Educational Excellence... WITHOUT a new parcel tax

 

Over the past four years, our local economy has suffered dramatically. Silicon Valley lost over 200,000 jobs in the “tech-meltdown”.

 

Yet the PAUSD has seen its budget cut just 2%-3% for the past couple of years, mostly from State and Federal sources.  Marginal cuts in discretionary sending have been made, but District staffing remains at near-record levels.

  • Our schools remain strong.
  • PAUSD’ core educational mission has not been compromised. 
  • Students’ API and SAT scores have increased during this period.

 

Regrettably, the PAUSD has elected not to live “within its means” during this period.   It continues to be too generous with its financial resources -- giving away education services to many who do not live in the District, and to many others who pay no property taxes in the District. 

 

A NO vote on Measure A will send a sobering message to the PAUSD that it is high time it get its financial house in order.  It must adopt stronger financial management, tighten its belt, balance the budget, and build reserves. 

 

Palo Alto can maintain its great schools – WITHOUT a new parcel tax.

PAUSD Financial Management – a Disappointing History

 

  • The PAUSD is a Basic Aid District which should have a long-range financial plan in place to anticipate the ups and downs of the Silicon Valley economy.  It has not such plan. 

 

  • The PAUSD should retain as much money as it can in its reserves.  Instead, it chooses a path of overly-generous spending.

 

  • The PAUSD employs no modern tools to predict property tax revenue.   Modern modeling techniques could easily provide 2-5 year predictions within reasonable bounds of error.  

 

  • In its 2003-04 budget, the PAUSD projected five year property tax growth to be 2.25%/yr.  In its 2004-05 budget, the projection was lowered to 1%/yr.  Yet the actual growth in property tax revenue for the 2004-05 school year is a healthy 6%.  Is this budgetary sand-bagging?  Is the District “crying wolf” about its revenues?   It sure looks that way.

 

  • The PAUSD has announced a $111M budget for 2004-05 -- its biggest ever.  It claims that a new parcel tax is needed to pay for new spending.  Yet it doesn’t promise the budget will be balanced. 

 

  • The PAUSD’s Food Service operation has lost about $600,000 over the past four years. It expects to lose another $250,000 over the next 2-3 years.  The District has been “borrowing” money from the General Obligation Bond Fund to subsidize the price of lunches during these years.  While this is legal, it means that there has been little effective management of the program, and it calls into question whether the Bond funds can ever be restored for their intended use.

 

  • In September of 2000, the PAUSD signed an Agreement with Stanford that resulted in Stanford “contributing” $10M to help pay for the re-opening of the Terman Middle School.  The PAUSD agreed not to require any other funds from Stanford during a 10-year period which will see thousands of new housing units built on the Stanford campus, with perhaps 1,000 new students being added to the PAUSD rolls.   While Stanford does not pay property taxes, the total cost of educating up to 1,000 new Stanford students could easily be over $120M over the 10-year period. The PAUSD has clearly protected Stanford’s financial interests at the expense of District property owners.

 

  • The PAUSD has guaranteed salary levels to its unionized employees, negotiating away its ability to reduce salaries to match revenues.  This creates a “structural” deficit whenever there is an economic downturn.  As PAUSD’s labor costs grow past $100M yearly, the structural deficit will increase to $3-$7M/yr.  A parcel tax is an easy way to bridge this gap.  Sound, forward-thinking financial management should prevent structural deficits from occurring in the first place.

 

  • The School District has allowed the inter-district transfers of about 116 students of non-resident staff members’ children at a current cost of $1.3M. It promises to increase to nearly $2M yearly as education costs grow and the number of students grows. The School Board can easily terminate this program.

 

  • As a Basic Aid District, the PAUSD receives millions of dollars a year in “excess” property taxes.  Two years ago, the District received (and spent) over $23M more than its Revenue Limit authorized.  This year, over $17M was received by the PAUSD.  The District receives much, much more “excess” property tax than any of California’s other 59 Basic Aid school districts.  This “excess” could easily be put in reserves to handle economic downturns.  Instead, the money has been spent increasing staff size and staff salaries.

 

 

PAUSD Teaching Staff Well Compensated

 

  • PAUSD salaries are the 3rd highest in Santa Clara County.  Fifty percent of the fulltime certified teaching staff makes more than $73,000 per year, whereas the average salary for California teachers is about $57,000 per year.

 

  • With a very generous benefits package, total cost-to-hire for these highly-paid teachers ranges from $90,000 a year to over $120,000 for the top earners.  Some education supporters say this is not enough. They want to raise salary and benefit packages to even higher levels. 

 

  • Teachers retire at 90% of high salary for 30 years service.  PAUSD Human Resources reports that average teachers’ exit salary is $88,000 at the current time.  In future years, these exit salaries will increase, as will the lifetime pension payments.

 

New Enrollment Without Accompanying Funds

 

  • For every 50 students enrolled in the District who are “illegal”, or wrongly allowed to enroll, the cost to the taxpayers is over $500,000 a year, based on PAUSD per-student spending reported to the State.

 

  • California allows people who live with valid residents to enroll their children in the PAUSD as “Affidavit Enrollees”.  This type of enrollment requires that the property owner, or valid resident, sign an affidavit verifying that the student actually has resided for 7 days and 7 nights in the valid resident’s home or property.  Once enrolled, no checks are made to confirm that such students actually live where their “affidavits” claim. In the Cupertino schools, it was recently discovered that hundreds of such enrollees were cheating and were dismissed.  The PAUSD claims no such problem exists in Palo Alto.

 

  • The children of Stanford staff, graduate students and undergraduate are allowed to attend PAUSD schools as “residents”.  Palo Alto’s property taxpayers are responsible for the educational costs of all such children (less any State and Federal money for categorical and Mandate programs).  Yet Stanford’s constitutional exemption frees it of any responsibility to pay property taxes other than special taxes (such as parcel taxes). This situation is unreasonable; PAUSD should demand that Stanford pay its fair share.

 

Cost Reduction Proposals

 

Palo Altans Against Measure A suggest the following cost-saving proposals:

 

1. Exit the Volunteer Transfer Program (VTP)

The Court ordered VTP program is currently costing the District $4.2 Million yearly to subsidize educational services for about 600 students from East Palo Alto.  Changes are occurring in East Palo Alto’s property tax base resulting from increased development, as well as shifts in the demographics of the residents of the city, make it advisable for East Palo Alto to begin considering the education of its own students and to help Palo Alto seek an exit strategy from this program.  However, with costs of educating students in the PAUSD currently at over $10,000 per student, the 5%-6% yearly increase in this cost will see this number jump to $15-$18,000 per student in the next ten years.  The PAUSD will simply not be able to pay for 600 non-resident students without full compensation.  If the State can not provide full compensation, then the District needs to seek a way out of this obligation.  This most likely means returning to Court to argue its case.

 

 

2. Terminate Non-resident Staff Inter-district Transfers

The cost of the non-resident inter-district staff enrollees is about $1.3M yearly.  As this number of enrollees grows in this program, the size of the subsidy will also grow.  It is estimated that within 5 years that the cost of this program could easily double. The taxpayers have no obligation to educate the off-spring of staff.  This PAUSD has never proven this program to be effective for its prohibitive costs.

 

 

3. Provide comprehensive validation of “Family Affidavit” enrollees.

This source of new enrollees in the PAUSD is fraught with potential abuse.  Most of the students enrolled in this program are in what is called a “Family Affidavit” status and are not reported on the 11th Day Enrollment report provided to the School Board.  The District claims to have only performed one “bed check” this year, even though there could be as many as 300 of these students enrolled in the District.  Cupertino’s Fremont-Union School District expelled hundreds of students mid-year; yet, Palo Alto claims that there are no “cheaters” here.  This just does not make sense, given human nature.

The District must begin to validate the residences of these “Family Affidavit” enrollees in order to fulfill its fiduciary trust to the Palo Alto taxpayer.  For every 100 students enrolled improperly, the taxpayers must pay $1M yearly.  The District Administration must do a better job; the School Board must do its job and demand accountability.

 

The PAUSD should seek legislative relief for these kinds of enrollees by seeking at least funding equal to the District’s Revenue Limit for each of these children.

 

The District’s solution to this problem is to levy a new parcel tax on the property owners without making any effort to insure that all of these enrollees are not “cheaters” or asking the State for help.

 

 

4. Stop Stanford Subsidy -- Require Stanford to “Pay its Fair Share”.

 

Stanford does not pay base property taxes, but none-the-less demands high quality education for the off-spring of its staff, graduate and undergraduate students.  Given the roughly 400 students enrolled who live on the Stanford Campus, the current subsidy for these students is around $4M per year.

 

As with the “Affidavit Enrollees”, the reason that these students are allowed entry to PAUSD schools is based on the legal definition of “resident”.  The PAUSD needs to be honest about this situation, draft at least a 10-year cost-to-educate the current and new Stanford students, and produce a report that accurately predicts the cost of providing these services to Stanford.  The District then needs to find an exit from the Stanford/Terman Agreement, where the PAUSD promised not to ask for any more money from Stanford in consideration for a one-time “contribution” of 10M which was used to re-open Terman Middle School.

 

The PAUSD should demonstrate to Stanford that the PAUSD taxpayers should not be responsible for the educational costs of the children of its staff and grad students, many of whom are not even US citizens and are only “residents” of the District by virtue of their studying on the Stanford campus.  Stanford should be convinced to “do the right thing” and pay the PAUSD the “full cost” of educating each student.  This “full cost” compensation to the District would be the only option -- “full cost” is Stanford’s “fair share”.

 

This analysis would also determine if there are going to be new classrooms needed in order to handle these new children.  If so, Stanford should accept this obligation and commit to pay for any/all facilities needed to support its new children.

 

 

5. Adjust Goals for Class Size Reduction

Class Size Reduction has been presented to the American taxpayer as a “panacea” for the clearly pressing problem of low student achievement in America.  Aside from the constant pleating of “more money”, smaller class sizes have been close behind as one of the reasons that American schools are failing.  Studies abound that contradict each other concerning the value of this program that has increased the cost of teachers by upwards of 30% and reduced the quality of teachers in the class room.

Relative to cost considerations in the PAUSD, If the District were to increase the class size (on average) to just twenty-five students from its current  20-21 target in the 4th and 5th grades, then over $1M a year could be saved.  If the class size for the K-3 grades were allowed to increase (on-average) by only one student per class, this would bring the savings up to about $1.7M per year. With additional cost reduction obtained from increasing the students per class in the middle and high schools, the labor costs for teachers (and staff) could easily be seen in the $2.5M-$3.0M range yearly. 

Using ten-year timeframes/windows for strategic financial planning purposes, this very small shift in classroom loading would save the District about $17M (or more, considering when CPI is considered).  When the middle and high schools are considered, cost savings in the range of $25-$30M is possible. 

 

It must be noted that this path may well require legislative relief from mandated targets of 20 students per class in order to continue receiving state funding.  The PAUSD should begin to request the Legislature for legislation that would allow it the freedom to increase the class size from any mandated class sizes that might exist in the law.

 

 

6.  Adopt Cost Reducing Technology

The PAUSD has shown little interest in use of cost-saving technologies such as distance learning and printing-on-demand, to name only two.  The advances in technology-based learning delivery systems have been exploding in the last ten years.  Video-based tools are now being delivered via Broadband Internet in ways that cable-based video can not.   While it would be unfair to claim that the PAUSD has not utilized technology to some extent, they do not have a long-range plan that considers cost reduction as one of its key goals.

 

Total Savings -- Over $10M Yearly

 

Savings from exiting the VTP program, terminating the non-resident Staff Inter-district transfers and obtaining full compensation from Stanford for educating its students could easily result in $10+M in annual savings. 

 

The District claims it needs new Parcel Tax revenues of $10M/yr.

 

We suggest the District be denied any new funds from the taxpayers, forcing it instead to “live within its means”, finding the $10M in the cost-savings proposed here.

 

 

What can you do?

 

1)    Reject Measure A -- Vote NO on June 7th!

2)    Demand the PAUSD School Board Initiate a Full Operational Audit.

3)    Demand the PAUSD Create a Long-Range Financial Plan -- and then execute it!

 

 

 

Palo Altans Against Measure A

FPPC: 1247142

 

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