Saturday, January 28, 2006

Nine ways that legislators could control school spending.

The letter below was sent to Representative Mike Tryon in response to Senate Bill 1682. Senate Bill 1682 is a Bill that will lead to making clear the true costs of referenda to voters. Below Mr. Speer points out that this is merely a band aid for the cancer of school spending and suggests nine ways to control public school spending. It should be noted that the Illinois Association of School Boards (IASB) opposes this Bill. I think it is safe to assume that the IASB does not want the voter to truly know how much a tax increase will cost a voter. Yet another reason to continue to oppose all education referenda. May we suggest you edit this letter below to fit your needs and and send it on to your Senators and Representative.

My Dear Sir,

I am an Illinois resident, living in Lake County and working as a financial advisor to Illinois (and Indiana) Counties, Cities, Towns and Villages -- and School Districts. I am employed to ensure that their capital financing (municipal bonds) meet the greatest success in the market. I have a deep and long term interest in the performance of Illinois schools.

I see that you are attempting to get a truth in taxation (as you describe it) act regarding the actual cost of a referendum proposal. Well and good.

But this is a single area among the many nooks and crannies which the general Assembly has in the past seen fit to legislate but not in the light of day. It will not, for instance, address the overcharging for drivers education courses as a means of funneling more money into the schools.

The following is extracted from a presentation I made to regional meetings last year of what I called the Flying Madigan Budget Circus. It addressed nine areas in need of legislative attention.

First, taxpayers generally believe that they are permitting their resources to be taxed for a specific purpose. After that specific purpose is accomplished the resources should be disencumbered. It is their money.

The legislature has systematically expanded the ability of the School District to issue non referendum debt. It allows the schools to finance new debt when old bonds are retired without asking taxpayer permission. It is not the school’s money; it is the taxpayers to whom it belongs. A Referendum established the single purpose for which the debt was approved. No additional debt without referendum approval should be permitted.

Second, referenda are now crafted to permit tax collections in the same year as the referenda were passed, putting taxpayer on a short fuse. This is an unnecessary burden. Taxpayers suffering a reassessment receive a second increase in taxes in the same year as a result of a successful referendum.

Third, the Capital Development Board has in many instances foisted construction grants on local School Districts with the School District permitted non-referendum funding bonds to complete the construction. Local taxpayers were excluded from the decision process. Working Cash Bonds are permitted to pay for projects -- a vile corruption of the working cash process.

Fourth, school construction, whether financed through State grants or through local debt issuance, is authorized to proceed without any indication that the additional money will be on hand to pay for its manning and operation. A referendum may have approved a construction project. A second referendum to increase tax rates and obtain moneys for the costs of operations may be simultaneously defeated and can be delayed until the shining new school sits on the plot of ground empty.

The State should never permit capital to be spent either through its grants or as the sale of Building Bonds or for any capital improvement purpose until it can be demonstrated that sufficient revenues are on hand without any new operating tax increases to staff, operate and maintain it.

Fifth, Early Retirement Plans are a continuing scandal. School boards must not be complicit in these attempts to enrich its employees -- but they are -- and at the expense of local taxpayers and eventually the State of Illinois.

The Governor’s modest plan to minimize this enrichment does not go far enough. While these plans before implementation appear to provide present value savings to a School District, there has been no requirement to provide ex post studies to the State and the taxpaying public (i) showing what the savings have been, and (ii) verifying what the savings are in relation to what was projected. The State should require such reporting, at the very least to be able to judge its efficacy.

The State should also not permit its Title I moneys be used to pay the artificial salary increases caused by the pension maximization program. Title I money for a current year should be reduced by the increase above the rate of inflation in salaries paid in the previous year.

Further, no person receiving a monthly check from the Pension Fund and retiring early should be permitted to accept another job within the educational establishment (within or without the State of Illinois) until his normal retirement date is reached or for a period of five years, whichever is greater. That would include private sector consulting jobs. The Department of Defense, for instance, has a similar process.

Sixth, under the permissive legislation of the State, School Districts are using Working Cash Bonds and Working Cash funds to make permanent transfers instead of temporary loans to their operating funds. These loopholes must be closed. Why? These one time transfers, while the debt service levy or working cash fund levy is in place, enable School Districts to violate, without referendum, tax rate ceilings and tax caps. The State has permitted the use of these moneys for construction, for indirectly paying higher salaries and thus pensions

Seventh, the State permits public employees in the teaching profession to go on strike and interrupt the educational process. Worse, the State allows Districts in settlement to enter into labor contracts, the cost of which exceed the anticipated available resources. No public body should be permitted under law to offer contracts for services to their employees the cost of which exceeds the current and forecast revenue from its existing resources. Such settlements that anticipate tax increases from referenda must be made illegal. Any contract which anticipates property tax increases as a source of payment for contractee services shall be null and void.

Eighth, tenure in K-12 Schools is a perversion of the Tenure Principle in universities. There, tenure permits a professor to engage in research – which may be controversial but which advances the level of knowledge in his field. Tenure at the K-12 level, automatically granted for continuing employment is featherbedding, especially when combined with collective bargaining and the closed shop.

Ninth, entry into the teaching field has been unnaturally restricted. As a retired naval intelligence officer, let me say that there is a large pool of personnel retiring each year from the Armed Forces, who have obtained subject matter mastery and who could be recruited to teach in our schools. Gubernatorial and legislative attention must be paid to eliminate or minimize barriers to these people of a certain maturity. Credit must be given for their own knowledge and experience as well as the educational courses and teaching experience in their service. The schools themselves must be permitted to open up the closed shop which appears to be the rule.

The State has made some effort correct the problems above. However, their efforts were abortive and incomplete. They need your attention.

The problems above, while significant, do not reflect the major problem area in primary and secondary education. Put simply, it is this: regardless of the level of funding, the education provided in our schools is not competitive with that being provided overseas. It is a twenty first century world economy -- a world which is knowledge based. America is not educationally equipped to compete. Please see the attachment for a discussion of this.

In the best of all worlds the cost of education should be related to the value of output. At present, qualitatively, the cost far exceeds the value -- and money is not the cure. The system needs reformation. There are culprits. The education mafia controls the system, the local school boards, the ISBE and -- unfortunately -- the legislature. The Teachers Union is out of control, the Administrators come from the same schools of education, as do the regulators. There is only one cure -- competition. Full school choice will raise standards and lower costs. This is easily demonstrable and I would be pleased to discuss this further.

In the meantime, welcome to the fray -- but one battle will not win this war. I hope you are in it for the long haul.


Paul D. Speer, Jr.

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