It took almost my full eight years on the school board to get really good financial news, but at last night’s board meeting we heard the almost unbelievable update that we will have enough money next year to restore most of the programs that were lost or cut since 2008, and even make some new investments. During my tenure, we had so many terrible financial years, and our district managed through the worst of them by cutting costs, reducing financial reserves, passing parcel taxes, and relying on ever-growing community support, such as that from the San Carlos Education Foundation.
Our financial good news stems from two major steps taken this Spring. The first was an increase in state funding — the acceleration of the full implementation of the new funding formula, as well as some increases in one-time funding related to Common Core implementation (all of this of course due to the more robust economy and surging State tax revenue). The second was the passage of Measure P by San Carlos voters. All of this means that we now have the ability for the first time in many years to pass a budget that is balanced, restores a healthy reserve level, and makes new investments in our students.
Essentially, the District is able to restore most of the programs cut since 2008, including reductions that were made to counseling programs, librarians, custodians, literacy, and electives. In addition, we can make a few new investments from items that were high on the priority list. Although some of the restorations will happen over time, we saw a budget proposal last night that included the following:
- A multi-year agreement with employees for salary increases
- Additional technology associatiates
- Greater investments in musical instruments
- Increased professional development
- Increased discretionary funds at each school site
- An additional position to support custodial, safety, and energy management
- Greater investment in district communications
- Increased number of counselors
- Increased facility maintenance
- Additional investment in literacy programs
- Additional custodial support
- Additional school secretarial support
- Adding middle school electives to allow students to have a second elective option
- Increased librarian time
The implementation details and timing of all of the above still need to be worked out. Although we have a few more meetings before we pass a budget, I suspect that the final one will be similar to what we saw yesterday. On a cautious note, it’s important to remember that our budget is currently based on the Governor’s state budget proposal, yet our revenue allocation will be based on the final budget passed by the legislature. So, there is still a risk that our revenue numbers could come in a little lower — we should have more clarity over the summer. But in general, our new financial picture allows us to see a much clearer path to executing upon most important initiatives in our Strategic Plan.
So, I don’t want to get too giddy, as we must recognize that California’s economy is cyclical and unfortunately school funding is dependent upon the State’s cyclical funding sources. That is why we will ensure that our near-term budgets have a very healthy reserve level (also, effectively back to the level it was before the 2008 recession). And we must recognize that although our financial picture has greatly improved relative to past years, SCSD is still one of the most underfunded school districts in a state that chronically underfunds education. Lastly, note that this is about our yearly operating budget — we will still face significant financial pressure in the short- to medium-term around our facilities projects, which are (ironically) negatively impacted by the good economy as the cost of construction rises rapidly in this region.
But for now, I will gladly take the good news, and it certainly gives me comfort that as I leave my school board service this year, I leave it with a renewed sense of excitement and possibilities!
Based on the County Elections Office updated return, the Measure P parcel tax for San Carlos schools increased its lead slightly to 68.3%, a material margin over the required two-thirds to pass. The election is not officially certified for a couple of weeks, but I think it’s a fair bet to assume the measure will pass.
This was absolutely critical for our the health of our schools and our community, so our deepest thanks to the campaign volunteers and the San Carlos voters. A very nice end to a great school year. I’ll give a fuller report on the year-end in a couple of weeks!
By now, San Carlos School District residents should have received their mail-in ballot for the May 5th election. This election has only one thing on the ballot, which is Measure P, the parcel tax measure for the school district.
This would affect our current two measures in force, Measure A (a parcel tax of $110.60 expiring in 2019) and Measure B (a parcel tax of $78 expiring this year). The absence of any new measure would mean the loss of approximately $750,000 from Measure B’s expiration. Measure P would combine Measures A and B into a single one, extend their term for 6 years (expiring 2021), and add $58 per parcel. If passed by 2/3 of the voters, the measure would both retain the existing local funding and also add approximately another $500,000 per year.
This is absolutely critical for both San Carlos Schools as well as the whole community. Please see my post that explains the background for this measure and why it’s so important. The measure requires a 2/3 super-majority to pass, so every vote counts.
This is a mail-only election — no going to the polls. So, please open that envelope, vote YES, and return your ballot today!
For additional information, see Measure P’s website (including additional information on how to support the measure) and Facebook page (please like it). Thanks again for all of your support!
Last night, the school board unanimously voted to place a new parcel tax measure on the ballot, to be voted on May 5th in a scheduled all-mail election. This would affect our current two measures in force, Measure A (a parcel tax of $110.60 expiring in 2019) and Measure B (a parcel tax of $78 expiring this year). The absence of any new measure would mean the loss of approximately $750,000 from Measure B’s expiration. This new measure (to be named by the elections office) would combine Measures A and B into a single one, extend their term for 6 years (expiring 2021), and add $58 per parcel. If passed by 2/3 of the voters, the measure would both retain the existing local funding and also add approximately another $500,000 per year.
As most readers know, California public schools have been underfunded for decades, and San Carlos remains one of the lowest funded districts in the state (in one of the highest cost regions). I believe that our staff has done an incredible job in creating a wonderful educational experience for our children despite this context. And naturally, this community has stepped up over and over again to create local sources of revenue for the District — primarily from these parcel taxes as well as from contributions to the San Carlos Educational Foundation. Together these two sources represent approximately 15% of our overall budget, and it would be impossible to have the caliber of teachers and programs without this local revenue. The District has also been quite enterprising in building out its pay-for-service programs, such as pre-school, after school, and camps.
Naturally, the pending expiration of Measure B started the discussion on the need for such continued funding. And unfortunately, due to the new Local Control Funding Formula (LCFF) adopted by the State, San Carlos receives less state funding that it would have under the old model (which was one of the lowest in the nation to begin with). So despite news from the state that funding for education is improving, the finances in San Carlos remain precarious, and we are in danger of running down reserves over the next couple of years without spending cuts or a revenue increase. And as parents in the District know quite well, cuts would be quite painful and detrimental for our students — we still have less funding per student than we had in 2007, and costs have gone up!
School finance is a very complicated and counter-intutive subject — if you’d like to learn more, I encourage to watch my video on California education finance — this was updated a little over a year ago to include the effect of LCFF. The parcel tax and education foundation are two of the few tools we have as a local community to control our own destiny. The parcel tax is a true “win-win” in that it helps students but also benefits taxpayers — real estate value increases from supporting the school system dwarf the small amount added to property tax bills.
However, like any measure, we need to get the word out! A group of community members is in the process of forming an independent campaign committee to lead the effort to support this ballot measure. Just as in prior campaigns, it will take a lot of work from a lot of folks to get this message out. If you’re interested in getting involved, please e-mail me and I will connect you with the right people. San Carlos has had a long history of supporting these measures and its schools, but it still required a strong campaign!
We are doing some exciting things in San Carlos – from the new schools being built to some of the incredible additions to the curriculum based our project-based learning, technology, and other “21st Century Learning” concepts – that we can’t afford to slow down and short change our students. This retained and additional funding will help us fill the gap created by the State and give us an ability to further invest in our students and our community. Please get involved, and certainly vote when you get your ballot!
At Thursday’s board meeting, the Board voted 3-2 to approve the new contract with the San Carlos Teachers Association (SCTA). This agreement included a 2% raise in the salary schedule as well as increased contributions to health benefits. Although the agreement was approved, every single board member expressed serious frustration at how the negotiating process went this year and the lack of constructive engagement by the bargaining unit. Rather than try to summarize everyone’s comments, I invite folks to watch the video of this agenda item (the discussion is about 20 minutes long — from approximately 13:44 – 34:20 on the recording), as I think there were very thoughtful comments by all board members. There was also an article today in the San Mateo Daily Journal giving a brief summary of the item.
Below I have included a transcript of my own remarks:
This is my seventh year going through the negotiating process, and I must admit it always felt like one of the strangest parts of the job, and certainly the most anachronistic. There are plenty of folks out there who are just stunned when we learn that in the 21st century, we still have this incredibly old framework for managing how our employees work and how much they get paid. Particularly in a context where otherwise we think of our staff members as professionals, it’s odd that we revert to this old factory-worker mentality for this large subset of important issues.
There’s no doubt that teachers need to get paid more. Our teachers do amazing work in this district, and I’m certain my colleagues on the board all agree that teachers are fundamentally underpaid. I’m sure most parents would agree with that too. I wish we could do something more dramatic about that, but we all know that we have so little control over our funding, and that the state had systematically underfunded education for decades. We strive to do the best we can, and supporting SCEF and putting multiple parcel taxes on the ballot gives us a little more breathing room. Is it enough? Of course, not.
But then it would be flawed logic to conclude that this District or this Board does not care deeply about its teachers or does not understand the criticality of a great teaching staff on students. Does anyone think that these five people sitting up here volunteer thousands of hours of their time because they don’t value teachers? Does the fact that our teachers get paid toward the top end of the scale of Revenue Limit districts in this county mean we don’t care about teachers? Or is more likely that making these decisions is quite difficult and complex, and that there are a lot of competing needs that need to be weighed, all under the cloud of continued financial uncertainty? Is it possible that we understand that with limited resources we cannot fully fund everything we would like?
There are many flaws in this collective bargaining process that we are required to undertake. The first is the obvious one — the assumption that the same compensation scheme and work rules would be right for everyone. I recognize this would be a challenge to change, but perhaps one day we will be able to treat our employees as individual professionals with individual needs and customized responsibilities. The second, less obvious, flaw is the application of a private sector “zero-sum” framework. In the case where the UAW is negotiating with General Motors, for example, the union may make a reasonable assumption that any money not captured by the bargaining unit goes back to the company, and hence would eventually flow to “management” or to shareholders. We don’t have this dynamic, yet the underlying assumptions and rhetoric are often similar. If the District “saves” money by not spending it on teacher salaries, for example, it’s not as if another group gets richer because of it. Rather, by definition, that same money goes right back into services for students — maybe not in the same year, but eventually it must. There is no “profit” taken out by anyone and there is no management windfall achieved by cost savings. And since 80% of our spending goes toward personnel, when that money is eventually spent it will go back to supporting our staff — maybe in not the exact same way that everyone wants, but supporting our teachers and our students nonetheless. The last flaw is the century-old assumption that the way to advance your cause is to “put pressure” on the board, rally the troops, and rally parents to your cause. I would think that we all would have learned that in 2014 in San Carlos, this technique is actually counterproductive. I suspect this administration — and I’m sure this Board — responds more positively to constructive engagement than to pressure.
In these seven years, we’ve had some more difficult and some easier ones with respect to negotiating. As you recall, we had years when we had to cut salaries because our own funding was cut so dramatically. We are fortunately not in that situation today, but as we all know, San Carlos was not a beneficiary of the new Local Control Funding Formula. Funding will continue to be very tight for many years — that is our sad reality. This is why it is crucial we renew and/or increase our parcel tax and we do everything we can to support SCEF growing.
I understand that Dr. Baker and the SCTA leads are discussing making changes in our process as well as the potential representatives on both sides of the table. I look forward to seeing such changes, but until such time, I can’t support such agreements and will vote no on this contract.
Last night the board made a final decision on the location of CLC. As I reported a few weeks ago, the School Board voted on August 28th to keep CLC on the Tierra Linda campus (even though I was the dissenting vote). However, at that time, we wanted to get more information before deciding the specific location on that campus. At last night’s meeting, the Board agreed to locate CLC on the upper section of the TL campus, roughly in the area currently occupied by Edison Montessori and some district Special Education preschool classes. This was determined to be both the most prudent fiscal option as well as the one which best gave CLC its own campus within the campus. After the new CLC is built, the buildings currently occupied by CLC would be remodeled to be the new 4-5 school.
Certainly having a new, separate, parcel of land for CLC would have been ideal for all, but the failure of the land swap proposal with the City caused us to choose one of our existing pieces of property. Even before we passed the District’s Facilities Master Plan 18 months ago, we knew this was a likely scenario.
There are a few open issues left, including determining a new location for the Montessori school and the other preschool classrooms, and there is still a fair bit of work to do in designing new traffic circulation paths around the campus. The District has been working with the City of San Carlos, the City of Belmont, and the Sequoia Union High School District to together devise solutions to help ease traffic flow on Alameda and Dartmouth as well as inside the TL campus. You will likely be hearing about some of these proposed solutions in the coming months.
In any case, it’s nice to have this closure for the CLC community and for the rest of the District.
There is often much misunderstanding and controversy surrounding the issuance of facility bonds by local school districts. The recent flap over Capital Appreciation Bonds is one of them, but completely ignored is a real cost added on to taxpayers by rating agencies who either don’t understand, or choose to ignore, how they work.
As background, if a school district issues local general obligation bonds (which must be placed on the ballot by the school board and then approved by local voters), these bonds are funded by an additional tax levy on property owners; this tax pays the interest and principal costs of these bonds over their life. Typically, this is an “ad valorem” tax, meaning the tax levied to pay debt service in any given year is based on real estate values (generally annual debt service divided by assessed values in that year). Each property owner pays an equal percentage tax tacked onto their annual property tax bills. So, effectively the bond debt service is collateralized by the property tax stream from the property owners. This is in contrast to a standard municipal bond where the issuing agency (the one receiving the proceeds) is the same as the one servicing the bond debt.
Like any financial instrument, the cost (interest in the case of bonds) is determined by the market. While investors generally conduct internal credit analysis, the bond market still relies on rating agencies, such as Standard & Poor’s (S&P) and Moody’s, to assign a rating to each bond issuance. For S&P, these ratings go from AAA all the way to D, with gradations along the way (AAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB-, etc.). The lower the rating, the higher the interest cost, on the theory that a lower rated bond has a higher likelihood of default and therefore must compensate investors with a higher return to accept that higher risk. For all bond issuers, public and private, getting a strong bond rating is key to keeping costs down.
When a school district issues general obligation bonds, it also goes to an agency like S&P to get a rating. As it does for other issuers, S&P rates the creditworthiness of the issuer on four key factors — the health of the local economy (which includes the tax base), the finances of the district, the management of the district, and the indebtedness of the district. The problem, however, is that three of these four criteria actually have nothing to do with the credit worthiness of the bonds. As school bond debt service is paid by property owners (unlike standard municipal bonds), the financial health of the district isn’t relevant at all. Even if our school district ceased to exist tomorrow, all of our bonds issued would still be paid off with no risk of default because the debt service isn’t coming from the district — it’s coming from property owners! The only possible scenario where these bonds could default would be if every property owner in the district declared bankruptcy, and did it simultaneously! Because even if the town were hit with a severe recession or if a substantial number of citizens moved away, the burden of debt service would just shift to the remaining taxpayers (who would then each pay a higher percentage ad valorem tax rate). In practice, the only conceivable — albeit farfetched — scenario to have a bond default would be some natural disaster where overnight our town literally ceased to exist!
It may be too easy to assume that this ignorance by the rating agencies is just laziness, but I would suggest this standardized approach is rather simply self-serving — the rating agencies generate business by doing this “research” on each local district when in reality no such research is necessary, because any objective analysis would conclude that all school bonds of this sort must be AAA rated almost by definition. This “rating deflation” costs taxpayers and districts real money — districts get reduced bonding capacity (given tax rate limits, a district can issue less bonds) and/or taxpayers pay more interest for no reason. For example, our district was rated AA- for its recent bond issuance, which is considered fairly strong by current methods. But even that three-step distance from a AAA rating can mean a difference of 0.35%, so for every $100 million in bonds outstanding, the taxpayers are burdened with an extra $350,000 per year (and of course, much more for districts with lower ratings).
Some bond attorneys argue that S&P has concerns about a theoretical situation where a district goes bankrupt and then looks to “sweep” money from the dedicated debt service account for general fund purposes. As this has never actually happened and is even against the law in this state, it’s a better assumption that keeping the status quo is just in the rating agencies’ self-interest. What incentive do they have to change a system so as to minimize or eliminate their “value-add”? Perhaps there are two conclusions here: (1) school bonds are probably one of the best debt instruments an investor can make given the relatively higher interest rate with no higher risk, and (2) in the absence of the rating agencies doing the right thing, maybe a state policy change can mitigate this long-standing, monopolistic power that is surreptitiously issuing an additional tax on most of our citizens.