It's hard to know where to begin on this budget mess. So many culpable parties, so little real discussion of how to - at the very least - maintain the good that is taking place in schools across Shelby County.
Add some fundamentally destabilizing forces - Memphis withholding $55 million, a Shelby County School Board intent on special district status - followed by the toxicity of prolonged, incredibly expensive federal litigation, the dysfunction of a too large school board, and a County Commission trying to pay as little as possible for the current level of what passes for education in Shelby County and that doesn't understand what it would take to provide a world-class education, and this is where we land. Oh - and don't forget a new property assessment which is expected to reduce property values and the County revenue available to provide any services, much less education services. And the County's overall rejection of a half-cent increase in the sales tax, meaning that the only way to increase revenue is to increase property taxes.
So should we start with the biggest problem? The oldest problem? The most pressing problem? The newest problem? The various sources of the various problems? On top of what we know in the public domain, it's hard to get a view into the shadows. If you're not angry, you're not paying attention. In no particular order, let's dive in.
1. The City of Memphis should be ashamed of itself. Pay the $55 million. Pay the $55 million. Pay the $55 million. Don't talk to us about PreK. Don't talk to us about how you've decided to spend the $68 million per year that you no longer have to pay in maintenance of effort, and why you've decided that taxes shouldn't correspondingly go down. Pay the $55 million. Pay the $55 million. Pay the $55 million. Since you don't have $68 million due for 2013-14, use that $68 million to pay off the overdue, interest accruing debt that you owe to the schools, and that you owe to all of us. Pay the $55 million. Pay the $55 million. Pay the $55 million. Don't negotiate, Superintendent Hopson. Don't cut a deal. Get us the $55 million and the interest and the penalties. And future merged school district: if Memphis fails to make good on its shameful debt, it's time to force payment and enforce the judgment, as your attorneys have no doubt already explained to you how to do. And get your attorney fees, too. Pay the $55 million. Pay the $55 million. Pay the $55 million. Please don't make me resort to petty name-calling and unfortunate invective, we're all grown ups here, and trying to have a rational conversation. You know it's the right thing to do, Mayor Wharton and City Council. Why waste more public money on the collection of this shameful debt? Pay the $55 million. Pay the $55 million. Pay the $55 million. Pay the $55 million. Pay the $55 million. Pay the $55 million. Pay the $55 million. Pay the $55 million. Pay the $55 million. Pay the $55 million. Pay the $55 million. Pay the $55 million.
2. The County Commission and Mayor Luttrell have forced the current crisis by asking for the budget 4 months early. Yes, there is much financial planning to do by our esteemed LEA, and some advance notice of the hoped-for budget is not just useful, but essential. And yes, the usual process used by district staff would result in a preliminary budget by the end of January. And yes, the School Board has unnecessarily delayed the process by failing to consider the recommendations before it. But asking for a balanced budget four months early has created false urgency, a reason for the School Board to do a rush job, and a reason for the School Board to punt. Even an April deadline would have resulted in better, actual numbers.
3. The Shelby County School Board is not the only entity to take advantage of the false urgency and the need for a rush job. In one of the early TSC reports, we see that the Transition Steering Committee was in talks with The Boston Consulting Group and Parthenon, two management consultant companies, and asked both for further information. About what, who knows. BCG was the consultant used by the Transition Planning Commission, and Parthenon has been used at the behest of the Gates Foundation on many of the staffing issues. By November 5, 2012, the TSC claimed to have gotten Board approval to use "consulting support for project management and technical assistance to facilitate specific issues associated with the merger . . ." Payment for the consultants "will be funded by community partners." No mention of which consultants were picked, or for how much, or exactly who was paying for what, but that probably took place at the Board meeting, right? Not exactly. Flip to pages four and five of the Board minutes from October 30, 2012. There's a resolution with very similar language: "given the daily demands of running two large districts, the Board approves consulting support . . ." to be paid for by community partners. Neither the minutes nor the agenda from that meeting provide any explanation of what consultants were actually selected, what specific tasks they will perform, at what cost, or who is paying that cost - only the basic timeline. But the resolution was rejected - and eventually withdrawn. Take another look at the minutes from October 30 - bottom of page five and top of six. The resolution was withdrawn, and the Board approved the timeline only. Is that a basis to hire a management consultant? Guess so.
Well, if there's been any question about whether BCG is back in town, it is firmly answered in the affirmative by only a cursory look at any of the documents presented by the TSC in the last couple of weeks. Remove the SCS and MCS insignias, maybe change the font, and you've got basically the same financial documents put together for the TPC. Just as an exemplar, take a look at Slide 8 from the last meeting of the TPC's Finance Committee meeting. This slide was the source of much consternation for the TPC, nicknamed "the waterfall". Just a quick look at the minutes show that much discussion was needed to explain the waterfall. Well, the BCG waterfall is a zombie and continues to stalk the staffs at MCS and SCS. These are the very same staffs that objected to the numbers and assumptions in the TPC work, and that now basically present BCG's work as their own.
How much money is BCG making off of this recycled work? BCG would tell us that this isn't recycled work, that it's just a recycled method. But let's talk about BCG's method. Here's a TSC update from December. Want to know why we're having so much gnashing of teeth from parents and teachers (I refuse to call them stakeholders)? From the TSC, the major assumption underlying the entire budget is a pretty major assumption: "your merged department's budget for FY2014 should be no larger than the MCS FY2013 budgeted amount." Talk about doing more with less.
BCG didn't even need the actual budget submissions from any department in order to do their "work". This is A Way to do a budget. But this is not The Way that budgets usually work. Usually, budgets are "bottom-up" - the departments submit budgets based on what it will cost to do their work. As the budgets from the departments are submitted up the chain, district staff leaders revise, negotiate, and generally work the numbers up and down the chain. But there's a clear understanding up and down the chain of how much particular line items cost, what is being sacrificed for savings, and what the expectations are for the various departments. BCG's Way is decidedly "top-down" - this is how much we're spending, so you, departments, figure out how to do your work with that amount. A certain amount of that happens even in the traditional model of how to form budgets as you get closer to the end, and money is tight. But this is not how budgets are built. On top of that, based on who is being presented to answer questions from the Board, we should be suspicious of the method. Dr. Tim Setterlund and Hitesh Haria are no dummies. They're honest, hard workers. And while they both have some (even considerable) budget experience, at budget time, the superintendents usually defer to their Chief Financial Officers. Neither CFO is being made available in public to answer questions from the Board. Neither is BCG - they're, in fact, so well hidden that if you didn't get up to your elbows in minutes and TSC reports, you might have missed their role altogether.
Another way we know consultants are involved? From this TSC update at the end of January, School Board commissioners had one-on-one meetings with staff (probably with BCG present as well). This allows district staff to respond directly to questions and concerns without pesky reporters and public meetings. Not only does this remove critical discussions from the public eye, but it allows staff and consultants to tailor their responses. Not everyone will get the exact same answer to any question even if the exact same question is asked. This method is designed not only to remove this discussion from the public (voters, stakeholders, whateveryouwantotocallit), but the method is designed to divide and conquer the Commissioners themselves. It isolates Commissioners so that they don't hear each other's questions, and can't build on the answers they are given, and can't follow-up on each other's questions. No big deal, nothing to see here. We'll "summarize" the input for you, and it will "save time" at the Budget Retreat so that everyone doesn't ask the same question. And we have to get this done yesterday. And don't worry about how much our work costs because other people are paying for it. And don't ask about what those other people want policy-wise, and how that gets incorporated into our advice. Nothing to see here.
4. If you don't like what you have seen in this high-level preliminary budget, wait until you get to see the actual line item budget. From the various presentations and TSC updates, we know about the ridiculous assumption that the old MCS FY2013 budget will be the merged district FY2014 budget, and we also know some of the trade-off's that the TSC and BCG have built into the budget: staffing levels, outsourcing, etc. But since this is a high-level preliminary "budget", we don't know exactly how the departments have made the numbers work. This will be critical for parents and teachers to understand what next year's classrooms will look like. Imagine Mayor Luttrell's surprise when he finds out that despite his stated hope to get line-item-level approval for the school budget for at least the next three years, There Is No Line Item Budget. For all of the work that Superintendent Aitken keeps telling us has been put into what has been presented to the public and the School Board, what we don't have is the work that we've come to expect to be completed by people who work in the respective finance departments in the time frame that they usually complete it. We needed the consultants so that the regular work could continue to get done, right? But who gave the instruction that the regular budget work didn't have to be done this year? We should, at this point, have preliminary line item budgets complete. And if it/they is/are done, how come these are not the line item entries that everyone is working from as they decide what and how to cut? Time to get closer to ground level, folks.
5. Given all of these things, it should have been no surprise to anyone, least of all the staff, that the budget as it was presented to Commissioners was dead on arrival. It is unclear whose advice was being followed, but despite the very negative reception from the Board, the public presentation of the "preliminary budget" to the public moved forward. If the hope from BCG or staff was that public support behind the budget would solidify and pressure the Board to approve it, then it was a miserable failure. This process, instead, allowed all the political cover in the world for the 15-5 vote to increase the amount of money to be asked of the County Commission. There have still been no binding votes on any of the hard issues, and everything is still very much up in the air. What is our baseline? Is it "current state" or is it "world class"? And what if neither is possible? Oh, and the County Commission is cranky because the gap is just too big.
6. The gap was always going to be big, and we're still not really talking about why. There was always going to be the loss of the maintenance effort from Memphis - about $68 million per year. But with all of those efficiencies that the TPC found, that should have been taken care of, right? Except for that the real problem is the abrupt anticipated decline in enrollment. Jim Horn explains it here - but the basics are that due to charter school and ASD enrollment upticks, the merged district is expected to lose $212 million in annual funding over the next few years. That's the budget gap. And that doesn't include the possibility of municipal school districts or the addition of vouchers into the budgetary mix. It's a budget gap that the district cannot control, and will have such an uneven impact that planning is made even more difficult - charters pull from multiple schools, 2 first graders from here, 3 from there, so it is unlikely that any school could "scale down" an entire classroom in even one grade due to the loss of enrollment. And the ASD keeps changing its model and the definition of "takeover". The other increases in expenses, for instance, those required by Norris-Todd related to the non-reduction of teacher salaries, are marginal compared to these other gaps.
7. It turns out that even with a lower per-pupil expenditure, the SCS staffing model is more expensive - and maybe, too prohibitively expensive to adopt across the merged district. It will take another post to explain how that could be possible, but the numbers bear out that bringing MCS classroom size to the current SCS classroom size will cost millions of dollars. Some folks in the county have lambasted the city for its lower performance levels. But perhaps, just, perhaps, as these folks in the county talk about what they will and won't put up for their children, they are starting to understand that some of the financial decisions impact the classroom. And it starts to get pretty hard to say that "my children deserve this" but "yours don't" when you're talking about kids all in the same district. With different districts, it's easier to pick out who deserves what. In the same district, we really should be concerned about equity. Not that the former MCS didn't make some unfortunate decisions about which schools deserved what resources - but it's time to clear the slate one way or the other and to be honest about how we're doing it.
8. Budget cuts were coming anyway. Property assessments will likely be reduced across the board. Both the city and county are in financial trouble, and that's before the looming sequestration. Even without the merger, the conversation about whether we can afford what we want, and whether we can even afford the minimum of what we were already providing - the conversation was coming. Taxes will be going up, and they need to go up to provide the same level of services we are already receiving because our revenues are going down and our costs are rising. What a mess. The merger gets some blame here, but it's not just the merger. The County Commission (and Mayor Luttrell) are attempting to use the merger to reduce the maintenance of effort in ways that would not have been possible but for the merger. In the situation we are in, preventing an increase has the effect of a decrease where certain increases are mandated by state law.
9. And what is Parthenon doing? Probably staffing stuff - and that is likely the next disaster. Anybody remember how the Gates project was partly about restructuring teacher compensation so that teacher pay would be based on student achievement? Or how Norris-Todd prevents decreases teacher pay due to the merger? Good luck in working out those conflicting goals in this treacherous financial situation, Parthenon.
10. People should just do their jobs. Stop withholding payment on shameful years-old debts. Stop creating false deadlines. Stop gambling that undefined funding requests won't alienate people that you need to work with in good faith. Stop trying to reduce funding to the schools. Stop trying to make sure your kids get theirs even if it means lowering the floor of acceptable education for other kids. Stop lobbying for the hiring of expensive consultants. Stop parroting what the consultants have presented as the God's honest truth when you know that the data has not been validated. Allow administrative staff to do their jobs. Validate the numbers and the data in a meaningful way.
These are some preliminary, big picture budget thoughts. No one has clean hands, and most, if not all, of our public officials bear some of the burden for contributing to a more difficult situation than was necessary. It was always going to be hard, but it didn't have to be this hard.