Archive for January, 2010

The Cost of Saving Money

Friday, January 29th, 2010

BAGS

BAGS

To illustrate how difficult it is likely to be to reduce the cost of public education in Vermont without also reducing the quality of same, please allow a local example or two.

These postings come to you from Barton, up in the Northeast Kingdom, where 153 children attend the Barton Academy and Grade School, not surprisingly referred to as BAGS by some, a standard kindergarten-through-eighth grade school.

For years, the school employed a professional, highly regarded school librarian, and the pupils had regular access to the library, where they could look up information, browse the shelves, get help selecting a book.

At the end of the last school year, she retired. To save money, the school decided not to replace her, at least for this year. Instead, the head of the computer room would do double duty at the library. By all accounts, she’s doing a great job. She’s capable, energetic, dedicated.

But she’s not a librarian. And because she has other duties, the pupils don’t have quite as much access to or guidance in the library as they did last year, and for many years before.

The decision not to replace the librarian was reasonable. That’s one less FTE (full-time equivalent) employee whose salary and benefits have to be financed by the taxpayers. In a tight economy, with school officials reluctant (as they should be) to raise taxes, leaving that position vacant is, at least debatably, the right choice.

But here is what is not debatable: A school with a fully functioning library presided over by a professional librarian is better than a school without them. It isn’t that BAGS isn’t a good school. Principal George Vanna said the library is “not boarded up” and is open almost as much as it was last year. The younger pupils still get their story hours. But Vanna also acknowledged that he’d rather have a librarian, even if only a part-timer. Maybe next year, he said.

In other words, saving money reduced educational quality. Perhaps not by much. Perhaps saving the money justified the reduction. But reduction it was.

As it almost was up the road at Lake Region High School, where the board decided to save money by cutting both the music program and the Spanish language program from full-time to half-time.

Again, a decision quite reasonable under the circumstances. But – again – a school with full-time music and Spanish instruction is better than a school with half-time music and Spanish instruction. Better enough to be worth the $68,000 needed to keep both programs fully functioning? Who knows? Either way, Lake Region would be a slightly worse school after the cuts (which were partially rescinded earlier this week after a public outcry; the board will try to keep both programs full-time).

The point here is not to express opposition to any of these cutbacks. In fact, it’s hard to see how anyone who served on a school board wouldn’t at least seriously consider approving those cost-saving steps. Whether those programs were worth the money is a legitimate question. But there is no question at all that they were worth something. So eliminating, reducing, or diluting them eliminates, reduces, or dilutes…something, a something which has value.

A lesson worth remembering as Vermont thinks about holding down school spending. In addition to Gov. Jim Douglas’s renewed call to “freeze” school budgets (not much more likely to be heeded than last year), Education Commissioner Armando Vilaseca is campaigning to reduce the number of supervisory unions and school districts, and even lots of Democrats speak openly about urging schools to consolidate. In Montpelier, at least, the established point of view seems to be that, in the current Washington health care jargon, something has to be done to “bend the curve” on school spending.

Making it all the more important to be wary of the commonly-heard claim by partisans on all sides that it is possible to cut costs without cutting quality. In theory, it may be. In practice, as the above examples demonstrate, it’s somewhere between hard and impossible.

Besides, some of the cost-cutting steps might not cut costs all that much. Vilaseca recently wrote of his supervisory union consolidation plan that, “my staff and I estimate this would save the state several million dollars a year.”

Kind of vague. Asked for elaboration, Education Department spokesperson Jill Remick supplied a Department study indicating that consolidation in Essex could save more than $600,000, or almost 25 percent, in personnel costs.

To put all this in some perspective, former Rutland Northeast Supervisory Union Superintendent Bill Mathis, who is skeptical about most of the cost-cutting proposals, pointed out (and Education Department statistics confirmed) that only 2.4 percent of the roughly $1.3 billion Vermont spends on public education (not including federal aid) goes to these central administration expenses.

“Let’s say we combined and saved one third of the money,” he said. “That’s less than one percent.”

Not a compelling case against consolidation. Less than one percent of $1.3 billion can be several million bucks. But Mathis’s larger point has merit. Almost everyone agrees that the big driver of school costs is the number of paid employees in and around the classroom, not the central offices. For several reasons (which will be examined in subsequent posts) Vermont has a lot them – teachers, teaching aides, counselors, librarians, technologists. The quickest way – if not the only way – to “bend the curve” of school spending is to have fewer of these educators.

Raising the threat of worse schools. A little-mentioned factor in this discussion is the real question of whether that “established point of view” in Montpelier is all that established among the electorate. Last year there was no “taxpayers revolt” against school spending at town and school meetings, as relatively few school budgets were rejected. With the lingering recession, it would be no surprise if more were defeated this year even though, in response to falling enrollments, schools around the state are cutting back.

Nobody likes high property taxes, but those were not a bunch of raging liberals who pressured the Lake Region School Board (raging liberals are not plentiful in this precinct) to put back the money for Spanish and music classes. A few made clear that if it took higher taxes to preserve today’s level of educational quality, then taxes should be higher.

Quite possible a minority outlook. But nobody’s really taken a poll on the matter, and there was the comment not long ago by one man whose politics are relatively centrist and who has no children in the public schools. When someone pointed out that Vermont spends a lot of money on education, he asked, “where else should we spend a lot of money?”,

Getting What You Pay For

Thursday, January 28th, 2010

NOTE: You could have read the following, almost word-for-word verbatim but updated just slightly, as early as Tuesday afternoon at the web site of VT Digger, with which the News Guy will be cooperating from time to time in pursuit of our mutual goal of providing Vermonters with more quality, in-depth journalism.

Any day now, the 30-member state Senate, perhaps unanimously as the House did Friday, will vote to cut the salaries of state legislators by 5 percent, thereby saving the state treasury, and hence the taxpayers, something like $105,000.

The “something like” is necessary because most legislators don’t get annual salaries. They get paid only for the weeks they are in session, so the longer the session lasts, the more they earn.

In this case, that means the longer the session lasts the more the pay cut would “save” even as the lawmakers earned more in the aggregate.

The weekly rate is now $637; 5 percent of which is $31.83, so the pay cut will bring down the total salary to $605 a week, or about $10,890 per lawmaker over the course of an 18-week session.

Multiply that $31.83 by 178 legislators, and the savings works out to $5,666 a week. Now assume the usual 18-week session. And the total saved comes to $101,983.

But that’s not all, as a famous cat once said. The two legislative leaders, the speaker of the House and the president pro-tem of the Senate, rake in bigger bucks — $704.70-a-week each, plus an annual salary of $10,895 each. Their combined weekly salary comes to $1,409. Together, their weekly pay is $25,369 for an 18-week session. Add in their combined annual salaries of $21,790, and together their total pay comes to $47,159.

Five percent of that is $2,358. Add that to the $101,983, and you get $104, 341 (rounding off to the nearest penny), which is close enough to “something like $105,000” for government work.

Not a bad piece of change, a hundred and five large. Most Vermonters could live on it comfortably for a year or even two.

On the other hand, at about one-tenth of 1 percent of the Fiscal Year 2011 projected $151 million budget deficit, its actual fiscal impact could be described as something between tiny and inconsequential, which lends some support to Rep. David Zuckerman’s contention that the value of the pay cut was political and symbolic, not budgetary.

“We’re doing this to put out there that we’re taking the pain,” he said. “It works well from a political perspective.”

Zuckerman, a Burlington Progressive, was the only legislator to express outright opposition to the pay cut, though it wasn’t very strong; he voted for the 70-page Budget Adjustment bill (H.534) in which the salary reduction was one small sentence.

Another lawmaker, Democrat Kenneth W. Atkins of Winooski, said he would not oppose the pay cut because state workers had just accepted lower pay. But he agreed with Zuckerman that lawmakers “earn less than the average working wage in Vermont,” and are by no means overpaid. He referred to a 2004 study on legislative pay by the Snelling Center which concluded that lawmakers should get higher salaries.

Pointing out that legislators get no health insurance or retirement plan, Atkins also refuted what he called the common misconception that they get subsidies for using their home phones, or free auto registration and license plates.

“Not true,” he said. “No one is here for the money.”

Whenever a Legislative session drags on for a week or two, letters to the editor and news reporters suggest that lawmakers want the extra weeks for extra pay.

Besides, senators and representatives get more than their salaries. They also get expense allowances for travel, meals, and lodging. Aren’t these payments also part of their total compensation?

No. Economists consider salary, deferred benefits, stock options, and an employer’s share of fringe benefits (health care, retirement plans) to be compensation. Reimbursement for expenses, whether in an itemized system or as per diem allowances, are not part of compensation.

Legislators get per diem allowances, and they do not set their own rates. The federal government does. Nathan Lavery of the Legislature’s Joint Fiscal Office said the state uses the U.S. General Service Administration’s travel expense rates. Those rates are computed for each locality, Lavery said, so that, for instance, Vermont legislators don’t get Manhattan hotel rate reimbursements for staying in Montpelier hotels.

For this year, the meals and lodgings reimbursement rates were increased from $54 and $93 a day to $61 and $101, respectively. The mileage rate, on the other hand, reflecting lower gasoline prices, fell from 55 to 50 cents per mile. A lawmaker could easily rack up more than his or her salary, in lodgings ($9,000 or more), and food ($4,590). Legislators pass almost all that money to hotels and restaurants. A few lawmakers may end up with a small surplus from their expense allowances, and a few probably spend more than the per diem allotment.

Even for the most frugal, the reimbursement rates don’t appear to provide an opportunity for lawmakers to rake in big bucks. Legislators get a special $85-a-night rate at the Capitol Plaza Hotel near the Statehouse. Add in the 9 percent rooms and meals tax and their total is $92.65, giving them an $8.35-a-night “profit.”

That’s probably soaked up by the unpaid phone calls, car trips, restaurant meals and occasional hotel bills the lawmakers spend – and for which they are not compensated – while the Legislature is not in session. Not to mention the time that could be spent doing something more immediately useful to them, like making money. They get a $118 per diem for official legislative meetings (which is subject to the 5 percent cut), but only if they actually attend them (and the Legislative Council checks).

While no one can prove or disprove that members of the Legislature are “in it for the money,” it does seem that anyone who is in it for the money lacks either the incentive or the intelligence or both to deserve getting elected. Putting the same thought and effort into another enterprise would likely prove far more remunerative. No doubt over the years a few lawmakers have plotted their travels and meals to cadge a few extra dollars from the system. For the most part, they could have earned more putting that time and effort into honest work.

There are also, of course, what might be called the secondary economic benefits of serving in the Legislature, almost all of whose members earn most of their money in other pursuits. A lawyer, accountant, or other professional can make contacts and get publicity that can help bring in clients and customers. The business executive who lobbies a legislator today might offer him or her a high-salary position tomorrow.

To use the office for personal gain, then, the smart lawmaker will stick to doing the job right, and not spend time trying to eke a few extra bucks out of the rooms and meals allowance.

Everybody’s But Mine

Wednesday, January 27th, 2010

Forenote: There will be an extra News Guy posting tomorrow, Thursday (as well as the usual Friday posting), along with an announcement about some new developments at the web site which we trust will be received favorably.

Actually, it might be more accurate to consider today’s post the “extra” one. Tomorrow’s will have more news; what follows is a bit of musing on Vermont and consistency.

Back in the day, Sen. Russell Long, the Louisiana Democrat who chaired the Senate Finance Committee for a century or so, used to sum up the average person’s attitude toward taxation as follows: “Don’t tax you, don’t tax me, tax that fellow behind the tree.”

Sen. Long

Bad poetry, but good political analysis.

As Vermonters are now learning (and proving), the same phenomenon applies to spending. From Gov. Jim Douglas on down, the attitude of the body politic is: “Cut the other guy to the bone, but leave my favorite program alone.”

Poetry no better. Perspicacity identical.

Exhibit A comes right from the top. For years, Vermont farmers and woodland owners have gotten a tax break thanks to the “current use” tax assessment. Nobody opposes this policy in principle; it’s kept thousands of acres open and green by removing an incentive for landowners to sell to developers.

But it’s also expensive.

According to whom?

According to the Douglas Administration, whose tax commissioner, Richard Westman, just a few weeks ago identified the Current Use policy as one reason everybody else’s property taxes keep rising.

As it happens, over the last year or so, the various “stakeholders” of Current Use – farmers, foresters, environmentalists, local officials – have been meeting to try to figure out a way to get a little more money for the state treasury without seriously diminishing the advantage to landowners.

And they succeeded. Or at least most of them thought they did, and they presented the Legislature with a plan that would bring in another $1.6 million in revenue.

Oh, no, said the Douglas Administration, represented in this case by Agency of Natural Resources Secretary Jonathan Wood. Yeah, we need money. We’re $150 million in the hole. But we don’t want money from these landowners because…well, because it’s a good program, Wood said.

Yeah, but they’re all good programs. Maybe what he really meant was—These are our friends.

Then there was the Governor’s major power play to get a special Legislative Board to approve spending several more million dollars for one of his pet programs even as he insists on cutting almost everything else. This was the cap-raising of the Vermont Economic Growth Incentive . (See VEGI Burgher,” the January 13 post)

Assume for the sake of discussion that this, too, is a valuable program. But it never seemed to have occurred to Douglas to apply the same standards to it that he wants imposed on other agencies—spend less than you have in your budget this year because we all have to tighten our belts.

Do not suppose, though, that this “cut everybody but me” attitude is limited to Douglas and his fellow Republicans. At a Democratic fund-raiser a couple of weeks ago, former Gov. Howard Dean scolded lawmakers who might be willing to consider reducing the budget of the Vermont Housing and Conservation Board.

“We need that program,” Dean said. “It is the perfect public-private partnership.”

It may be, and like Current Use, it has been useful as a conservation mechanism. But it couldn’t survive a year or two with a little less money?

The liberals are somewhat less inconsistent than the conservatives here, because some of them openly call for some targeted and temporary tax increases to help the state over its $150 million budget shortfall. But everybody agrees that programs will have to be cut.

Just not their favorites.

OK, some folks are willing to take less. State workers took a three percent pay cut. Yes, they did it under pressure and to avoid more layoffs, so it wasn’t just an act of noble sacrifice. But it was a sacrifice, as was the five percent pay cut taken by their bosses, the “exempt” state workers who earn more than $60,000 a year. The Stowe teachers agreed to give up the 5.5 percent pay hike they had negotiated for this year.

But these seem to be the exceptions. The default position for Vermont advocates left and right remains a firm and forthright conviction to cut spending. On everybody else’s programs.

Aftnote: Because the News Guy rarely misses an opportunity to ridicule or insult the Burlington Free Press when it deserves ridicule or insult, it’s only fair that the paper’s triumphs be recognized. Last Sunday alone it had three pieces of first-rate journalism: Sam Hemingway’s lead story about tritium contamination at nuclear plants nationwide, Nancy Remsen’s story about the potential impacts of state budget cuts, Candace Page’s fascinating account of niche marketing agriculture in Vermont.