Trend in “Bubble Gap” Narrows (Yay!); Actual “Bubble Gap” Grows (Boo!): Confused? Read On…

Written By: Robert Cox

Bubble Gap 2010-11-small.jpg

Good news and bad news for New Rochelle residents…and then some really, really bad news.

GOOD NEWS: the gap between the actual school budget and the school budget adjusted for the decline in home prices (using the Case-Shiller Home Price Index) is showing its first decline in several years.

BAD NEWS: the gap last year, forecast at $35mm, was far wider than expected ($46mm v. $35mm). The gap is narrower but larger ($38mm v. $35mm).

Now, the REALLY BAD NEWS…the Board of Education and administration of the district continue to fiddle while Rome burns. The nearly single-minded focus at every budget meeting has been cost, cost, cost (code for teacher’s union, teacher’s union, teacher’s union). There has been almost no discussion about the revenue side of the budget except for the usual complaints about the “unfairness” of the decline in “assessables” — the “assessed” value of all property in New Rochelle — as if that has some bearing on what the district is SPENDING.

The assessed value of property is simply a proxy used to determine how to divide up the tax levee imposed by the city and school district among property owners. It has nothing to do with ACTUAL property values (in this context). I know most folks do not understand this but just realize the board of education is lamenting a 20 year DECLINE in assessables. Have property values been declining for 20 years? No. They are two different animals and, to some degree, a red herring to confuse residents.

What matters — and what these charts show — is the relationship between the budgets and ACTUAL property values. And as these charts show, when the value of property in New Rochelle began to drop like a rock starting in 2006, the school budget kept right on growing as if that decline was not relevant. Of course, it is not only relevant but basically the whole ball game since the vast majority of the money used to fund that budget comes from local property taxes.

That the gap is closing to a small degree is a good start but it is not going to mean anything if this first step — a $5mm cut — is not continued for the next 3-5 years (depending on what happens with property values). If we start to see a recovery in the property market we can work out way out of this mess in a few years. But that requires continued, sustained budget cutting. In fact, what these charts are suggesting is quite normal, in the wake of a prolonged recession the impact at the state and local level lags about 2-3 years.

And for those folks who hear about a bursting bubble in the housing market but do not know what it looks like — that red line is the bubble. When you understand that red line as the housing bubble you can see how the district rode the wave of the housing bubble on the way up and then kept riding it even after the bubble burst.

As a reminder, here is last year’s chart with a $35 million gap between the actual budget and budget adjusted for the decline in home prices (using the Case-Shiller Home Price Index).

bubblegapchart.jpg

2 thoughts on “Trend in “Bubble Gap” Narrows (Yay!); Actual “Bubble Gap” Grows (Boo!): Confused? Read On…”

  1. Teacher’s Cuts
    When the district cuts teachers and some retire and are not replaced, how will the district distribute the remaining staff? Has this come up at any BOE meetings?

    1. No such discussions have occurred.
      No specifics on programs or teachers have been provided at all.

      What Schools Superintendent Richard Organisciak made clear at the last meeting that the chances of a last ditch rescue from the State are slim and none and slim just left town.

      I did ask about the NEW program they intend to add starting next year — a Mandarin language program – which Organisciak stated would go forward despite the financial situation. This is just another of these programs that do nothing to address fundamental problems like school violence, the third lowest graduation rate in Westchester County or the least healthy cafeterias in Westchester/Putnam.

      As usual there is some “free” upfront money which will then disappear saddling the district with yet another expense we cannot afford — this is what happened with the CILA Italian Program, the Museum at the High School, the Full-Day Kindergarten Program and now a Mandarin program which is a “nice to have” not a “must have”. In just the past year and going forward into the next budget, these “Free” programs have cost about $5mm which is, ironically, how much they are cutting from the budget.

      In the case of the Mandarin program, the district is getting $300,00 a year for three years. When the CILA Mandarin program is rolled out it will have a teacher and aide for grades 2-5. The cost of the teacher and aide is about $150,000. Personnel costs are 70% of the budget so you come up with about $200k per year for each grade.

      Do the math.

      At the end of year two we will have paid for the initial 2nd grade class and then 2nd and 3rd grade class in the second year. That comes out to about $600,000. The grant for the first two years is $600,000. So Year 1-2 is “free”.

      In year three the total cost will have been $1.2 mm and the last year of the grant will bring the total grant to $300,000. So after, the second year, grant and all, we are in the red on the Mandarin program.

      Fully rolled in year four the grant is gone. Total cost during those first four years is $2.4 million, the grant is topped out at $900K so we are in the red $1.5mm.

      You keep adding programs like this year in and year out, adding $1.5 mm here and $2.4 million there and pretty soon you are talking about real money, right?

      The district is still continuing to insist the first year of Full-Day K was “Free” because we got a $900,000 reimbursement for the cost of “conversion”. Not mentions is the $2.6mm for the 13 teachers they transferred to the program (they are considered “Free” because they were already working for the district as if somehow that makes them ‘free” — if you can figure that out let me know). And then there was the news that the state frozen foundation aid this year for all districts so we did not get ANY new money for adding all those kids to full-day K and that costs us an additional $1.3mm. That makes Full-Day K for the first 2 years another “Free” program that costs us $3.9 million.

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