18 June 2008

Public Schools: Generous with Other People's Money

The Objectivist
Dunkirk-Fredonia Observer
June 10, 2008

New York has the highest state and local taxes in the United States and spends more per student than any other state. In this context, the New York State Commission on Property Tax Relief Commission has suggested a way to contain skyrocketing education costs. Even this mild remedy has ruffled the feathers of the education crowd. In this column, we look at local taxes and the recent proposal.

Taxes are grinding New York taxpayers into the dirt. Note that the following figures come from the Commission’s findings. New York State has the highest tax burden in the country. The tax burden is 33% above the national average. Statewide spending is not the problem. Albany is a model of discipline compared to local governments and school boards. State taxes are only 1% above the national average.

Local governments and school boards are the villains here. New York’s incredibly high taxes are driven by the highest local taxes in the country, 79% above the national average. Excluding New York City, New Yorkers pay $26 more per $1,000 income than residents in other states. This is 57% higher than the national average.

The engine driving these local taxes is property taxes, which are a disgrace. Property taxes are 75% of local taxes. As a percentage of home value in 2006, 9 out of the 10 highest property-taxed counties in the United States were in New York. Chautauqua country is on the list of shame with the 6th highest in the country, taxing its residents at 2.52% of the home value each year. Property taxes have grown more than 150% above inflation since 1982. They’ve grown by an eye-popping average of 7% since 2001.

The property taxes are pushed ever higher by education costs, which, outside of New York City, are 62% of the property taxes. New York schools spend money like drunken sailors. In 2008-2009, New Yorkers spend $18,768 per pupil. Again, this is more than any other state (although the District of Columbia spends more) and reflects a 7.9% annual rate of increase from 2000 to 2006. The overspending is in part due to the fact that school boards spend other people’s money. 47% of school revenue comes from state and federal rather than local sources. It is also likely due in part to the fact that only 14.2% (2006 figure) of enrolled voters vote on the school budget. With such low enrollment, parties with a financial stake in the monster spending levels, for example teachers and people with kids in the system, can consistently win votes so long as they get out their members.

The recent spending increases result in large part from payroll padding. From 2001 to 2007, there was a 4.8% increase in staff (7,400 more staffers) and 3.6% increase in teachers (5,000 more teachers) despite declining student enrollment (down 0.9% or 15,900 students). In 2005-2006, the average teacher cost the taxpayer roughly $82,000 per year ($59,000 in salary and $23,000 in benefits). Because this amount is reasonable, the problem appears to be the number of employees not the pay level.

This level of property taxes lowers property values, which makes people poorer. It also drives businesses away. This increases unemployment and drives young adults from the area. For example, civic leader Kevin Gaughan asserts that Erie County lost 30% of its young adults (18-24) since 1990. Property taxes thus cause upstate New Yorkers to lose jobs, retire later, and watch their children move away. Now explain to me why school boards and associated special interests aren’t villains.

Enter the Commission on Property Tax Relief. It wants to cap property tax increases. The cap is a limit to the annual increases in school property tax levies and the Commission would set it at 4% or 120% of the Consumer Price Index, whichever is lower. According to the proposal, if the school district held its increase to at or below the cap, it need not put its budget to a vote. If it wanted to increase spending by more than the cap but less than 5%, 55% of the voters would have to approve it. If the increase were more than 5%, 60% would have to do so. Any part of the levy that is not used can be banked for future years, although it may not exceed 1.5% of the previous year’s levy. The idea for a cap is nothing new. In 2006, 43 states had some type of cap on real property taxes.

The Commission also put forth a circuit-breaker proposal. It proposed that an income-tax credit that will kick in for low- and moderate-income residents when property-tax bills exceed a certain percentage of their income.

The proposal is mixed. The cap is probably necessary to prevent school spending from breaking taxpayers and ravaging the New York economy. Still, it is dangerous. We can expect that school spending will reliably come in at 4% because there is little incentive to spend less. Because 4% is likely be higher than inflation, the taxpayer burden will continue to grow relative to people’s incomes and property values. The supermajority cap-buster is troubling in that the education special interests can probably mobilize to push the rates up, at least in those areas without vigilant taxpayers.

The loss of local control accompanying statewide caps is not unfair given that state and federal taxpayers pick up about half the bill. By analogy, if an employer pays for half of his worker’s education, it seems fair and appropriate to insist that she take courses in real subjects and perform at a reasonable level.

The circuit-breaker idea is a mistake. The reason that school systems can spend like drunken sailors is that they spend other people’s money. If local taxpayers had to foot the whole bill for education, school spending would have a direct and immediate effect on local taxes. This would likely end the ratcheting up of school hiring and spending. The circuit-breaker makes local taxpayers foot less of the bill and thereby makes things worse.

It is a shame that the Commission chose such a clunky method to slow skyrocketing education costs. However, it’s better than the likely alternative, which is more drunken-sailor spending. In any case, the discussion of this proposal should begin with the acknowledgment that the school systems and associated special interests are villains who offend us with their outrageous and undisciplined spending.

04 June 2008

Fredonia and Dunkirk Statistics

The Objectivist
Dunkirk-Fredonia Observer
May 24, 2008

Dunkirk and Fredonia are inextricably linked. It is interesting to see how they compare to each other. In this column, we look at some of the numbers.

Demographically, the towns are similar in some important respects. The following data comes from the 2000 Census. The two are about the same size: Fredonia (14,690) and Dunkirk (16,097). Dunkirk has a more stable population (60% have lived in the same house for five or more years) as compared to Fredonia (49%).

Dunkirk residents are older. Dunkirk residents average 39.6 years versus 25.9 for Fredonia. 7.3% of Dunkirk residents are 80 or older versus 3.1% of Fredonia. They have roughly the same percentage of young people. People 19 or younger comprise 29.7% of Fredonia and 26.5% of Dunkirk. It is not clear to what role the college plays in this.

There appears to be an income difference. Fredonia is less poor than Dunkirk (the 2000 median household income was $37,010 for Fredonia and $29,310 for Dunkirk). Both are not great. U.S. households averaged $47,599 in 2000, when the Census was last taken. In 2000, 6.4% of Fredonia households made more than $100,000 versus 3.8% for Dunkirk. Dunkirk has more rich households. In 2000, it had more people who make more than $200,000 (209 versus 118).

Fredonia has a higher education level. In 2000, 28.4% of Fredonia had a Bachelors degree or higher versus 13.4% for Dunkirk. The former is roughly the current national average. In 2006, for example, 28% of the U.S. population had a Bachelors or higher. On the other end, 12% of Fredonia didn’t graduate from high school versus 25.9% for Dunkirk.

Dunkirk has a much higher percentage of minorities, but both are whiter than the rest of the country. In 2000, 22.4% of Dunkirk consisted of minorities (16.8% Hispanic and 3.9% black). In contrast, only 6.2% of Fredonia consisted of minorities (2.4% Hispanic and 2% black). In the current U.S. (2006 figures), 35% were minorities or of mixed heritage (15% were Hispanic alone and 13% were black alone). Neither town has many Asians (0.3% of Dunkirk and 0.8% of Fredonia) versus 4% of the current U.S. population.

Using 2005-2006 data from the New York State District Report Card, we find that the schools differ significantly. More Dunkirk students are poor. 56% qualify for free lunch versus 18% for Fredonia. Dunkirk also has more discipline problems. It suspends more of its students than Fredonia (8% versus 2%). In addition, more of its students drop out of high school and less plan to go on to a four-year college (38% versus 56%). It should be noted that some of those who don’t complete high school later enter GED programs, so it is unclear whether these numbers should trouble us. None of these differences appear to result from the number of students with disabilities because both have roughly the same percentage as each other and the rest of the state. The two school systems also differ greatly in race and ethnicity. 6% of Fredonia students are black or Hispanic versus 45% of Dunkirk.

The analogous statewide numbers fall in between those of the two school systems. 37% of statewide students qualify for free lunch, 5% of the students are suspended, and 40% are black or Hispanic.

The students also perform at different levels. In terms of 2005-2006 Regents examination among high-performing high school students, Fredonia significantly outperforms Dunkirk. Here are a few of the percentages of students with the highest scores (85-100) on the Regents Exams, with Dunkirk in parentheses: Comprehensive English 31% (25%), Math B 34% (5%), U.S. History and Government 49% (40%), Living Environment 29% (10%), and Physics 39% (6%). It is an interesting question as to what produces the different levels of performance. It is not due to differences in expenditures, class size, or the number of administrators and staff.

The performance differential begins early on. Consider the 2005-2006 numbers. 55% of Dunkirk fourth graders are at level 1 or 2 in math. Level 1 indicates that the students have serious academic deficiencies and level 2 indicates that students need extra help to meet the standards and pass the Regents examination. In contrast, this is true for 22% of fourth graders across New York and the same percentage of Fredonia fourth graders. Similar problems occur with regard to English scores, with 50% of Dunkirk students at levels 1 or 2. Fredonia (34%) scores about the same as the rest of the state (31%).

Dunkirk’s math problems intensify in middle school with level 1 and 2 scores in math and English scores coming in at 74% and 82%. It should be noted, though, that the statewide scores are nothing to write home about at 46% and 51%. Oddly, Fredonia does well at math (26%) but not at English (52%).

It should be noted that in the eighth grade, Fredonia is nothing special when considering high-end scores. It has an average percentage of Level 4 scores (these students exceed the standards are moving toward high performance on the Regents examination) that tie the state average in math (10%) and are 2% lower in English. By high school (using the 2002 cohort), Fredonia students outpace the rest of the state with 20% more level 4 scorers than statewide student population in English and 25% more in math. It is an interesting question as to what explains this gain. Dunkirk’s results are mixed with 16% fewer high scorers in English and 4% more in math. Dropout rates for this 2002 cohort fit the general pattern. When compared with statewide numbers, 18% more of Fredonia students graduate than the statewide average. In Dunkirk, 1% fewer do.

In terms of spending, both school systems spend a lot. For example, from Fall 2002 to the recently passed budgets, Fredonia has increased its spending by 33% to $15,807 per student per year (using 2005-2006 enrollment). Dunkirk has increased its spending by 23% to $17,457 per student per year. The latter is a case study in which irresponsible spending occurs when someone else picks up the bill. Dunkirk residents only pay 28% of the bill ($4,821 per pupil). The overspending is predictable. If restaurant patrons knew that the state was going to pick up 72% of their bill, you can bet they would be more likely to order steak for themselves and fancy deserts for their children.

Overall the numbers are mixed. The area appears to be poorer than the rest of the country in terms of household income. The numbers also show that the towns differ significantly in income, age, race and ethnicity, and school performance.