Legislative Testimony
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Testimony-Task Force on School Cost Reduction, Haverford
Haverford Twp. SDFebruary 2007
By Lawrence A. Feinberg, Legislative Liaison, School District of Haverford Township Board of School Directors and Chairman, Delaware County School Boards Legislative Council
Good afternoon and thank you for this opportunity to present testimony on behalf of the School District of Haverford Township and the other 14 school districts in Delaware County. I would like to acknowledge the help of our business manager Ms. Tracy Marshall in preparing data based upon our actual audited costs to support this testimony. I am attaching a number of documents detailing the cost increases I will be presenting.
My testimony on school costs covers the following areas: special education, healthcare benefits, PSERS contributions, transportation, construction, cyber charter tuition and cost saving measures.
SPECIAL EDUCATION
Federal IDEA funding pays on average about 18% of special education costs; we have been waiting for Congress to meet it's commitment of 40% funding for almost 40 years. In 1992 the State of Pennsylvania paid 100% of the excess costs of providing special education services. A s the State's share of the funding for public education has decreased from about 50% to about 34% of the average costs statewide, the difference, including special education costs, has been passed along to local taxpayers. This contrasts with a national average state contribution of 56%. For the 2005-2006 school year our unreimbursed special education costs were $8,620,652 or just under $480 per household for each of our 18,000 property owners.
The increases in special education costs for the past three years have been $899,458, $1,323,324 and $1,305,706; percentage increases of 10.9, 14.4 and 12.4 that far exceed the rate of inflation. While our regular instruction costs have grown at an annual rate of 4.65% since 2001, our special education costs grew at an annual rate of 11.98% - almost three times as fast. Over this 5-year period, the state special ed subsidy has grown at an annual rate of only 2.4%, less than the rate of inflation in Philadelphia of 3.2%, again shifting more of these costs to local taxpayers.
Schools are obligated to provide not just educational services but more and more healthcare and social services that were previously provided by state and local entities. These cost increases track more closely with those seen in the health care industry. We are responsible for providing special education services as needed to a total population of 8300 children ages 3 to 21 in our township, not just for the 5500 school age students in our public schools.
Increased federal and state reimbursement would certainly help to decrease the local share of these costs, as would better funding for early intervention programs that could help to minimize the number of students identified for special education services. Hundred of thousands of dollars are being spent on legal fees related to special education as we have the obligation and responsibility to provide those services but do not have adequate legal protection. Reforms to the legal environment might provide significant relief from excessive legal fees associated with special education litigation.
HEALTH CARE BENEFITS
For the 2005-2006 school year our health benefit costs were $6,096,449 or about $338 per household. The increases in health benefit costs for the past two years have been $759,539 and $373,784. The prior 2 years showed a decrease of $765,753 following a jump of $3,302,315. Like many other districts, we have switched to health care plans that require our employees to pay a higher share of the premiums and higher copays, but even so our health care costs continue grow at a rate three times faster than salaries. The annual expenditure for salaries in 2005/06 was $7.172 million higher than in 2000/01 (4.44% growth rate); while the annual benefits number was $5.356 million higher (annual growth rate of 12.5%).
It is noteworthy that over the last five years the costs of benefits have become an increasingly larger share of our budget, reaching 18% in 2006/07; in that same year the actual dollar increase in benefits (healthcare and PSERS) of $1.514 million was actually higher than our dollar increase in salary costs of $966,000.
Haverford is part of a county-wide consortium for healthcare benefits which helps to stabilize our rate increases since they are based 50% on our experience and 50% on the consortium's experience. The consortium's $65 million combined premium provides some leverage in our negotiations for better rates. In addition, depending upon interest rates we prepay our premium to receive discounts ranging from 3.5% to 4.5% ($200K to $300K per year). As labor contracts are negotiated we have moved from a zero employee contribution to a current range of 2% to 8%.
PSERS CONTRIBUTIONS
The table above shows Haverford's estimated PSERS contributions through 2012. Back in the 1998-99 school year our PSERS costs were $1,627,478 with an employer contribution rate of 6.04%. When the stock market peaked for the 2001-02 school year our costs dropped to $336,210 with a contribution rate of 1.09%. With the 25% increase in benefits voted by the legislature and the accompanying drop in the stock market our 2005-06 costs bounced back up to $1,720,672 with a rate of 4.64%. Our 2006-07 rate is 6.46% with a contribution of $2,492,208 costing the average homeowner $138. We anticipate that our costs will skyrocket between now and 2012, with each additional million dollars in contributions adding $55 to the average homeowners property tax bill.
These are costs that school boards have virtually no control over. The taxpayers of Pennsylvania can no longer afford to fund a defined benefit pension plan.
TRANSPORTATION
State law requires that if we bus our own public school pupils we must bus all pupils residing in the township to any school within 10 miles of our township boundaries. For special education students there is no distance limitation. For the 1998-99 school year we transported students to 120 schools traveling about 600,000 miles at a cost of 2,053,267 or about $114 per household. By 2005-06 we were transporting students to 138 schools traveling about 710,000 miles at a cost of 3,035,707 or about $168 per household.
If there were hybrid school buses available we would certainly take a hard look at them.
Over the last 5 years the total of the three main subsidies we receive from the state - ESBE, special education, and transportation - have grown at an annual rate of only 3.2%, significantly lower than the growth rate in costs. Over this period, these three subsidies have decreased from 9.8% of our total revenues to 8.9% during the current fiscal year.
CONSTRUCTION
Last year Haverford opened Chestnutwold Elementary, our first new school building in over 50 years. It was frustrating that we were unable to incorporate energy saving features in the design of that school that could have saved our taxpayers considerable costs over the life of the school but would have pushed us above the Act 34 referendum limit. These included heat recovery and ground source heat pump systems, triple glazed windows and increasing wall and roof insulation beyond code requirements.
A key problem is that the legislature is requiring a statewide "average" cost for new schools which does not take into account the 10 to 20% cost differential in the Philadelphia area due to wage rates and the overall market. The legislature should consider amending the Act 34 calculations to reflect the dual nature of the Philadelphia area and the rest of the state if they are going to use construction costs as a measure of the referendum limit. Secondly, they should provide an exception from the limits to permit school districts to build better higher performing buildings, recognizing that first costs are quickly recouped by savings over time.
While you may be told that there is newly enacted PDE incentive aid of 10% for a building that achieves a LEED rating, in the case of Chestnutwold, where the effective aid to the District was limited, this extra aid would only have been worth $41,624 . This was hardly a real incentive or help when the additional cost of meeting the LEED requirements commissioning/LEED submissions, etc. would have easily been over $100,000.
We estimate that we could save 10 to 15% on building costs if we were not subject to prevailing wage rules. If we assume a 15% savings then we might have saved $1,989,000 on the Chestnutwold School and as much as $2,737,000 for our pending Manoa School project. That level of savings could have been used to incorporate energy saving features that would have provided long term savings.
Another area that might save considerable construction costs would be the elimination of the multiple prime requirement. That would remove an entire layer of potential litigation and clearly allow the general contractor to control the scheduling and work coordination on a project. A single prime approach could also reduce the need for expensive construction management services that can add 2.5% to 5.5% to project costs.
In discussions with our architect it seems that a great improvement would be to allow "best value" contracting that would permit a school district to select a contractor based on both bid price as well as reputation. At present, the ability to get a bond essentially qualifies a contractor to do a project, a system that has no bearing on prior performance. The case law does not favor the school district in trying to disqualify a bidder with known performance issues as long as they are able to obtain a bond. Many construction problems are tied to the fact that the lowest responsible bidder is typically the one who forgot the most on bid day. Paying a few dollars more could eliminate much of the change order issue where the low bidders try to recoup their losses from bidding.
CYBER CHARTERSCHOOL TUITION
In 1997 there was no such thing as cyber charter tuition; this year Haverford has already exceeded our budget of $240,000, spending $300,000 on cyber charter tuition. Five year's prior cost history for Haverford beginning with the 2001-02 school year is $40,383, $64,622, $154,159, $185,783 and $217,371. With 13 of 15 Delaware County districts supplying data, the countywide costs for three years beginning with 2003-04 were $939,195, $1,846,884 and $2,604,867.
Spreadsheets detailing Haverford's 5 year unreimbursed cyber charter tuition and 3 year Delaware County School Districts cyber charter tuitions are attached.
Even with the State reimbursing about 30%, these costs are staggering, especially considering the fact that local school districts have essentially no control over the cyber charter schools. The State should assume full financial responsibility for these schools without deducting funds from school district subsidies.
The four suburban Philadelphia County Intermediate Units formed the 21 st Century Charter School operating out of the Chester County IU and it is able to provide a cyber education for about $4000 per regular education student. This year, based upon PDE's form 363, Haverford is required to pay $8520.17 cyber tuition for a non-special education student and $21,181.43 cyber tuition for a special education student, regardless of the actual cost to any cyber school. It is my understanding that the Chester County IU has an account where they have been accumulating the excess tuition over actual costs but by state law they are unable to reduce their tuition charges or refund the difference to the school districts.
Why should cyber charter schools be permitted to make huge profits from our taxpayer's money when local school districts have no control over their enrollment, spending or performance? Why should school districts be required to pay excessive cyber charter tuitions, especially when we are operating under Act 1 budgeting constraints?
OTHER COST SAVING MEASURES
We participate in a joint purchasing arrangement through the Delaware County IU that reduces our costs for supplies and fuel. Last year our estimated savings through this program were $220,000. We also participate in the State's COSTARS vehicle purchasing and PEPPM technology consortiums.
We are just beginning to participate in a countywide distance learning program that will deliver Mandarin Chinese coursework.
Our food service department operates at no cost to our taxpayers on a completely self sufficient basis. To my knowledge, we are one of the few districts in the Commonwealth that does this.
To date, Haverford has not utilized the mandate waiver program. However, we would suggest that if there are mandate waivers that are effective in saving money for many districts then why not have a means to identify them and change the laws accordingly.
CONCLUSION - DEATH BY A THOUSAND PAPERCUTS
One of the most significant things the State could do to help school districts control costs would be to pass legislation requiring that any proposed legislation effecting school districts includes the pay as you go state funding required for school districts to fully comply with that legislation. This becomes even more significant now that Act 1 spending caps are in force. While unfunded or underfunded mandates like special education and cyber tuition have large impacts on our budgets, the cumulative impact of a steady stream of unfunded or underfunded legislation also takes its toll on our taxpayers and/or on our educational programs.
Take Act 1, for instance. It required school districts to mail homestead exemption forms to every homestead/farmstead on the tax rolls and to do a follow-up mailing for those who did not respond to the first. There was no money appropriated for postage in the bill. The local tax policy commissions required data analysis and support from financial consulting firms in reviewing demographic, taxing and cost information. There was no money appropriated for professional services in the bill. Our superintendents, business managers and solicitors were required to plan, publicize, coordinate and attend a new series of meetings for the local tax policy commission. There was no money appropriated for the additional legal fees or required advertisements. There was no money appropriated for training of administrators and school board members in the requirements of the new law.
In my 7+ years as a school director it has been my experience that the above scenario tends to be the rule rather than the exception. Year after year legislation is signed into law that adds clerical, administrative, research, recordkeeping, training, information systems and legal and other professional services costs to school district budgets without providing funds to offset those costs. A copy of Statutory Mandates Imposed on School Districts 1995 - 2005 is attached; as you peruse the list try and envision what you would need to do (and spend) to operationalize each of the items.
The State Legislature seems all to willing to routinely pass off additional costs to school districts. If the Legislature is committed to reducing property taxes they need to help us control costs by ending the flow of unfunded and underfunded mandates from Harrisburg.
Finally, on behalf of the School District of Haverford Township, thank you again for this opportunity to present information on school district costs and some possible means to help control those costs. Please do not hesitate to contact me if we might provide any additional information.
Attachments:
SDHT historical costs for each area