Closing Schools? How About Better Management

Closing Schools? -- How About Better Management.

By Alex Saitta

March 6, 2016

Introduction:

The school district building program had three financial requirements:

First to finance $387 million program. That was done by passing the Greenville Plan in 2006 and approving a 39 mill property tax increase. Today the annual bond payment is $24.5 million.

Second, the district had to cover the increased costs to operate the extra space and acreage. Those rising operational costs were covered with natural revenue growth from 2010 to 2014. When you look at the cost of operations, utilities, insurance, and day to day repairs, it’s $12.8 million a year.

Finally, we have to cover capital maintenance items like replacing roofs, HVAC’s, repaving parking lots, and computer refreshes. This year $4.6 million was spent on capital maintenance.

In sum, the district is spending $42 million on buildings this year.

Capital Maintenance Budget:

Let’s focus on the capital maintenance budget for next year, which is the bone of contention. Refinancing the district’s construction loan is generating a stream of savings used to help fund that budget. This year that was $3.25 million. That figure is rising by $250,000 a year so will be $3.5 million in 2016-17.

As mentioned $4.6 million is being spent on capital maintenance. A 10% increase would be $5 million.

For 2016-17, $5 million minus $3.5 million yields a $1.5 million deficit. This is manageable if the board takes the following steps.

Principles:

My solution is to focus on the root of the problem which is the $1.5 million deficit.

1) Until we are able to fund the capital maintenance of existing buildings, there should be no additional construction or renovation.

2) The board has to be more involved. The public gives us authority to be involved, so they expect that. The board should create the total figure for the capital maintenance budget. When I think back to the first capital maintenance budget we were given different copies over a period where spending ranged from $3.6 million to $8.5 million. It is like we’ve said to a builder, build me a house. You’d say build me a house and this is our budget limit. The board must determine broad priorities of how that money is spent. I just don’t think a roof needs to be replaced that isn’t leaking, just because it is nearing its life-expectancy.

3) We should manage our budgets, not just create lists of new spending and ask for more money. For instance, if the head of department XYZ is allocated $1 million for capital needs and he wants to spend $1.2 million, ask him what in your budget could you reallocate to give you that extra $200,000 you want?

E.g., Bob Folkman one year, said I have this need. Instead of the knee-jerk response of asking for more money, he said I’m going to pay for it by doing this, reallocating that, and moving this over here and it won’t cost anything more.

E.g., Dr. Pew created a new program and I was thinking what will be the cost of this? She said we moved this, changed that and reallocated there and there is no extra cost. Better manage existing resources; that's what managers do -- they manage existing resources. We can promote secretaries to managers to create lists of wants and needs, calculate the costs and ask for more money all the time.

The Numbers:

I was the central figure in discovering Clemson was violating the TIF law and brought the case to our attorney and district administration. I hoped the money would go toward something that would make a notable difference. The annual in-flow of TIF money is $600,000. It should be earmarked for building maintenance. That gets us to $4.1 million revenue, so the capital budget would be $900,000 short.

Instead of having meetings to close schools or discuss another tax increase — both the public opposes, the board should:

1) Examine its $193 million in annual spending, rank expenses from necessary or most important to least important and reallocate let’s say $600,000 from the bottom to building maintenance. The last time the board combed through the budget like that was 5 years ago.

2) Allocate a couple hundred thousand of new revenue to building maintenance — revenue is likely to grow more than $4 million next year.

3) Sell surplus properties and there are five or six. When one is sold, it can be used to help plug a small hole in the maintenance budget.

4) Consider spending some savings; savings is about $3 million.

That would balance the 2016-17 budget. In 2017-18 the refinancing savings should grow another $250,000. Ditto in 2018-19, and then the TIF revenue doubles to $1.3 million.

Conclusion:

There isn’t a lack of money or inability to manage this — revenue growth is the highest in 10 years and $1.5 million could be reallocated to building maintenance. Rather, the issue is the board and administration would rather spend the money on something else besides keeping those small schools open. Beit a $20,000 LED sign at the district office, extra pay raises, airplane tickets to some education conference, or building another administration building.

With the opposition to closing schools so loud and unanimous, clearly there is a government breakdown here, between the will of the people and the actions of its elected body.