This year's RCSD budget crisis can be traced back to the absurd process that "balanced" last year's budget

<p> The current budget crisis in the Rochester City School District (RCSD) is somewhat a mystery. We often hear that the school district overspent its budget by tens of millions of dollars, but rarely hear how this happened. Just how does the school district go from having a budget that was balanced on paper at the end of the 2018-2019 school year to being $30 million short at the start of of the next? One answer is the completely absurd process used to balance last year's 2018-2019 budget. </p> <p> A good starting point is the <a href="https://go.boarddocs.com/ny/rochny/Board.nsf/files/BGRT8Z763488/$file/Dade_Audit_Committee_Mtg._PPT._10.8.2019.pdf">Oct. 8 report from Superintendent Terry Dade</a> where he states that the 2018-2019 budget was $22.4 million dollars underbudget when compared to actual expenditures. He highlighted 6 items in particular:</p> <ul> <li> BOCES Special Education Services </li> <li> Charter School Tuition </li> <li> Self-funded Health Insurance </li> <li> Substitute Teachers </li> <li> Retirement Benefits </li> <li> Transportation </li> </ul> <p> The confusing part of this list is that each item represents a predictable expense. For example, health insurance costs vary from year to year, but the change can be estimated based on the number of new hires and predicted rise of health care costs. This won't result in 100% accuracy, but it should be fairly close. </p> <p> How did the school district underbudget by so much, in so many areas that should have been predictable? Well, in order to balance the 2018-2019 budget, they simply reduced the budgets for these items without any plan to actually reduce spending. </p> <h3> A "balanced budget" </h3> <p> In March 2018 Superintendent Barbara Deane-Williams and CFO Everton Sewell were tasked with closing a $52.1 million deficit from the initial budget estimates. They outlined their plan in the <a href="https://www.rcsdk12.org/cms/lib/NY01001156/Centricity/Domain/92/Budget%202018-19%203272018.pdf">budget overview presented on March 27</a> (see page 28). The majority of the gap was closed with 2 changes:</p> <ul> <li> Appropriating an extra $10 million dollars from the general fund, for a total of $20 million (AKA dipping into the district's "savings account"). </li> <li> Reducing various budget items for a total of $32.2 million dollars, including 5 out of the 6 items that would later appear in Dade's report as underbudgeted: BOCES, Health Insurance, Substitute Teachers, Retirement Benefits, and Transportation. </li> </ul> <p> I'll emphasize again: all of the items listed are more-or-less predictable. Any reductions should be accompanied with a reason that we would expect decreased spending or a plan to cause that to happen However, the district never presented anything approaching an explanation, including when board members questioned these reductions. Here are some excerpts from the <a href="https://go.boarddocs.com/ny/rochny/Board.nsf/files/AXNL7H50FAA9/$file/2018-19%20Round%201%20Board%20Budget%20Questions%20w.%20Responses%20from%20Administration.pdf">RSCD Administration's answers to the School Board's questions.</a> </p> <blockquote> <p> <b> Question: </b> In light of the additional teachers and other staff (total of 186FTE) to be hired in the next year, how is the District planning to attain a $2.6M reduction in employee benefits? </p> </blockquote> <blockquote> <p> <b> Answer, prepared by Everton Sewell: </b> This reduction is not a year over year reduction, but rather a change in the projected amount that was originally projected for 2018-19. The overall employee benefit is still increasing to accommodate for the change in FTEs (Full-time Employees) </p> <p> There are many drivers contributing to our employee benefits including NYS retirement system, Social Security, COBRA Claims, medical and dental costs, unemployment insurance and workers compensation, just to name a few. The initial increase costs of employee benefits were projected to be $13.2M. Detail analysis of each item indicated a potential reduction is sustainable. </p> </blockquote> <p> The first paragraph seems to either miss the point entirely or is intentional misdirection. The district was proposing to add 186 full-time positions and administration itself predicted a 4% rise in health care costs, a 10%-15% increase in retirement benefits costs, as well as a 4% increase for other benefits (<a href="https://www.rcsdk12.org/cms/lib/NY01001156/Centricity/Domain/92/CompletePDFBook.pdf">RCSD 2018-2019 Budget</a> section 3, page 26). Because of this, it's clear that simply comparing the year over year budget numbers is pointless. A better comparison is against the initial projected amount, which factored in employee growth and increased costs per-employee. When compared to that number, the employee benefits budget was most certainly reduced. </p> <p> The second paragraph is long on words, but short on explanation. In essence the administration is asking us to accept the reductions based on on their claim that "detail analysis of each item indicated a potential reduction". </p> <p> The <a href="https://www.democratandchronicle.com/story/news/education/2019/09/25/16-million-rcsd-health-insurance-deficit-rochester-schools-crisis/2431333001/">D&amp;C actually has some good reporting on the health insurance reductions</a>. It's unfortunately behind a paywall, but here are some key takeaways: </p> <ul> <li>The district reduced health insurance budget per-employee in the 2017-2018 budget, which resulted in underbudgeting when compared to actual costs.</li> <li>In 2018-2019 the district further reduced the budget per-employee, below the already underbudgeted number while actual costs continued to rise.</li> <li>The self-insurance fund balance was positive $11.8 million in June 2017. Money from this fund was moved to the general fund to cover expenses. According to Dan DiClemente, present of the BENTE union, this was done without union official's knowledge.</li> </ul> <p> Charter school tuition was similarly underbudgeted and this happened from the start, before the March 2018 changes. The budget line increased from the 2017-2018 to 2018-2019, however that increase was not nearly enough to cover the predicted increase in both charter school enrollment numbers and per-student tuition cost. Superintendent Dade's report listed charter school tuition as $6 million underbudget. </p> <p> Other questions received similarly unhelpful answers. </p> <blockquote> <p> <b>Question:</b> What "transportation efficiencies" are currently being considered by the District? </p> </blockquote> <blockquote> <p> <b> Answer, prepared by Mike Schmidt: </b> The transportation department is utilizing the feedback from the Board of Education to guide our process of securing efficiency and improved service. We will not be transporting the sixth grade students at Young Men's Leadership on RTS service. We are looking very closely at our service for high school students in alternative programs to provide them more flexibility. </p> </blockquote> <p> If you can find any explanation of why they expected significant savings, please send me an email (ben at rocus.org). I'm struggling to find any substance in this answer at all. According to Superintendent Dade's report, contract transportation was underbudgeted by $3.3 million in 2018-2019. </p> <h3> Maintenance of Effort </h3> <p> The contract transportation budget was lowered as part of "Department Maintenance of Effort reductions" that totaled $15 million dollars. These reductions seem entirely arbitrary. </p> <blockquote> <p> <b>Question: </b>The 2018-19 RCSD Budget Overview presentation referred to $15M in projected cost savings from "Department Maintenance of Effort Reductions". Please explain the major source(s) of these reductions, and how the estimates were derived. </p> </blockquote> <blockquote> <p> <b> Answer, Prepared by Everton Sewell: </b> The major sources of the $15M are listed below. </p> <ul> <li> Specialized Services $2,701,705 </li> <li> Student Support Services $885,164 </li> <li> Alternative Program $1,574,623 </li> <li> Transportation $1,272,404 </li> <li> Safety and Security $306,278 </li> <li> Facilities $2,986,753 </li> <li> Info Mgmt. &amp; Technology $1,337,530 </li> <li> Deputy Supt of Admin $213,159 </li> <li> Teaching and Learning $2,192,780 </li> </ul> <p> The estimates were derived based on the remaining budget gap at the time and taking that as a percent of the total operating budget for all the nonschool departments. The amount came to be about 12%. </p> </blockquote> <p> I find this answer completely amazing. How did the administration determine how much each department could be cut? They simply took the amount the needed to balance the budget and split it up proportionally between all the departments. There was no investigation into how these departments spent their money. The administration simply assumed they could be cut by whatever was needed to close the budget gap. </p> <p> It's unclear what happened with the budgets for the departments other than transporation. Were they able to reduce spending by 12%? Were they underbudget but not listed on Dade's report? Were the budgets restored, and if so where did the funding come from? Hopefully the upcoming results of the state audit or the comprehensive annual financial report will explain more. </p> <p> One effect of this budget process is that it severly limits any public participation. When the administration fails to provide clear explanations of what's changing and why, then it becomes very hard for anyone to understand the budget and virtually impossible to give meaningful input. </p> <p> One consistent cry from the community from the start of the budget crisis is that there is room in the RCSD budget to make cuts without cutting teachers and staff. Many have volunteered to work with the board to identify these areas. Could the community help to find areas of overspending to help balance the RCSD's budget? It seems reasonable considering that the top-down approach, largely driven by the superintendent and CFO, has driven the district into our current financial crisis. It's also one of the few alternatives to suggestions of state control for the RCSD. </p> <h3>Stepping Back</h3> <p> This article focused on tracing the current budget crisis back to the absurd and dysfunctional process used by the RCSD administration and board to balance the 2018-2019 budget. However, it's important we we also look at the larger picture to avoid missing the forest for the trees. The larger picture is that we have a school system that's underfunded at all levels of government, city to federal. We have a system of highly segregated schools, 65 years after Brown vs Board of Education. Finally, we have numerous charter schools working to attract students away from public schools, taking large portions of RCSD funding in the process. </p> <p> It doesn't seem fair to simply say the board or the administration didn't know how to balance a budget. If they had adequate funding from the start, like most/all of the suburbs, then there would have be no need for this absurdity in the first place. </p> <p> So let's be fair: The RCSD has been been tasked for years now to balance an underfunded budget at the same time as it needed to improve the quality of education for our children. Maybe it could have been done with the right expertise, more community involvement, or an exceptional leader, but the administration and board we had were not up to the task. They tried to balance the budget using absurd measures that could have been predicted to fail from the start. </p> <h3>Upcoming Events</h3> <p> If you're interested in fighting for change in the Rochester City School District, please consider one of these actions: </p> <ul> <li><a href="https://actionnetwork.org/events/fundourschools-lobby-day">Fund our Schools Lobby Day</a>. Citizen Action and Alliance for Quality Education are taking a bus to Albany to lobby to "demand that Andrew Cuomo fulfill his obligation and pay the Rochester City School District the $86 million its owed in Foundation Aid."</li> <li>Protest at <a href="https://www.governor.ny.gov/news/governor-cuomo-announces-2020-state-state-will-be-held-empire-state-plaza-convention-center">Govener Cuomo's State of the State</a> address. A group of Rochesterians is organizing to protest the lack of state funding at the address. There's a lottery to get tickets inside, but if folks don't get tickets they are planning to make some noise outside instead. If you're interested, please send me an email (ben at rocus.org) and I can get you in touch with the group.</li> </ul>