Snowflake Schools: Lessons in Polarization

One problem exacerbated by the digital age is the extremes to which opposing sides migrate, when people talk and post at each other rather than engaging in the give-and-take characteristic of reasonable discourse.  The recent debate over the property tax levy passed on December 16, 2013, by the Hinsdale Township High School District #86 school board illustrated this clearly.

For those of you who didn’t follow these heated exchanges, the issue was whether or not the school board would request an increase in its levy.  State law restricts the amount school boards can raise their share of property taxes to the rate of inflation for the previous year plus any new growth.  (The entire law can be found at http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ChapterID=8&ActID=596.)  It used to be that property taxes were adjusted by how much a house’s assessed valuation went up or down, but with the real estate boon of the 1980s leading to increases that shocked many homeowners, the Property Tax Extension Limitation Law went into effect in 1992 for DuPage County (Article 18, Division 5 in the law above).  Thus, when a school board makes a request to the state to increase its tax levy for the next year, that increase is limited to growth in the consumer price index (CPI) for the most recently completed year (or 5%, whichever is less) plus any new housing or businesses that began paying property taxes that year.

Four of seven members of the Hinsdale #86 school board voted to keep the levy request for fiscal 2015 exactly the same as for 2014 rather than raising it by the 1.7% CPI increase permitted.  For fiscal 2014 (the tax payments homeowners made in June and September of 2013), District #86 collected $72,605,822.  The 1.7% growth in CPI would have increased that amount by $1,234,299.  Keeping the tax rate static means that next year, the amount collected will be the same, $72,605,822, instead of the $73,840,121 it would have been with that 1.7% bump.  In addition, the basis for next year’s levy request in District #86 will again be that $72,605,822.  So the district will not collect that $1.2 million in revenues for 2015, and it will continue to collect less than it could have as time goes on.  In 2016, for example, the uncollected amount will increase by the same $1,234,299 not collected in 2015 plus whatever the CPI increases (we’ll use 2% for the sake of this example), for a grand total of $1,258,985 ($24,686 or 2% more than the original $1,234,299) and so on for 2017, 2018…  And that’s assuming the board elects to increase the levy for 2016, instead of continuing the freeze, which would mean the amount of uncollected revenue would be even higher.

That leads us to the way supporters and detractors debated this issue and those facts.

Those against the “flat tax” (as it was characterized in the press) called it “reckless” and a “tragic mistake” in how it would impact the district’s ability to educate our children.  They argued the lower revenues would lead to a lack of competiveness in teacher salaries, increased class sizes, and run-down facilities.  But, this inflamed rhetoric ignored the healthy balances the district has been carrying for years, its ability to float bonds should it need emergency cash, or the favorable comparisons of its teacher salary schedule to other districts nearby.  To illustrate:  District #86 began fiscal 2014 (which started on July 1, 2013) with a balance of $22,071,328, which didn’t include any of the taxes or funds received for fiscal 2014.  In other words, this school year commenced with a savings account (reserves) total of over twenty-two million dollars, or 26% of the budgeted expenses for the school year on hand before any taxes for that year had been collected.

Then there are teacher salary comparisons.  The starting and maximum salaries in Downers Grove high schools for 2013-14 are $49,862 and $118,757 respectively, compared to Hinsdale’s $53,379 and $126,247 (+7.1% and 6.3%).    The other high school district nearby, Lyons Township, has starting and ending salaries 2.1% and 1.0% higher at $54,492.43 and $127,512.26.  It’s pretty unlikely that any teacher (or principal, for that matter) who leaves Hinsdale #86 for either of those districts is doing so because of the salaries.

Another argument made by the anti-flat-tax people had to do with the compounding problem. As we explained above, when a school board requests an increase in its revenues, the basis for that increase is the amount of the previous levy.  So District 86 will now have to use a lower number than it would have if it had increased the levy for 2015.  And the opponents pointed out that this “lost revenue” will compound every year hereafter, costing the district more and more…forever!

That’s true, to a certain extent, but the school district always has the authority to seek additional monies in the form of a referendum.  Make the case to the public, put the needed revenue enhancement/tax increase on the ballot, and let the voters decide.  No, it isn’t easy to pass a referendum these days, but school districts have found ways around this for decades:  Hinsdale #86 has done numerous building projects costing tens of millions of dollars without any referendums in the last forty years by spending built up reserves and/or floating bonds.  The board has access to bond sales to raise money if it needs to do so without any input from the public.  The scare tactics employed by opponents of the flat tax ignored the district’s history of surpluses and bond issues, instead focusing on possibilities of future pension payment shifts and emergencies, neither of which is probable, much less impending.

Now, before you think I’m a supporter of the flat tax, let me state clearly that I am not.  Just so you know, I taught in District 86 for twenty-five years and represented its teachers in contract negotiations eight times, twice as chief spokesperson.  I do believe that the flat tax proposal is the wrong move simply because it ignores the reality of inflation.  The CPI goes up only because things cost more, and to freeze your revenues when costs have increased 1.7% doesn’t make financial sense.  Yes, the referendum process mentioned earlier is one way to play catch-up, but it is a slow process that requires a great deal of foresight.  Financial planning gets simplified when you can access cash in advance, rather than hoping you can persuade voters during the next election, assuming you’ve met the filing deadlines to get your initiative on the ballot.  And floating bonds seems deceptive to me:  It’s as if the board is saying to its community members, “We can ignore the referendum process and circumvent the will of the voters,” not an especially civic-minded approach.  Then too, previous boards have always held it was “crucial” to maintain upwards of 20% of the next year’s budget in its reserves, so it’s anyone’s guess how the board will react as that balance decreases as costs increase.

The freeze advocates also downplay the argument that the tax savings of the freeze per household is insignificant to homeowners.  But do the tax freeze savings of roughly $40 per household make much difference to them?  Would they rather have $40 or make the school district more financially secure?  Keep in mind that one of the most important reasons home values are maintained is the community’s schools.  Those in favor of no tax increase should be up-front with their opposition to any tax increases, a line of reasoning that values principle over practicality.  It’s not that forgoing this tax increase will make a significant difference in any family’s finances (any more than the lack of an increase will destroy the schools).  So making sure that revenues keep up with expenses is less important to flat taxers than making the point that taxes don’t automatically need to increase just because inflation has.  And that leads to the question:  Would most homeowners prefer to pay $40 as a way to insure their home’s value, or would they rather make a political point that saves them a couple of bucks?  Unfortunately, that debate didn’t occur during the recent flap.

But the freeze also sends a message to the teachers with whom this board will be negotiating this school year.  Keep in mind that the teachers and the district just finished a long monetary discussion in February 2013, settling the financial issues of the last two years of the current teachers’ contract with salary increases of 0% for 2012-13 and 1.23% in 2013-14.  That 1.23 % total is 2% less than CPI for those two years (3.3% overall for 2012 and 2013).  Because I still communicate with teachers in District #86, I know they were not especially thrilled with that outcome (the lowest salary increase in over thirty years) and expect the new contract to result in more significant raises.  The board, however, has now turned down revenue it had every right to collect—and which every comparable school district in the area accepted—in effect publicizing that it didn’t think it would need over a million dollars that could be available for salaries.

So, if I’m a teacher in District 86 (and I was), I’m thinking, “Huh?  We just accepted smaller-than-inflation increases for two years, and the district’s response to this going into a year when we will be negotiating a new contract is to turn down money it could use to fund salaries?  Okay, that had better mean it has plenty in its reserves to compensate us fairly!  But wait a minute—what about the way they negotiated with us just last year when they also had those reserves?  Hmmm, I wonder if we should get some picket signs ready.”  Does this flat tax guarantee a teachers’ strike this coming August?  Of course not, but it wouldn’t surprise me if the school board has contributed to more labor unrest with this move.

Nor does it help that one board member, Ed Corcoran, is listed on the Steering Committee for a community group, Citizens for Clarendon Hills, that on its home page (http://www.citizensforch.com/) recommends school districts, “Hold the line on staffing costs & eliminate non-essential personnel.” The whole flat tax rationale is extolled on this site, leading to the reasonable conclusion that District #86 is being influenced by a philosophy advocated by a community group which lists only nine members on its site, with no other information about how many people it represents.  And the site describes taxing bodies in the following way: “It’s like having your children ask you for $100 today with no idea how they are going to spend it next month. Are you going to blindly hand over the $100? And then, will your child look for ways to reduce that $100 when its (sic) burning a hole in their (sic) pocket? Governmental entities are no different.”  I’m guessing that most governmental entities don’t equate themselves with children unable to resist throwing away their cash, and would not find that characterization fair or helpful.  I know that teachers certainly didn’t see District #86 school boards as profligate during the twenty-five years I worked at Hinsdale South.

So both sides are exaggerating and misleading instead of having an important discussion about the revenues to run the schools, not to mention ignoring recent history prior to new contract negotiations with its teachers.  Next time, we’ll analyze how things might have gone if the school board had been committed to a reasonable discourse focusing on the issue, instead of mainly trying to make a point.

For more on school reform, including the give-and-take of true discourse, see James Crandell’s website http://www.snowflake-schools.com/.

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