A Fair Wage

As the private sector faces an uncertain future, it's time to revisit of an old post of mine from the blog at Mises.org.

Keep in mind that there is no demand for teachers with a masters degree plus 45 hours, anywhere. Even public schools are not in the market looking for such highly-paid employees. Why not?

What is fair about a salary that the market will not bear. That statement sounds harsh, but its true.

But, for some reason, folks want to remove public educators from market forces.

-- Jim

By Jim Fedako
Posted on 11/16/2007
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by Jim Fedako

You hear it from them all the time; teachers just want a fair wage. Well who doesn't? This line of thought leads to two questions: How are wage rates established in a free market? And, are market wage rates fair?

How are wage rates established in a free market? The insights from the Austrian School of Economics show that workers earn their discounted marginal value product. In simple terms, workers earn now the current value of what they add to the production of future goods. That explanation easily fits those who produce consumer goods or factors of production, but what about those in the service sector? How, for example, is the wage rate of barbers established?

In order to understand the service sector we have to consider the alternate cost of employment. The marginal worker, one who can either work in the factory or cut hair, decides which employment to pursue based on relative wages and costs. The cost for working in one field is the wage of the best alternate form of employment in another field. If the cost of working exceeds the benefit, it behooves the worker to seek the alternate field of employment.

If the factory offers better wages, the worker takes the factory job. If cutting hair offers better wages, the worker becomes a barber. If the relative wage rate of barbers begins to exceed the relative wage rate of factory workers, the marginal factory worker switches professions and enters the barber market. By doing this, the wages of barbers would fall as the wages of factory workers rise.

Had the worker stayed in the factory, he would have lost potential earnings. It is the alternate cost of employment, the foregone potential earnings, which guides acting man into the most remunerative employment. And it is this voluntary movement, the change of professions, which tends to guide the labor market toward equilibrium. [1]

This simplistic example shows that service sector employee wages are tied to the discounted marginal value product of labor in general.

Are market wage rates fair? As detailed above, workers earn either their discounted marginal value product or the equivalent wage of their best alternate employment. To say that one wage rate is unfair is to say that the worker earning that rate deserves a premium wage over a similarly productive worker in another sector of the economy. To say that a math teacher is underpaid in a free market is to say that the math teacher deserves to be paid more than the value product of teaching relative to (say) engineering.

In a free market, wages cannot be unfair as they are set by the direction of the consumer. When the alternate cost of employment rises above the wage rate, workers shift sectors and set the labor market back toward equilibrium. [2]

In order to gain a wage premium, government interventions must occur. These interventions can take the form of field or general minimum wages, granting unions legal right to control sectors of the economy, government wage supports, or the creation of a government monopoly or quasi-monopoly in a sector of the economy – the school system for example.

In a free market teachers would also earn the equivalent of their discounted wage in the productive sector of the economy. A math teacher would earn the equivalent wage of a similarly productive worker in (say) the software industry – who earns the equivalent wage of a similarly productive worker in the engineering industry, and so on. If the math teacher was underpaid relative to his best alternate employment, this would be a signal there is an excess of math teachers, and that math teachers are being underutilized in their current employment.

But the teacher market is not free; it is a quasi-monopoly where the vast majority of employees are unionized under a government-run system. Unlike the Soviet Union, which used the free markets of the world to establish some sort of price level, public schools do not look to private schools for wage guidance. Private schools pay their workers a much lower wage, but as above, they must pay a wage that exceeds the alternate costs of employment. [3]

Are public school teachers overpaid? Since there is no way to discern the true alternate cost of employment for all public school teachers in a free market – because no free market for teachers exists – we must rely on the available market data provided by private schools. This shows that teachers are, in general, overpaid.

In addition, and more importantly, we know a priori that governments are inefficient and over-pay and over-employ factors of production. Also, government teaching licensure rules create barriers to entry for those wishing to seek out a teaching career, thus driving wage rates higher. Then, of course, there are the government-backed unions who rule the roost through strikes and threats of strikes. [4]

Are public teacher salaries unfair? Certainly. They are unfair to the taxpayer who is forced to pay the tax bill that supports the premium wage of public school teachers. In a free labor market a teacher's real salary can only increase with the marginal value product of employees in the next best alternate employment. In the quasi-monopoly that currently exists, teachers have realized salary increases that are not tied to the labor market; the salary increases are simply the result of political pressure.

The next time you hear teachers claim that they need a fair wage, tell them to drop the union banners and open education to the free market; the one market where everyone earns their fair wage.



[1] Of course the opposite holds if the factory worker made relatively more than the barber. Professions would switch and wages would tend toward equilibrium.

[2] Equilibrium is the direction of the movement, not reality. Equilibrium is the infinite endpoint on the continuum that is never reached though the actions of individuals tend to keep the economy moving in that direction. As consumer preferences change, the economy is rocked away from the direction of equilibrium, but the vast numbers of astute entrepreneurs act quickly to satisfy these new preferences and bring the economy back on course – well, in an unhampered market anyway. Government likes to damage the rudder in such a manner that even the most astute entrepreneur cannot set a new course.

[3] Certainly there is an additional psychic income earned due to the rewards of teaching, but the psychic income exists in both the private and public school market. In fact, every job has its own form of psychic income that is based purely on the subjective valuation of the employee.

[4] Everyone has a study that shows teachers are either overpaid or underpaid based on salary and benefits per number of hours worked in a given year. Conflicting studies are the product of the current empiricist/positivist paradigm. The only way to read through the data and understand economics and the impact of policies is to use the a priori approach to understanding of the Austrian School.

Is High School Football a Public Good?

It's that time of year again ... time to consider who should pay for private goods ... because the community doesn't pay, your neighbors do ... Jim


Article published at Mises.org

Is High School Football a Public Good?
By Jim Fedako

Most of us would never think of asking our neighbors to foot a personal bill. We accept responsibility for car and roof repairs as ours alone. In addition, we don't bang on the door across the street in order to demand a contribution towards our children's figure skating lessons, taekwondo classes, etc. That which is consumed or used by our families is to be paid from our pockets — the definition of personal responsibility.


Now let's change the situation slightly. Instead of a figure skating lesson — the realm of the private good, consider the local public high school football team — the realm of the supposed public good.[1] The technical definition of a public good — a good that is nonexcludable, nonrivalrous, subject to free riders, and hence will only be provided by government through coerced tax dollars — has been corrupted in the modern lexicon to mean anything that is perceived to benefit society in general, no matter how specious the benefit argument.

Based on the technical definition, football is not a public good as teams are excludable and rivalrous since each team is limited to 11 players on the field without penalty. But no one really applies the technical definition to derive public goods. For if they did, the concept of public goods would disappear from economic textbooks and from debates over the need for government interventions in the market.

Instead, the collectivist definition — the vacuous, yet now standard, definition — applies the general welfare argument to elevate football from a private activity to that of a public good. The argument goes something along these lines: football is beneficial because it prepares boys for adulthood, keeps them off the streets after school, and provides them with a place where they can excel.

continue reading ...

When the workers become management

This post of mine is almost two years old, but it is timely given the current union negotiations.

When the workers become management

You just have to love it: The contract talks between the Ohio Education Association and its professional staffers appear to have stalled. Could a strike be imminent?

"What," you say, "one union suing another? How could that be possible?"

Picture this situation: A union which constantly complains about wages and working conditions being struck by another union over similar issues? What happened to the worker’s paradise and the evils of management?

The OEA and Ohio Professional Staff Union have an acrimonious history with law suits, strikes, and grievances marring what should be a marriage of worker bliss. It appears that scarcity is even recognized by unions when it’s their bottom line taking the hit.

Regardless of who wins or loses, this is quite an enjoyable situation. I hope that public educators make this into a real teaching moment. Each union seeks to enrich itself at the expense of all others; other unions included. Fair wages, huh!

Ludwig von Mises was correct, union logic collapses whenever and wherever the divergent views of individual unions are confronted by the realities we all face everyday. One can only dream that these negotiations end up as the next reality show.

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.

The Epistemology of John Dewey - The Father of Progressive Education

What is the epistemological basis for our current education system? What are the driving concepts that form the pedagogy in vogue today?

A couple terms need to be defined: epistemology is the theory of human knowledge; while pedagogy is the art or science of education.

A passage that details the history of education knowledge and science:

"I have never seen anywhere in the world such a large proportion of intelligent, happy, and intelligently occupied children." Impressions of Soviet Russia, John Dewey

John Dewey's Impressions of Soviet Russia is a quick primer on the ideas that formed the genesis of the Progressive Education Movement. Dewey, who thought that Soviet Russia was a vision of a utopian future, is considered the father of the movement. In addition, fifty years after his death, Dewey is still idolized at education schools such as Columbia University's Teachers College, where he taught future educators and future educators of future educators.

Progressive education is alive and well as noted by the glowing references to Dewey throughout current education literature, including multiple awards given in his name. It's the ideas of Dewey that form the current educational belief system; ideas formed out of the collectivist movement that runs from Bismarck's Prussia through Lenin's and Stalin's Soviet Russia and onward.

Note Dewey's praise above for the "intelligently occupied children" of Soviet Russia.

It's the ideas of Dewey that are driving the so-called education reforms coming out of universities and being implemented in your local schools.

Educationists: First they demand your tax dollars, then they condemn you for earning them

Jeffrey Tucker over at Mises.org posted the following article.

Read it and weep for our future as the Rethinking Schools teachers (follow the link below) scheme ways to destroy what remains of our Liberty. These teachers -- who I believe represent the vast majority of public educators -- play out their socialist agenda in an after-school program. An experiment in Marxist social change.

Should those of us who produce value in the private sector apologise to those who live off our toil? According to the teachers at this school, we should. We are in debt to those whose serve the state. This is a theme heard over and over again from almost everyone on the Left (note statements from Clinton and Obama). According to these folks, the private sector is no place for the next generation.

Yes, these folk believe that one most be employed by the state in order to produce anything of value. Our efforts and our products are nothing more than the fruits of our servitude to the evil capital class.

Never answered are these questions: Who will produce in this utopian paradise? Who will be left to pay the taxes?

From Legotown to Communist Utopia
Jeffrey Tucker

A commentator on this blog draws our attention to this piece on the site Rethinking Schools. It is called "Why We Banned Legos." It is indeed an amazing piece of work, a perfect distillation of the romantic attachment that bourgeois educators in a prosperous society have for a communist ideal they have never experienced or seen or, apparently, read about.

In the short version, the teachers allowed the children in an after-school program to build a massive and growing Legotown. As kids will do, they students tended to homestead certain pieces and structures, and then barter them. Eventually resentments over who owns what emerge, and, after some inadvertent destruction of some buildings took place, conflicts arose.

The teachers then used the occasion to teach a lesson straight from old-time communist ideology, bringing the kids around to the view that all structures must be public structures, that nothing can be owned but by groups, and that all structures will be standard sizes.

It is an engaging if very alarming read! I would be curious to know to what extent the kids absorb the "lesson" they were given, or, if their heart of hearts, they really do miss the excitement and beauty of the real Legotown.

In any case, reading this piece, you can understand how it is that Castro's resignation has unleashed mind-boggling statements about the glories of the society he created, and its "immense achievements in terms of healthcare, poverty reduction and education."

From Legotown to Communist Utopia: A tale of indoctrination

Public educators condemning the source of their wealth -- the productive private sector. Oh, and don't think such nonsense doesn't happen here. -- Jim

note: I know, I know, there he goes again, picking on public educators. But, I ask, why do they make it so easy?

From Legotown to Communist Utopia
Jeffrey Tucker

A commentator on this blog draws our attention to this piece on the site Rethinking Schools. It is called "Why We Banned Legos." It is indeed an amazing piece of work, a perfect distillation of the romantic attachment that bourgeois educators in a prosperous society have for a communist ideal they have never experienced or seen or, apparently, read about.

In the short version, the teachers allowed the children in an after-school program to build a massive and growing Legotown. As kids will do, they students tended to homestead certain pieces and structures, and then barter them. Eventually resentments over who owns what emerge, and, after some inadvertent destruction of some buildings took place, conflicts arose.

The teachers then used the occasion to teach a lesson straight from old-time communist ideology, bringing the kids around to the view that all structures must be public structures, that nothing can be owned but by groups, and that all structures will be standard sizes.

It is an engaging if very alarming read! I would be curious to know to what extent the kids absorb the "lesson" they were given, or, if their heart of hearts, they really do miss the excitement and beauty of the real Legotown.

In any case, reading this piece, you can understand how it is that Castro's resignation has unleashed mind-boggling statements about the glories of the society he created, and its "immense achievements in terms of healthcare, poverty reduction and education."

To those who say, "Enough is enough!"

The time to act is now.

As the base grows, so grows the next levy. The actions that the board takes in the next few months decide the timing and amount of the next levy. If the board controls costs, this levy can stretch and the millage remain relatively low. If the board negotiates away its new cash balance, the base grows, and the next levy is set in stone.

To cut the base is to cut programs. Under this scenario, the board and administration win due to the way folks in the district tremble at any threat of cuts. So, the solution is to stop the base from growing; and that time is now.

You can expect that the next contracts will be for three years, and that they will include large increases since the unions will demand raises commensurate with the supposed support of the voters. If the board negotiates away its cash balance now, the community can do nothing later.

Either a recall campaign is started soon, or pressure is put on the board to negotiate in the interest of the taxpayer; pressure at board meetings, via emails, phone calls, letters, etc.

The future is today!


Note:

The reality is this: Boards use residual negotiations. They look at what they have as far as cash over the levy cycle, and negotiate it away.

Olentangy Levy: Parents Blinked

Frightened by your own board.

It certainly appears that threats work. But, to be threatened by your own elected officials and paid bureaucrats. Well ...

A little push and the board wouldn't have cut your busing -- it had no reason to cut that or any program. In your hearts, you knew it. Yet, you cowed under pressure of your own elected officials. Democracy at work, I assume.

Really, 10 parents in the boardroom are enough for any board to question its decisions. Make that 50 parents, and busing would have stayed, along with everything else.

Keep in mind that accountability is a two-way street. The community must be willing to stare down the board and administration every now and again. Otherwise, in their own minds, the board and administration grow more and more conceited. Olentangy saw that in the 90's, and I expect that we will see it again.

So, as the board and superintendent stared, the parents blinked. The result is this: Parents gave the board and superintendent a mandate to do whatever they choose. Whether the next issue is likely high salary increases, perverse books, or something else -- parents, do not complain. Your blink allowed whatever power you once held to pass from community to board and superintendent.

Transportation for control -- a Faustian bargain of sorts.

It was as simple as that.

Kicking Churches Out of Schools

Pass or fail, I learned a lot during this levy campaign. One aspect of the campaign that troubles me most is desire of the superintendent and board to close school buildings to churches, should the levy fail. Why is this so troubling?

Many Christians lament the fact that God is no longer welcome in public education. They believe that a faceless government has done this, against their will, and against their beliefs. Yet, come levy time, some of these very same folks play God as a bargaining chip: "If we can't have our levy, you can't have your church!"

Think about that for a minute. The superintendent and board is looking to use God and His Church as a means to pass a levy. In this instance, need has no meaning. Such a stand is pure arrogance and disobedience. Christians threatening churches is an action to mourned. But they've done it, and they are doing it.

I noted the lilt and glee coming from the board during the discussion of the threatened cuts.[1] Not one defense of taxpayer, community, parent, or church. It was as if closing the schools to churches is a good thing -- or, at least a good threat. Shouldn't someone have protested? Alas, there was no voice in the wilderness.

There is no need for the proposed cuts, pass or fail. This district faced a situation that was much worse in FY03.[2] Yet, no cuts were made in FY04. Different board, different superintendent.

Instead of taking the high road and negotiating contracts in favor of the taxpayer, the district is claiming that it will kick churches out of its buildings should the levy fail.[3] That really troubles me. It should trouble you.

The next time that someone laments the removal of God from public education, remember that it's not always some faceless government doing this, it may just be our friends and neighbors doing it for some worldly reason.

Something to think about.

notes:
[1] The audio is available on the district web site.
[2] The deficit for FY05 was greater than the current deficit, and, the district's valuation was much lower. Greater deficit with less resources.
[3] As I have posted many times, the district cannot close its buildings to churches, or any organization for that matter, should the levy pass and the cuts enacted.

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.

What Olentangy for Kids is not saying

1. Local school district property taxes have been rising at an annualized rate of over 7%.

Is this rate of increase -- double inflation -- due to something special about education in Olentangy? Yes. The average employee has been reaping yearly salary increases of close to 6.5%, plus projected increases for health insurance of 12%; far, far above the private sector.

2. The levy on the ballot will increase operating millage by almost 30%.

That's a huge increase, isn't it? But, as I have previously written, the money is not for the kids, it's for salaries and benefits. The district is facing a $2 million deficit -- which can be covered by reduced salary increases and controlled insurance costs -- yet the superintendent plans to cut $10.5 million. Why such large cuts? To supposedly punish parents should the levy fail. All about the kids? Huh. It's all about the ego of the superintendent. Oh, and your hard-earned tax dollars.

3. The district does not need to cut $10.5 million.

Olentangy for Kids is supposed to be separate from the administration, yet they have appear to take marching orders from district officials. The district simply needs to balance its books for FY09. Since the treasurer just reported that revenue is up and expenditures are down, the district will likely show a positive cash balance for FY09 when it files its updated Five-Year Financial Forecast in May (read this previous post for more details). In addition, the district can also reduce expenditures by controlling costs as it negotiates with its unions. FY09 is safe: there is no need for this levy.

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: 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: Cutting services while costs rise

Last year (FY07), the district cut transportation for elementary students within one mile of school, based on sidewalks, speed limits, etc. So, you would expect that there would have been huge costs savings. Yet ...

District transportation costs rose between fiscal years 2006 and 2007, plus the district purchased additional buses; a $1 million worth. So, the district cut services, increased expenditures, and purchased buses. Doesn't say much for cost savings, does it?

Wouldn't it make sense for the district to reduce transportation expenditures under the current level of service, reaping the benefits of the updated walk policy? Such efforts would allow the levy to last another year. But, alas, the district just wants to continue spending your tax dollars; business as usual I suppose.

note: It's all reported in the district's Comprehensive Annual Financial Report (CAFR) for FY06 and FY07, available here for FY06 and here for FY07. (Search for "transportation.")

Olentangy Levy: the simple solution

Public school districts in Ohio must file a Five-Year Financial Forecast [1]with the state department of education each October, with an update in May. This forecast lists revenue and expenditures for the current fiscal year, as well as the next four fiscal years. In addition, the district must list the assumptions used to create the forecast.

Fair enough.

So, the district files its forecast in October 2007 stating that it will have a $2 million deficit at the end of FY09. The assumptions show that the assumed increase in base salaries is $1.93 million. On top of that, the district pays an additional 14% of employee salaries to the state retirement systems. This means that the increased salaries also increase the district's employee retirement contribution by $270,000. Therefore, the total cost for FY09 salary increases is more than the FY09 deficit. Got that?

So, negotiating a zero percent salary increase clears the deficit. [2]

Isn't that onerous? Not really. Keep in mind that teachers will still see an average increase for next year of 3.7%, based on step and education increases. Given that an average salary increase of 3.7% is above the standard for the private sector, and given that the district assumes it will fund an additional 12% of employee insurance costs -- well above the private sector, it's obvious that a levy failure and the implementation of this simply plan will keep things business as usual; not the catastrophe that the superintendent claims it is.

A simple solution.

note:

[1] The district's Five-Year Financial Forecast is here.
[2] Or, the district could control healthcare costs and still provide a salary increase, in addition to the step and education increases.

Olentangy Levy: Short of repetition, there's nothing more to say

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 four 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.

A Grand Insurance Plan

Your property tax dollars fund family heath insurance costs for district employees at over a $1000 per month ($1005.98 to be exact). Not a misprint! That certainly is a grand plan -- plus it's a lot of tax dollars.

By controlling these costs, the $2 million dollar deficit for FY09 disappears. A simple solution to the district's grand ol' cost problem.

This March levy is about spending more money. It's as simple as that.