Dr. Harner - "Super Blogs" relating to budget pressure points

Super Blog

State bills could change how we fund schools

Posted by Bill Harner at 1/18/2017

Good evening!

Shortly after the gavel comes down on Monday to begin the next session of the PA State Legislature, I expect that PA Senate Bill 76 School Property Tax Elimination will be brought forward. Last year, the bill failed by one vote, 25-26 with the Lieutenant Governor casting the deciding "no" vote. Taxes are a burden for all of us! They are relative to what we earn (income tax), spend (sales tax,) and the value of our homes (property tax). It's even worse if you are a business owner because Pennsylvania has one of the highest corporate tax rates in the nation. Many businesses have left our state because of it. As a homeowner myself, I pay the full array of taxes like most of you. However, as the Quakertown superintendent, I have a fiduciary responsibility to keep the Board and community aware of the implications of what is out there that could put the district at risk.

Just the sound of this bill makes it popular! School Property Tax Elimination! The thinking is that it is expected to be an 'easy lift' for the Legislature. So what's the downside? Here it is: SB76 will virtually eliminate local financial control of schools and create an annual guessing game in the school district budgeting process. I believe this bill is short-sighted, especially for communities like ours, and in fact, for many communities across Pennsylvania. Before considering such a major shift in school funding, our elected leaders in Harrisburg need to make the 'heavy lifts' first, which they haven't done yet. They need to first solve the PSERS crisis, then start controlling expenses, reduce or eliminate unfunded mandates, and balance their own budget.

How is SB76 Property Tax Elimination suppose to work? The bill promises to "replace dollar for dollar revenue lost" to school districts - that's $15 Billion across 500 school districts. That's a lot of funding to redistribute, and a lot of money to send to the state in hopes that we get the same amount back! To eliminate property taxes, the Personal Income Tax (PIT) rate will increase from 3.07% to 4.95%, the Sales and Use Tax (SUT) will increase from 6 to 7% and expand to apply to more items, and the state will collect all that new revenue and send funding out to school districts, to include a cost of living adjustment. This fiscal year, Quakertown Community School District receives 25% of its annual revenue from Harrisburg. If SB76 is enacted, our state revenue will jump to 86% of the '17-'18 QCSD Budget - if we get what is promised. A big if! This reminds me of why social security is so far in the red.

What are the repercussions for Quakertown? One wrinkle is that school districts must continue to tax property owners for debt service. In real numbers, that is over $10 million of debt payments a year until the year 2032, when it declines precipitously until 2045. Any borrowing for new construction, e.g. building, renovating or upgrading schools would have to be approved by a community-wide referendum. Historically, that route does not work. Only two school construction referenda have passed in Pennsylvania since the implementation of the Act I Index ten years ago.

Let's put SB76 into context of past state level decision making. Over a decade ago, Governor Ridge and PA Legislature voted all state and public school employees, including themselves, a retirement increase (PSERS and SERS). It became a seriously underfunded mandate, with the burden falling on school districts. This year, 34% of every dollar of salary must be paid into PSERS by the taxpayers. That means the cost is passed on to you through property tax increases. It also resulted in cutting school programs and people as PSERS obligations crowded out other spending. For example, in Quakertown, the PSERS expenditure line item grew by a factor of 10 from what it was - 1% to 10% of our budget or $1 million to $11 million, over the past ten years. During the same time, the district cut staff by over 80 positions.

If you remember last year, the Governor and the Legislature could not come to terms on the state budget. Districts across the state received only half their state revenue until nine months into the fiscal year. Many school districts that receive 50% or more of their revenue from the state had to borrow money to make payroll - further passing more burden onto taxpayers! Exacerbating the problem in Harrisburg is that this year's state budget was not balanced - it was underfunded by $1 billion. School boards are required to balance their budget every year by law, the state is not. So, PA began the year with a shortfall and now, half way through the fiscal year, revenue collections are running behind by $600 million, which makes that gap even bigger.

As a homeowner and district leader, who is fairly well versed in public finance, I am troubled with SB76. There is no doubt tax reform is needed badly! Let's do it systematically! Put "first things, first!" We must address the 'heavy lifts' first - especially the PSERS crisis. Before we simply hand over $15 billion of our hard earned money to leaders in Harrisburg, we should expect them to get their own financial house in order. Building trust is important! The consequences of not approaching tax reform thoughtfully and in the right order could be devastating to public schools and our economy throughout the Commonwealth. I encourage everyone to follow this issue carefully and share your thoughts and concerns with your elected officials. I thought you should know.

Bill Harner
Superintendent, QCSD

wharner@qcsd.org, @billharner

Contact your PA State Legislature

Super Blog

SB76 Further Explained

Posted by Bill Harner at 1/28/2017

The SB76 School Property Tax Elimination discussion in Harrisburg and across Pennsylvania is picking up lots of steam! As I do my very best to be as transparent as possible with you so that you may draw your own conclusions on issues, I shared my SB76 blog with PA House Representative Staats and Senator Mensch last week. I have an excellent relationship with both legislators! They always make themselves available to discuss education policy issues.

Earlier this week, Senator Mensch sent out a survey regarding SB76 and other possible state fiscal priorities to those who receive his newsletters. I hope you take advantage of his initiative to solicit constituent opinions on the topic. Also, please take the time at the bottom of the survey to sign up to receive his periodic newsletter. Constituent involvement makes democracy work - let your voice be heard here, in Harrisburg, and in Washington!

Before you answer his survey questions on property tax elimination, I request you read on so that I may share a few more details with you about what I called in my previous email the "heavy lifts." These are things that the Board and I believe are essential for Harrisburg to become more fiscally responsible with our precious taxpayer dollars. These things should be addressed before any further consideration of eliminating local school property tax in favor of increasing state revenue collection (taxes) by $15 billion, or 50%. The school board discussed this important issue at last night's meeting. Their thoughts were captured accurately by the Intelligencer newspaper reporter.

The three most significant "heavy lifts" that drive up our expenses that Harrisburg has control over are PSERS/SERS retirement systems, the "prevailing wage," and unfunded state mandates.

I have shared with you in several previous blogs about the PSERS - Public School Employees' Retirement System - issue. It is the Board's #1 priority to be fixed by the state. This article puts the PSERS crisis for the state, school districts, and all taxpayers into context. Across the state last year, local school districts paid a net $2.8 billion into the PSERS system for their employees - the state paid the other half. That's 20% of the total property taxes raised last year across Pennsylvania. As a reminder, PSERS costs in school districts are driven by state mandates, not by local decisions.

The second priority is the elimination of the prevailing wage. Prevailing wage dictates what districts pay for labor costs for school construction and development projects. Quakertown Community School District, and other school districts in Bucks County are assigned to the Philadelphia region for its PA mandated prevailing wage. The dividing line for our region is to our northern boundary with Southern Lehigh School District, which is assigned to the Lehigh Valley region. What a difference a few miles makes! By being assigned to the Philadelphia region, QCSD pays significantly more in labor costs. How much more? Approximately 25% markup! If QCSD was assigned to Lehigh Valley region, QCSD would have saved approximately $20 million on the $70+ million QCHS Renovation project. Instead, we pay top dollar, not competitive labor costs for our local area. Over the next decade we have new schools to build and school renovations to make. This construction will be much more cost effective if prevailing wage legislation is eliminated.

The third priority is to minimize the number of underfunded and unfunded state mandates that our local taxpayers end up paying for. An excellent illustration is charter school funding. Up front, most of our Board members have stated their support for charter schools - as have I. I love the competition. But, charter schools lack accountability to a publicly elected board and the funding formula is catawampus! For example, when a Quakertown student attends a charter school, we pay the average QCSD per pupil cost of $12,000. If the student has a disability, the money we send to the charter school is double, or $24,000. A student living in Lower Merion attending the same charter school would pay double what we pay. It's all based on what school district the student is from. The irony of the charter funding formula in PA is that vast majority of our charter school students attend a cyber charter school, when QCSD has its own cyber program that costs approximately $3,000 per student. As the Auditor General Eugene DePasquale of PA has pointed out, PA has the worst charter school law in the nation, and we pay a lot for that lack of accountability and transparency.

Thanks again for reading. We started a school district webpage with relevant information on SB76, including contact information for all of our elected officials. We ask that you get involved and share your opinion on this issue one way or the other. We look forward to your feedback and hope that you will take a few minutes to complete Senator Mensch's survey.

Have a super weekend!

Bill Harner

Superintendent, QCSD

wharner@qcsd.org, @billharner

Super Blog

Results of 2/9/2017 School Board Meeting

Posted by Bill Harner at 2/11/2017 (excerpt)

Before the Board meeting, we had a special Finance Committee Meeting. Most of the Board was in attendance. The major question that Finance Committee Chair Chuck Shermer asked of the Administration at the last Board meeting was why is there such a significant jump in projected expenses next year over this year - about $8.1 Million more. The tight budget to expenditure in '15-'16 column came about because of the unforecasted purchase of the 126 acres on West Pumping Station Road. The significant budget pressure points are PSERS, added debt service for completing the high school renovation, federal mandated special education services, contractual salary increases, and the need for a few new federal and state mandated positions. The Committee was provided a detailed summary of these pressure points. At the conclusion of our presentation and their questions, I was directed to bring the number down through "extreme austerity." That means controlling expenses even more this year, and seeing what we can do without next year. There is a lot of good information posted on our '17-'18 Budget. If you have any questions about the details, please ask.

Later at the Board meeting, five high school juniors made excellent presentations regarding their personal thoughts about "Advanced Placement and Class Rank Reform in QCHS." The Board and I were incredibly impressed with their research and presentation skills. As I mentioned in a blog a few days ago, there is conversation at the HS about stress resulting from the increased opportunity of students taking rigorous courses and competing for class rank. It was an excellent opportunity for the Board to learn first hand from our students' experiences and have insight into the social/emotional culture of QCHS as student performance increases. The students shared that they came out of middle school under the Standards-Based Grading system, and it was a huge paradigm shift with greater expectations required for success, and requiring better study habits and skills. I shared with them that we have been working on developing those habits and skills already in our elementary and middle schools. It will take us several years to get everything in place. Over the next few months, we will be looking further into the issues.

Following the student presentations, the Board received a presentation from the Administration on the Class of 2016 Graduate Survey results. The response rate from the Class of 2016 was 26% and almost all the respondents were attending college. Most had taken at least one Advanced Placement course, which is the board goal for students attending college. 80% of the respondents said they were expecting a 3.0 or above for their 1st semester, 75% said they were either Good, Very Good, or Excellent in how well QCSH prepared them for college, and 28% are majoring in a STEM field. This is a significant increase in each of these areas over previous graduate surveys. What was interesting was that most students had to take at least some coursework online, and that Canvas was the most utilized Learning Management System in college. As you know, that is our LMS, too. In my Quakertown student meetings and parent emails I am told that Canvas is not universally used by our faculty. On Monday, at my meeting with students, they told me that it would greatly reduce their stress if teachers made a syllabus available which included course requirements, due dates for projects, and dates for quizzes and exams. So we will make sure we improve in that area.

Again, thank you for reading. I hope that you have a wonderful weekend. The Board and I will be holding our Mid-Year Retreat tomorrow, and I will report on it shortly.

Bill Harner

Superintendent, QCSD



Snow Day Blogging: Celebrations and Looking Ahead

Posted by Bill Harner at 3/15/2017 (excerpt)

Facilities Plan and the '17-'18 Budget: Our problem - we have a community developed comprehensive facilities plan, and no money to fund it without compromising program. And while we wait to figure out how to afford to renovate or replace old school buildings, it's expensive to keep old equipment going, like boilers. The sum of the parts (costs for repair), is much greater than the whole. The Board is in a Catch 22, and still staring at a $4 million budget deficit for next year. Last Thursday night at the Facilities Committee Meeting, then later that night during the Board meeting, I was directed by the Board to bring back a "clear path" to accomplish both bringing the budget into balance AND moving forward to meet our facilities needs. To make it all work will be a game changer! I am charged with bringing forward a plan next week that will maintain effectiveness (keep programs), but increase efficiency (lower costs). I expect the possible solutions to be a paradigm shift for many.

Thank you for reading. Please continue to share your thoughts, ideas, suggestions, and criticisms with me. I routinely share all of your input with the Board leadership. It helps us get better at what we do!

Bill Harner

Superintendent, QCSD



Super Blog

Budget Proposals include a hearing to close Milford for 2017-18 school year

Posted by Bill Harner at 3/23/2017

Good evening! At the QCSD Finance Meeting earlier this evening, and subsequently at the Board Meeting tonight, I presented the Board of School Directors numerous options for closing the structural deficit projected for the '17-'18 Budget while addressing our many and significant facilities needs. Unlike the federal and state government, school districts are required by state law to approve a balanced budget every year. Doing nothing to close the deficit would be a disastrous option! The strategy to use the fund balance to balance the '17-'18 Budget will double the problem for the '18-'19 Academic Year. It would posture the district for serious program reductions. It is simply not an option! Meanwhile, we have students attending school in old, substandard buildings, with no solution in sight for more than a decade.

As I shared with you before, the Board is considering raising taxes to the Act I Index for next year. In deference to our taxpayers, they declined to use Exceptions under Act I and to restructure our debt service payment to free up operating dollars to help us bring our budget into balance for next academic year. At the Board's last meeting on March 9th, they directed the Administration to come up with more options for them to consider to close the deficit, which is approximately $4.7 million. The Board's guidance/direction includes:

  • Not compromising student programs - academic, arts, and athletics,
  • Freeing up operating dollars to pay for Phase I of the Community Facilities Plan and complete necessary annual capital maintenance.

The presentation that I made to the Board tonight - "Budget and Facilities Options." can be found at this link. It includes eight options for the Board to consider. A few of the options require near immediate decisions while others may be extended out over time.

As always, we would like your feedback, thoughts, and criticisms. As you consider this presentation and process some of your first thoughts, please know that the Administration's purpose is to optimize the financial resources that we are provided to advance student achievement and improve college and career readiness, while taking care of our people. QCSD has a wonderful faculty and staff that make things happen, each and every day. I am incredibly proud of what they do. So, we must be mindful of our team of professionals to sustain the positive motion and direction that the district is going!

Tomorrow, in faculty meetings across the district, principals will be talking to their teams about what we know and our objectives. There are a lot of thoughts, concerns, hurt feelings, and disappointment to share. No doubt, it is a lot to digest, especially if your school building is directly affected by one of the options. Nevertheless, we will work collaboratively and transparently through the decision process. We hope that you participate in this collaborative process.

Again, I am looking for your feedback. I will share it with the Board and the district leadership team.

Most respectfully,

Bill Harner

Superintendent, QCSD

wharner@qcsd.org, @billharner

William E. Harner, Ph.D.

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