Seth Rosenblatt’s Blog

With all of the debate over the last week about the recently passed $700 billion “bailout” by the Federal Government — and I certainly don’t wait to debate the pros and cons of that — a lot has been focused on the affect on “Main Street” — how it affects homeowners, small businesses, etc. However, what may have been missed was that the current financial crisis has had a very direct negative affect on local schools as well.

Steve Mitrovich recently outlined the situation in his Superintendent’s Newsletter on September 30. School Districts are required to invest most, if not all, of their working capital — which includes their reserves as well as the cash they’ve received from the State — with the County Treasurer, who then invests the pooled money from dozens of public agencies in the County. The entire pool is about $2.7 billion, but unfortunately almost 6% of it was invested in bonds in the now bankrupt Lehman Brothers. Due to a writedown of this entire holding, EVERY public agency (including every school district) in the county lost a lot of money. For the San Carlos School District, we lost over $600,000.

What is even more disturbing about this situtation is that despite the claims of “surprise” coming from County officials, it was clear to a lot of people a long time ago that Lehman was in trouble. Even a very cursory look online led me to an article on April 1st that talked about Lehman having its days numbered. It doesn’t require an advanced degree in finance to know that investing 6% of any portfolio in any single company is a bad idea. Then not seeing the warning signs with Lehman Brothers specifically is frankly unbelievable. And, to top it all off, the stated goals of the fund are capital preservation first, liquidity second, and yield third. These are supposedly professional investment managers here.

Unfortunately the problem may not be all behind us. Over 80% of the County’s fund is invested in Financial Services — again a shocking lack of diversification.

As the Superintendent’s note stated, the San Carlos School Board did meet on October 2nd to discuss our options. Although I can’t predict yet what will happen, we are clearly not the only people upset by this. Many school districts are consulting attorneys to understand our options here. We also need to find a long-term solution to either take money away from the control of the County Treasurer and/or influence their investing decisions to be more diversified and truly focused on capital preservation.

I will keep you informed as events develop here.

What do these two things have to do with one another? Unfortunately there is a fairly direct line between the politics played by our elected officials in Sacramento and how we decide to fund public education.

Gerrymandering is the practice of manipulating electoral district or constituency boundaries for electoral advantage. In other words, draw the map so that any given district will consistently vote one way. Well, that is what has happened in California, and this has basically shielded incumbents from any challenge from the other political party. So, what this do? It rewards extremism by both parties — since you know you’re not going to get any serious opposition from the other party come election time, you tend to pander to your base. Competition only comes during the primaries, not the general election.

For example, the Republicans in the state legislature have all said they would never support new taxes, because even if a majority of Californians supported them, their “base” in their gerrymandered district would vote them out of office for another Republican.

Combine this problem with a need for a 2/3 majority in the legislature to pass a budget, and you have a recipe for disaster. No party makes up 2/3 of the legislature, so there are never any real compromises, just stonewalling and trick accounting (For example, the latest budget proposal includes raising money by actually changing payroll withholding, but not the actual tax! That’s just borrowing from next April to pay for something today…that’s shocking to me).

So, short of re-districting and/or removing the 2/3 supermajority required to pass a budget, I see no path in the medium-term where California can create a stable revenue base and have the money to truly fund public education to even a minimum level required.

Yet another reason why San Carlans need to take matters into their own hands and vote yes on Proposition S.

Yesterday I attended the first class in a once-per-month, ten month program sponsored jointly by the Redwood City, Belmont, and San Carlos Chambers of Commerce. It is called Leadership Redwood City/Belmont/San Carlos, and despite it’s not terribly creative name, it looks like an extremely interesting program. it was recommended to me by some members of the school board and city council.

It is a program designed for anyone who wants to learn more about the ins and outs of local civic issues, and each month’s class is devoted to a specific topic. Some of those include transportation, education, housing, economics, health care, city and county government, etc.

The first class yesterday was mostly an introduction, but I was impressed with the cross-section of attendees…including elected officials, legislative aides, community college leaders, educators, police and firemen, public works officials, youth program managers, and local businesses. I’m sure I’m not doing justice to the amazing work that a lot of these folks do.

I also got some interesting statistics. In San Mateo county, by 2010, 19% of the population will be 60 and over. By 2030, it is projected that 29% will be 60 and over, while the population of folks ages 25-49 is projected to go down by 10% during that same time. This will make for some interesting issues as it relates to housing, transportation, and the our tax base in the coming decades. More detailed demographic projections from the state can be found here.

Other interesting tidbits:
- 41.5% of all households in San Mateo county speak a second language at home
- South San Francisco is the most diverse city (ethnically speaking) in the County, while Portal Valley is the least.

We also got to see a fascinating movie produced by the County in 1939 to attract people to move here. Apparently San Mateo County was quite notorious from the late 19th Century all the way up to 1940 for being one of most corrupt counties in California. You can learn more at the San Mateo County History Musuem.

Today is the first day of school, and there was an amazing energy to it (and it wasn’t just from the espresso cart in front of Arundel for the parents to get their morning caffeine). Kids are excited (maybe a little nervous, but still excited) — they have the anticipation of their new teacher and their new classroom, seeing friends they may not have seen all summer, and also the feeling that they’re growing older (of course, kids — unlike adults — like that feeling). Parents and teachers also seemed very excited. It’s good to remember that with all of the issues surrounding running a school district, it always comes back to kids — kids who are excited to learn, teachers who inspire them, and parents that support the schools.

It reminds me why I got involved with the school district — giving our kids every opportunity we can, and that starts with an inspiring education that will make them life-long learners. So, in the upcoming months when we will discuss issues like the November MEASURE S parcel tax, we must remember it’s all about kids. These kids will one day grow up and probably take care of us, but now is our time to take care of them.

Tonight at a special board meeting (where I actually dialed in from New Orleans — on a business trip), the School Board unanimously approved placing a measure on the November ballot to increase the existing parcel tax by $75 per parcel, for a total of $185. In addition, this measure would not have a set term, which is frankly what the most successful school districts have done.

Next steps — an independent campaign committee will be formed (technically, the school district or the school board can no longer officially do any work to promote the measure — although we all could certainly act as individuals in our own time). The campaign committee would raise the required money and run the campaign.

What you can do to help:
- Donate money to the campaign (more info on this soon)
- Volunteer for the campaign
- Tell all of your friends to do the same
- Vote YES on the measure in November

This November promises to be an exciting election for many reasons, and it’s absolutely critical that we pass this parcel tax measure to ensure that we’re doing the most we can for the kids of San Carlos. This money will go to new programs and to attract and retain excellent teachers. In addition, it will give us a stable source of income which is crucial given how unstable state funding has been (and will likely continue to be).

I will contiue to update you more as this process moves forward — but in my humble opinion, this is probably going to be the most important issue we tackle this decade! Because without the resources, all of our dreams of an inspired education for our children are just that — dreams.

Last night the School Board met to discuss the possibility of placing a new Parcel Tax measure on the ballot in November. See the article in the San Mateo Daily News that discusses the meeting. The new ballot measure would effectively replace the existing parcel tax (Measure D), increase the per parcel amount by $75, and have a perpetual term.

This is an absolutely crucial measure that will allow us to both preserve programs in the light of extremely uncertain (and variable) state funding as well as expand new programs, better attract and retain teachers, and march toward that “inspired” education for all of our children.

Although there are some pros and cons to putting the measure on this November’s election, the Board felt that, on balance, the November election would provide a favorable environment giving the expected historical turnout. There was a small dispute on the language of the ballot measure, which will need to be resolved by the next meeting on August 4th. At this meeting we will take the official action item to place the measure on the ballot.

When the School Board votes to put a measure on the ballot, then an independent campaign committee will take over, with volunteers to help fund raise and campaign. You’ll soon hear more from me about that.

Although it came with little fanfare, the School District and the San Carlos Teachers Union did settle the contract for teachers’ salaries for both this past year and the year coming up. See the Supertendent’s letter announcing the settlement.

As I have mentioned before, I was confident that we would work out a fair deal, and as a new board member I was suprised by the adversarial nature of the process. It seems so anachronistic to have a 20th century blue collar union bargaining process for a series of professionals working for a non-profit organization. This is hardly the auto industry.

Some of my colleagues have mentioned — and Steve Mitrovich mentions it in his letter as well — that we need to improve the negotiating process. Not withstanding the fact that many other school districts do it the same way, the current process creates an unnecessary wedge between groups who truly have the same goal in mind — attracting, motivating, and retaining excellent teachers and providing the best education for our children. (Unlike the private center, where there is assumption that any cost savings line the pockets of management or shareholders, no such dynamic exists in our case. All money gets spent for the children — it is merely a matter of balacing the mix of what that money gets spent on.)

Unfortunately the macroeconomic environment is not going to get any better in the near term — State financing is not expected to improve anytime soon (and we are limited on enrollment growth — see my earlier post), so hard choices may lie ahead. Also, it is imperative that we pass an extension/increase in our Parcel Tax. See the following article about the Board’s effort regarding a new parcel tax (my family was on vacation at the time, but I fully support the effort and would have voted with the other 4 board members). I encourage you all to get involved in this effort!

If it were only that simple. As we’re close to the end of the school year (and the school’s fiscal year at the end of June), the San Carlos Educational Foundation has been furiously fundraising to reach its goal of $1 million dollars raised for our schools — a truly amazing feat. They are over $900,000 now, and they have a “challenge grant” which would net them an additional $25,000 if enough new donors participate. Please see their site and donate if you can!

On a personal note, I will be on vacation for the last two weeks of June, so you probably won’t hear from until early July. Have a great summer!

One of the principles of the airline industry’s business model is “yield management” — maximizing the likelihood that any given airplane would be full with passengers. As much of the cost in flying an airplane is fixed, any empty seat causes almost 100% of that lost revenue to flow to the bottom line.

There is an analogy here to school finance. In the Board Meeting last night, we discussed why, that over the last decade or so, San Carlos has actually been able to increase salaries at a greater percentage than our revenue per student funding increase (the “COLA”) for the State. Because San Carlos is largely a Charter school district, we have flexibility that other school districts do not — we can more easily accept “out of district” students roughly at our whim in any given year. This has the effect of allowing us to more proactively “manage” our enrollment number from year to year. So, if you look at the enrollment in the District, you’ll see a steady growth — much of this was from out of district “charter” students. We then received additional revenue because of the additional students, but even more importantly, we were doing better yield management. A simple example: if we knew there would be 15 more students from San Carlos entering any particular grade in a particular school, we could then let in exactly 5 more from out of the District, and then hire one additional teacher — effectively the classroom, like the airplane, would be full.

Although this has given us much flexibility in the past, unfortunately those days are coming to an end. Why? Simply stated, we are running out of physical capacity in our school campuses. So, barring construction of new facilities (or a dramatic increase in the use of portable classrooms, which would not be a very popular notion), enrollment growth will be modest or flat for the forseeable future. We won’t be able to manage that growth if we’re bumping up into our true capacity. That translates into no more “efficiency gains” and less total revenue relative to our costs. We will of course get more information on this when we get our final demographic study, but no doubt we will have to take all of this into account in planning future budgets and our overall cost structure.

Today I sent an e-mail update to folks who had supported me throughout my campaign giving them my reflections on my first six months in office. Feel free to take a look and send me any comments.