The magnitude of the ‘Ask’

by Loren Martell

Photo credit: Ted Heinonen
Photo credit: Ted Heinonen

It’s that time again, when our school board representatives exercise the only budget solution they ever come up with: collecting more tax money. 

First, the numbers

During the 2011 election, when district 709 was again trying to procure a pile of money from the public, school board candidate Judy Seliga-Punyko famously described the tax referendum on the ballot as “just a couple of lattes.” Knocking on doors, as her opponent in that race, my repeated comeback was: “Let the peasants eat cake with those lattes!”

In laying out the three tiers of the levy, the district uses figures based on a home with an assessed value of $150,000, and breaks those figures down monthly, so they sound like pennies a day. Add up all those pennies, however, and the ‘Ask’ on this ballot would be a substantial bill for our community.

The first tier is considered a “renewal,” and will not raise taxes, so the district is not providing tax numbers for this part of the referendum. This tier technically includes a $424/per student non-voter approved tax. Using percentages based on the other two tiers, the $424 tax will cost $6.39 per month for a home assessed at $150,000, or $76.68 annually. The second part of the first tier is the amount voters are being asked to approve: $371.78. Again using percentages from the other two tiers, this part of the levy would cost the owner of a $150,000 home $5.54 per month, or $66.48 a year.

Combining these amounts ($76.68 + $66.48) equals $143.16 a year for the first tier.

Tier #2 will cost an additional $575/per student. Again using a home assessed at $150,000, the district claims this tax will be $8.64 per month, or $103.68 a year.

Tier #3 will cost an additional $335/per student. Based on a home assessed at $150,000, this tier is claimed to cost $5.03 a month, or $60.36 a year.

Adding all these figures together ($76.68, $66.48, $103.68, $60.36) equals $307.20 tax per year for the owner of a home assessed at $150,000, or about $3070 over the next decade, just to support the district’s operating expenses.

All three tiers of the levy add up to $1705.78/per student. For the Duluth community, the three tiers total $14,499,130 annually, or just shy of $145 million over the next decade.

A correction

For those who read my op-ed on the levy in the Duluth News Tribune, I used a figure of $995.78/per student for the current two-tiered levy, which is set to expire. I came up with that number by using the full $424/per student non-voter approved taxing authority.

This authority is a bit murky because of bureaucratic changes. When it was first introduced in 2013, the authority required a board referendum and public action by school boards. At the time, it was called the “Local Optional Allowance.” In 2014, however, the State bureaucrats changed the name to the “Local Optional Revenue,” and moved its approval to the levy-certification process, done annually in December.

The only reason I’ve been able to discern for this bureaucratic change is that it gives school boards more cover to do something very unpopular: take away the public’s right to vote on its tax money. Five years ago, district 709 claimed in all its promotion for the levy that the taxing authority had been “put in place by the State.” That was untrue. The State had only made the authority available; the Board approved use of the tax during the regular meeting of August 2013.

Even though the authority is now more easily camouflaged in the certification process, its use is still a Board choice. As Tom Melcher, School Finance Manager of the MDE informed me in an response to an information request: “The local optional levy is not mandatory. School district boards make an annual decision on how much to levy as part of the overall levy certification process.” In other words, it is the school board’s choice to use none, part or all of the $424/per student levying authority. If anyone asserts otherwise, he or she is not being truthful.

ISD 709 has made it clear the Board will use all of this $424/per student taxing authority come December.

The school board narrowly (3-3, one member absent) decided against using another $300/per student taxing authority in this referendum cycle. The three Board members who backed away from taking our money deserve some respect, and subsequently I’m not openly opposing the referendum. I continue to hold to the belief, however, that the public has a right to make its decision based on complete information.

The district’s Finance Manager showed me a State document showing the taxing authority used five years ago was half ($212/per student) of the $424, but the district’s CFO informed me in a 8/12/16 response to an information request that the full $424 was originally “subtracted from the voter-approved referendum amounts.”

None of these numbers add up correctly, but the district claims the two tiers of the current levy equal $795.78/per student. The reason this is important is because in my News Tribune article I stated that approving all three tiers of the levy would add another $710/per student, or $6,035,000 more a year. Using a figure of $795.78/per student for the current levy means approval of the new levy would actually increase the revenue amount by $910/per student. This translates to $7,735,000 more per year, or nearly eighty million more tax dollars over the next decade.

Another leap of faith

The astonishing phenomenon of this process for me is that, aside for another beggarly ‘Ask’ for more money from the public, no one is asking anything. A local government organization has blown a thirty million dollar reserve, run up a $22 million dollar annual debt and raised its tax levy $20 million a year--all in a decade!--and no one is putting its current request under a microscope. The public is being asked to just blindly hand over more money.

What we are being subjected to is an full-scale advertising blitz, with the media being treated as advertising venues and our representatives playing the part of hard-selling sales people.

How exactly are the investments claimed under each tier being laid out in real monetary terms? How do the expenditures for these investments match the amount of revenue generated by the levy, projected out for an entire decade? Everything has been pushed forward in the vaguest, most generic terms possible with the expectation it will all be accepted again on face value.

When I raised some questions about the second tier from the podium during 10/16/18 Board meeting, telling the Board I intended to write about this before the election and politely requesting a clear explanation of the numbers, I was ignored. Explaining the tier to the public during the meeting, the Superintendent just vaguely assured the numbers would provide “long-term financial stability.”

Given the track record of district promises, how can anyone be assured by this assurance? There has been no close examination by the Board of the numbers, extended out for a decade; the public surely still hasn’t seen them; and my question is, why? Where is the mainstream media, the supposed watchdogs of government? Why isn’t anyone digging in and studying what we’re being sold by an organization that should be at best, financially, on probation?

I’ve submitted an information request for all calculations around the deliberative process that conjured up the ballot questions, but am unlikely to see any kind of response until after all the votes have been cast.

So, do the numbers work?

For ten years? On the face of what I’ve seen, I don’t think so. First of all, ISD 709 is in deficit mode. It cannot afford the contracts the Board has already approved. The teachers’ union contract alone (and you can pretty much double this number, by factoring in all the other bargaining units,) will increase salary expense $705,000 in fiscal year 2019. “Step” and “lane” increases (number of years employed and education level,) adds another $720,000. Toss in an additional bonus of $35,000 for “longevity” brings the total increase for this year to $1,460,000, just for teacher salary increases.

Benefit increases for the teachers’ union contract for fiscal 2019 add another $557,761, for a total expenditure increase of $2,017,761.

ISD 709 is going to be struggling to cover these kinds of increases over the next few years, and it seems inevitable that some of the new levy money will be used to plug this budget hole.

The $575/per student ‘Ask’ of the second tier would bring in about $4.8 million at the current APU enrollment number. The district plans to use part of this money to hire 25 new teachers. At the lowest step-and-lane entry level (BA/ BS degree, first year teacher,) 25 new teachers at current salary levels would add about a $1.6 million expense for salary and benefits. Projecting outward, at current benefit and salary increases, it would cost the district about an additional $100,000 annually to keep these teachers employed for another decade, reaching a total cost of about $2.6 million a year.

A number of factors, however, make this figure variable and difficult to project accurately. How many of these new teachers will get their masters degrees? The base salary for a teacher with a masters degree climbs significantly with each year of employment. By 2021, it begins jumping in incremental steps from $45,574 to $72,919, spanning from one to nine years as a district employee.

The current contract is good through this year and then another two-year contract, already signed, takes effect. What kind of expenses will the district be looking at, beyond that? As I pointed out (to deaf ears) from the podium in the boardroom, the only tier of the levy the district can truly project for ten years is the technology tier, because expenditures are adjustable each year to the exact annual revenue amount generated. The district is claiming the revenue in the other two tiers can support 41-43 teachers for a decade into the future, but how true is that claim, given the pattern from the last ten years? Who is verifying the numbers?

I can only tell you who’s not: our “representatives” and our media “watchdogs.”

Besides 25 teachers, the rest of the revenue in the second levy tier is being promised to support “specific interventions at specific sites…and also,” the Superintendent promised, to help “ensure the long-term stability of the district.” How much of this revenue--about $3 million a year--will be earmarked for “specific interventions” and how much will be drained off to cover other expenses and “ensure” stability? Will funding be sucked back out of the investments made for specific school needs over the next ten years, as annual compensation for 25 teachers inevitably rises?

In the past, when revenue has fallen short because of poor money management and faulty planning, inadequate State funding, charter schools and unfunded mandates have been used as scapegoats and the taxpayers have been clobbered.

Another unknown variable in these calculations is enrollment. Enrollment numbers have dropped 13% over the past ten years. Revenue from the levy is contingent on enrollment. Duluth’s citizenry could optimistically join in with the DFL happy-talk club and envision the numbers rising, but that would buck the pattern. More realistically, the best we can hope for is relative stabilization in student numbers.

In a related concern, I questioned from the podium how investments put in place five years ago with passage of the last levy will now all be theoretically supported by the first tier of the new levy, because both add up to $795.78/per student. I pointed out that enrollment has dropped considerably in five years, meaning total revenue is less, and expenses (especially teacher compensation) is considerably higher. The number of teachers hired with passage of the levy five years ago was 16.

During the September, 2016, Education Committee, Mr. Gronseth himself stated: “We passed (in 2013) a levy that was supposed to produce small class sizes, and we still have that in place. That levy paid for about 16 teachers.”

During his spiel promoting the ‘Ask’ during the October Board meeting, Mr. G. claimed that “since 2013, the referendum has supported 16-18 teachers,” and the district now has 16-18 teachers listed under the first tier of the referendum.

There is material difference between the expense of 16 compared to 18 teachers, but I’m certain our time-tested prognosticators, as always, have everything figured out. The bottom line takeaway is that, according to the Superintendent, a “yes” vote for the first tier of the referendum will continue to fund and protect the status quo of all current district operations.

The needs

ISD 709’s biggest fiscal problem is all its gaping holes of need. Money needs are so great, handing the district nearly $8 million more a year will barely keep it going and make little progress in increasing its competitiveness in the educational marketplace. “We know,” the Superintendent said, while laying out the ‘Ask’ during the August Business Committee meeting, “that there are other important areas (that need money) too. We know we’d love to see our class sizes even lower. We would love to see our opportunities expand in our middle and high schools…” The Super added other areas of need, “such as early-childhood and CTE (career technical education.)”

On top of educational needs, the Red Plan left a fiscal disaster in its wake. The district has no reserve and huge debt. The plan that was supposed to create “educational equity” across the city and “ultimately close the achievement gap,” created only negatives, requiring big future investments to even the playing field in our schools. It also left us staring into a maintenance tsunami--a “huge number”--as the Facilities Manager described it, while recently warning the Board the tsunami will hit ISD 709 before the next decade is up.

It is pertinent to point out again that the district’s total levy (including all the millions for the capital investment) spiked $20 million in a decade and only 13.5% of that increase was voter-approved.

On top of that, the district is locked into a pattern of signing contracts, under DFL rule, that it cannot afford. It was completely irresponsible to sign two, two-year teacher contracts that will increase expenses by multiple millions, with the budget so close to the edge. Just months after the contracts were approved, the Board was forced to cut $1.5 million from operations midyear, to avoid slipping into statutory operating debt status.

During the last legislative session, Carla Nelson, Chair of the State Senate Education Committee declared: “The truth is: some school districts have entered into union contracts that are squeezing classroom budgets.” Former gubernatorial candidate, Tim Pawlenty, said: “We have to put some legislative rule in place to prevent school boards from approving contracts they can’t afford.”

These statements certainly apply to the operation of ISD 709, but observing our local operation all these years has made me wonder about the long-term sustainability of all traditional public school districts.

In the last biennium, the State allocated $17 billion for K-12 education, 40% of its general fund, and all we ever hear is how chintzy funding is. Most people understand a top-notch education for every child is the great social equalizer, but how much more money can we invest into this mandate without any reforms?