations for their occupancy and use, and with the limitation that providing such access “should not seriously infringe upon the original and necessary uses of such properties.” R.C. 3313.76. By its terms, this statute applies to school grounds and schoolhouses, other buildings under the supervision and control of the state, and buildings maintained by taxation under the laws of the state. It contemplates that the buildings to which it applies are being put to necessary use by the governmental entities that supervise and maintain them.

Ironically, the opinion relates to Morgan County Schools while Davis was still there. The opinion reasserts the "must" with regard to districts opening their buildings to the public, with the standard exceptions regarding infringement on the original and necessary uses of the buildings.

Though the opinion was based on issues that are not relevant to our current situation, viz., the use of a building where the then-current fitness and public uses had not yet been determined, the essense of 3313.76 stands.

Request for Clarification: a simple yes/no

Confused, I asked Schmitz for clarification. In essence, can a school district reporting an $8.5 million ending cash balance close its buildings just as he had opined.

Pat,

I read your opinion regarding the Olentangy district's claim that it can close schools, and I have a few questions:

You state that:

1. The district is "compelled" to make cuts when, in fact, the district only has to correct it's reported negative balance of $2 million for FY09. Compel is an interesting choice of words, the state does not "compel" cutting programs, only correcting the negative balance. And, it is an especially interesting choice of words given that ThisWeek Olentangy (Feb. 14, 2008) is reporting that Davis states "he is 'not claiming that state law is mandating' the cuts he's proposed."
   
2. Closing schools to the public will protect "essential programs" when, in fact, the district is reporting no savings from closing buildings. Since the district has never quantified any dollar savings from closing buildings (refer to the district website), any savings resulting from closing buildings is not part of the $10.5 million in proposed cuts, and, hence, has no impact on programming.

Just so that you are aware: though the district is facing a $2 million negative balance in FY09, it is proposing $10.5 million in cuts. Once these cuts are enacted, the district will be reporting an $8.5 million positive balance. Therefore, the cuts would put the district in a better financial position than most districts in Ohio. Closing buildings to the public will not affect FY09 programming under this scenario.

The $2 million can be corrected by any means, such as tighter negotiations with the unions. So, once again, the word "compel" -- as in compelling cuts -- does not apply in this situation.

Since general funds are more or less fungible, based on your opinion, Olentangy could have closed buildings years ago due to cost saving reductions. The district could make the claim that open buildings always impact programming since it could be argued that the district would have initiated program X if it could rid itself of expenses associated with open buildings, all the while reporting positive carry-over balances in its general fund.

And, if it were the case that districts can close buildings to the public based on these types of cost savings, no district would ever have to comply with 3313.76 in our world of scarcity and alternate choices. The law then has no teeth; it's invalidated by your opinion.

Is this what you are opining? That districts can close buildings on any claim
of supposed cost reductions and savings.

note: I recognize that you only opined on the information provided, but your opinion is being used based on the current situation in the district. Also, please refer to NCLB and Boy Scouts. Allowing the PTO's in the schools would require the district to allow Boy Scouts, unless, of course, the district is willing to forgo federal funding.

Respectfully,

Jim Fedako

The Response

A simple yes/no question deserves a simple yes/no answer. Yet, Schmitz equivocated:

Jim,

I have received your messages. If there is need for further discussion, I will let you know.

Pat Schmitz

Now, to be fair to Schmitz, he is employed by the district in this instance. But there would have been no reason not to have responded yes to my question, if yes was indeed the correct response. He didn't. Why?

A Records Request

In order to dig deeper, I sent a public records request to the treasurer. I wanted to read the story conveyed to Schmitz. The request reads:

(P)lease forward a copy of the letter(s) or email(s), along with all information provided, sent by Superintendent Davis or any other district employee to an attorney or attorneys at Scott, Scriven & Wayhoff LLP requesting an opinion regarding the district's authority to close buildings to the public.

A Response

The treasurer did some research and provided this:

Jim

We have no emails/written correspondence by any employee regarding the closing of buildings to the public.

Becky

Still at a Loss

So the conversation between Schmitz and the superintendent was via phone or some other means. But what was the message? Did the superintendent tell the true story? Did Schmitz rewrite Ohio law with his opinion? Or, was some other story told to Schmitz? A story that would necessarily result in the opinion that the district desired.

The Truth about Opinions

An attorney can only opine on the information provided: the tale. It's not his duty to research the validity of the claims -- in this instance, the fiscal condition of the district after the cuts are enacted, should they be enacted.

And, someone fishing for an opinion to hold in hand can obfuscate reality -- spin the tale. Certainly the opinion wouldn't stand up in court, but it looks impressive in hand, providing psychic cover for the levy committee.

What We Do Know?

This we do know: Schmitz appears to have opined new meaning into 3313.76; his name is on the opinion. Based on Schmitz's opinion and his unwillingness to respond to a yes/no question, I have no choice but to assume that he continues to claim that school districts can close buildings while reporting an $8.5 million cash balance. Schmitz is legal light years ahead of everyone else in Ohio

Maybe other Ohio districts will now use this opinion to threaten their voters. Or, just maybe, Schmitz will respond to a yes/no with a yes/no. Don't hold your breath.

The district cannot close its buildings to the public; it's a threat, plain and simple. But what about the ethics of a superintendent who will take any action, make any statement, with the exception of the honest, forthright one? Hmmm.

So a lot of time, money, and effort went into lying to churches. But, in the end, it's the district taxpayers who end up paying for nonsense opinions that end up being wielded as threats. Fiscal accountability. Huh.

Olentangy levy: The Taxpayer Summary

There's really nothing more to say about the Olentangy levy. I am reposting my executive summary -- actually taxpayer summary. I encourage you to read all my other postings so you can understand that there is no need for the March levy.

Let's focus on just five of the things we know:

1. The $10.5 million in cuts is not required.
2. Bond investment is available and can be used.
3. The administration and board have no intent on negotiating tighter contracts.
4. Schools cannot be closed to the public, churches are safe.
5. The last year(s) of all district levies have deficit spending.

Additional explanation:

1. The cuts list is a threat; plain and simple.
2. The fact that there is bond investment income means that the district is not selling bonds only when bond money is needed. I don't think anyone wants the district to sit on a pile of bond money -- funded by tax dollars -- so that investment income can be earned. The board will consider this option after the levy fails.
3. The negative balance in FY09 is cleared by tighter negotiations. It's that simple. The district is not currently proposing this as a solution, but it will after the levy fails.
4. The district can't close schools to the public. Never could. State laws will not allow it.
5. Deficit spending in the out-years of a levy are normal, in fact all district levies are structured that way -- including the one on the ballot.

Olentangy Levy: Most inane comment from a board member

Olentangy board member Julie Feasel posted this comment on another blog:

I just want to point out that Olentangy did make $6 million in cuts to future spending BEFORE even going on the ballot and we continue to look at how we can trim costs. (emphasis added)

Did you get that? They made cuts to future spending when the issue is this fiscal year and next fiscal year. Is this her idea of cutting costs?

Really, why do I care that they cut projected costs, effective FY2010, when it's FY2009 that has the supposed negative balance (I say supposed as there is no real deficit -- read my previous post)?

Inane!

Just think about it: There are costs that can be cut, yet Feasel and company are waiting until 2010. And, they want to raise your taxes for such nonsense.

This is the logic which guides the district. Amazing!


note: According to Feaselian logic, I am a financial genius and a good steward of my money since I decided not to buy an aircraft carrier in 2010. I cut $1 billion is costs. Wow!

Olentangy Levy -- Breaking News: A District Flush with Cash

Important news ... Please read carefully.


Two recent reports show that Olentangy is a district flush with cash.

As always, I have provided either the document or its link. Take some time to read these financial statements in order to understand the district's financial condition. I encourage you to research, ask questions, and learn.

By the way: You won't find this analysis at the Olentangy for Kids website. They just stick to the district spin. And, when I was involved with the committee (even chaired it), my numbers and analysis were consider the end; the final answer. Now that I don't like their levy, they don't like my numbers and analysis. Oh, well. Such is life.


First -- The monthly Comparative Statement of Receipts and Expenditures

The statement below -- reported to the board last night -- shows that revenue is up and expenses are down. Likely, though it's too early to be certain, the ending negative balance for next fiscal year -- the reason for the levy -- will be gone when the district updates its Five-Year Financial Forecast in May.

The deficit is gone! No need for a levy.

(note: Click on the document to enlarge. Also, the second analysis follows this document.)

Second -- Investment Income

The district's latest Comprehensive Annual Financial Report (CAFR) is now available on the state auditor's website. This CAFR reports financial activities within the district for the fiscal year ending June 30, 2007 (FY07).

Once again, the district is reporting bond investment income -- $4.7 million worth. Over the past three fiscal years, the district has reported $9.6 million in investment income. And, more is being generated this fiscal year.

This money is available to be used for operating expenses. There is no need for the levy.

While it is true that money generated through bond sales cannot be used for operating expenses -- in fact such money must be used in the manner specified on the ballot, the investment earnings can be used for operating expenses. And, most likely, they will be used for expenses that are typically funded through the general fund.

There is no need for this new levy. There is more than enough available through the investment income alone to offset any negative year ending balance for FY09.

Oh, sure, the administration and levy committee will state that the investment income was approved by voters for future capital expenses. But, that contradicts the claim that the district only sells bonds when needed. In order to earn investment income, the district must have excess bond funds to invest. Therefore, bonds were sold before they were needed; if they are even needed at all.

The district typically puts more debt on the ballot than will be needed to fund the capital projects listed. There is a reason for that: to protect against rising and hidden costs. It is a contingency plan. Makes sense, but this pot of money is not supposed to continually grow.

The voters never approved a large bond fund to be used as a means to generate investment income. That money -- your tax dollars -- should be in your account generating investment income for you.

So, the district sells more bonds than needed, before they are needed, builds up a pot on bond funds as an investment tool, all the while claiming it is out of cash. Hmmm. Doesn't sound too honest to me.

See if the levy committee addresses either of these documents. Likely, they won't as these truths don't match their story. But, ask them anyway.

Olentangy Levy: Christmas in July

This is a reissue of an article I posted at the end of July, 2007. This is a reminder of the fiscal actions the board took while facing a deficit. (note: here is the link to the amended contract.)

July 30, 2007

Olentangy Residents,

Your board of education just celebrated a night of giving; giving the gift of taxpayer dollars of course.

The board amended the superintendent's contract effective July 17 and added almost $400,000 in salary and benefits. That's a lot of money given the cry for an additional levy. Actually, it's a lot of money no matter how you put it. Of course, it's all for the kids. Yeah, right!

Keep in mind that the superintendent was already one of the highest paid in Ohio. And, that was before the new amendments.

The new contract is a wonder to read. It removes the original accountability language and replaces it with guaranteed dollars.

In true double-speak, the bonus that was based on performance, and is now just another salary component, is classified in the contract as "at-risk compensation." At-risk? Come on, the bonus is guaranteed and is to be paid out before the school year begins.

Funny, the Ludwig von Mises Institute just published my article on such types of gifts; gifts where the elected officials stand proud as they give your tax dollars away in their name.

I really don't know what's worse: the board giving away your tax dollars; the superintendent accepting those dollars while whining about budget shortfalls; or, the spin that was placed on this whole mess. Some people have no shame at all.

Remember this as the board and superintendent discuss the "need" for a November levy; despite the fact that none is needed until 2009. That will, of course, hold only if the board stops giving away your tax dollars in their name.

Read the provisions of the contract (below). You will be amazed, shocked, and troubled. I was.

Olentangy Levy: What about my current tax burden?

Glad you asked.

The Ohio Department of Taxation reports the tax effort -- burden -- for each district in Ohio. Tax burden is defined as the amount of local school district taxes collected as a percentage of personal income. Despite the spin to the contrary, Olentangy has a relatively high tax burden. In fact, the district is the 101st highest ranked out of the state's 614 districts based on the tax department's latest report. It's all right here in Appendix D.


note: School-related property taxes in Olentangy are rising at an annualized rate of over 7% per year, meaning that school-related property taxes are taking an ever-increasing portion of the incomes of district residents. In fact, the district tax burden has increased 61% over the latest seven year's worth of department data.

Lying to the churches

I really don't understand how the superintendent and his administration can look their community in the eye and repeatedly lie, with Olentangy for Kids smiling and nodding in agreement.

These folks are threatening churches and other local organizations that, should the levy fail, district schools will be closed to the community. It's a great lie to spread since it creates an immediate need and a reason for those groups to campaign for the levy, but it's absolutely false.

According to Ohio law:

3313.76 Schoolhouses available for educational and recreational purposes.
Upon application of any responsible organization, or of a group of at least seven citizens, all school grounds and schoolhouses, as well as all other buildings under the supervision and control of the state, or buildings maintained by taxation under the laws of this state, shall be available for use as social centers for the entertainment and education of the people, including the adult and youthful population, and for the discussion of all topics tending to the development of personal character and of civic welfare, and for religious exercises. Such occupation should not seriously infringe upon the original and necessary uses of such properties. The public officials in charge of such buildings shall prescribe such rules and regulations for their occupancy and use as will secure a fair, reasonable, and impartial use of the same.

Effective Date: 10-01-1953 (emphasis added)

The superintendent cannot legally close the schools, and he knows it.

Yet, the superintendent, his administration, and their levy campaigners are now lying to churches and other organizations.

What lesson is being taught? That it's OK to lie as long as you get what you want? What about ethics and personal integrity.

Lying to churches? Hmmm.

Olentangy Watch: The public records request

Besides Scott Galloway, the clock is running now on an three unfulfilled public records request. Day four has come and gone; no data. You would think that with the new push for open records, the district would satisfy this request in the timely manner specified by state law. Let's see where this goes.

The Olentangy Watch: Why the silence?

I have never -- never -- met a politician who didn't seek the opportunity to defend his position. Could it be that Olentangy board president Scott Galloway's levy has no defense; it's illegitimate, and Galloway knows it.

Readers of this blog, consider why the board president does not defend his district's expenditures, especially given that he ran on a platform of controlled expenses and reduced levies. His silence alone is reason enough to question the March issue.