The following was written by Steve Willson in a comment, but it needs to be spread more widely:
A Quick and Easy Guide to Figuring Out If Governments Are Wasting Your Taxes
I want to point out something to all the good people who comment on this site: what I do is actually pretty basic.
Steve Willson at a McHenry County College Board meeting.
You can do the same thing I do, and I encourage you to do so.
When you look at a government and you wonder, “Do they spend a lot or a little”, here are a few simple calculations anyone can do.
First, go on their web site, pull up their annual report, and find out how much they spend in total.
That number’s not hard to find, even if you’ve never looked at a government financial report before.
Now go to the Census Bureau web site and find their population. (Easy for a county or a city; harder for a school district.)
Divide expenditures by population to get a per capita number.
That by itself is sometimes helpful, but being able to compare it with other governments is a bigger help.
So, second, do a quick web search and see if you can find a survey or a report with averages.
In five minutes, I found a survey of Illinois conservation/forest preserve districts that provided me with figures on other districts, plus averages.
If you can’t find a survey, visit a few web sites for other similar governments and get their expenditures and populations.
Your very own informal survey doesn’t have to be exhaustive to give you a pretty good feel for what’s high and low.
(By the way, don’t be enamored of averages — look at the minimum.
(MCCD spends twice the average but four times what neighboring districts spend. If our neighbors are happy with their districts, why is MCCD spending four times what the lowest cost district spends?
Crystal Lake Community High School
(Or consider schools: D155 spends more than $14,000 per pupil while another local area high school district spends only $10,000 yet gets essentially identical results. Why does D155 spend 40% more than that district? Why do they pay their teachers about 50% more than the average salary at the other McHenry County high school districts? You can get huge amounts of data on schools from the Illinois Interactive Report Card at iirc.niu.edu.)
Third, ask yourself “Dollars per unit of service”.
Again, look at the school district example above: dollars per student.
Crystal Lake Library
Or look at the Crystal Lake library.
They have a budget of roughly $4 million.
Their annual circulation is about 1 million items.
In other words, it costs them about $4.00 to circulate one item.
Is that a lot?
Well, 30% of what the library circulates is movies, and RedBox will circulate the same move for $1.50.
So, yes, I think that’s a lot.
In fact, for what they spend on movies, they could buy every family in Crystal Lake a subscription to NetFlix!
Answering that kind of question is harder with a government such as MCCD.
It would require knowing how many people use each of their sites and the total cost of each site (amortized cost plus maintenance and service).
That’s not something you can do from the outside very easily.
But it is, of course, exactly what our government administrators should be providing to both their board and the public.
Now, if the government is proposing a big new project, the fourth thing you ask is “Dollars per unit purchased”.
For example, the Crystal Lake Library wants to build a 40,000 square foot addition for about $28 million.
That’s $700 per square foot!
Typical retail space in Crystal Lake goes for about $100.00 per square foot.
But suppose the new addition only cost $4 million or $100 per square foot.
Would it be worth it?
Well, ask yourself this: will you borrow more books if they build an addition?
If not, then even at a reasonable price, the new space is a waste.
In other words, it’s the same kind of obvious questions any business person would ask if they were spending their own money and not the taxpayers’ money.
For example, if you owned a restaurant and your table were only 60% full at the peak times of each day, would you build an addition?
So,
- total expenditures per capita;
- a few comps;
- cost per unit of service; and
- dollars per unit purchased for big new projects (e.g., cost per square foot for a building; cost per lane-mile for a highway), plus some comps.
Four numbers, three of which are pretty easy to get.
No math more complicated than division, and not a lot of time required.
Now, does that tell you everything?
No, of course not.
Does it tell you exactly where to cut?
No, of course not.
That’s the level of detail the board should be asking for.
But these few numbers, quick and easy to generate, provide sufficient information for you, the voter, to have a pretty good idea if a local government is profligate or not.
This is an absolutely brilliant way to coldly analyze government and its expenditures.
Steve, along with others, tries very hard to give the public rubrics by which we may measure any unit of government’s performance.
If only we could measure everything by pure analytics like math…
The intangibles of government are how it is incorporated, managed and the people who are involved in it.
The structure of how a government is formed and its goals are important.
The comparison to Red Box is a bit unfair in several respects.
Red Box holds no property and owns no buildings outside of their corporate center.
Yet even if we compare our library’s distribution of movies to Family Video it is still an unfair comparison as the library holds a more diverse inventory, has a responsibility to have better structures and air handling systems to protect the diverse inventory (some have clean rooms to protect items of great historical, societal or cultural importance which is part and parcel of why The People desire libraries), has higher costs in the other facets of the inventory(first edition books, rare book collections, hardback vs paperback novels…) accounting for a far higher cost than the movies themselves, has a higher cost of property ownership as private businesses tend to offload property and its management to a separate corporation(limiting and compartmentalizing liability and costs), has a higher cost of management due to inefficiencies of having no way to defray administrative costs across broader geographic areas than the one their building serves and governments (the Crystal Lake Library in particular) do not offset costs of construction with the sale of other buildings and property.
The People also have a say wherein their priorities lie.
If The People, through inactivity, stupidity or actual civic minded duty, make a decision to allow the State or the County to put them into indentured servitude so more land may be managed by the government than by private citizens in any given region then The People may do so.
It is the duty of those with skills and knowledge, like Steve, Mark, Susan and many others who comment here, to lead in their communities and turn the local government around.
However, we must not make the mistake of believing the priorities and structure of government can be compared to private business.
We must also not make the mistake of forgetting we are nation governed by The People through a representative government which oftentimes has the psychology of Cybill.
Math is beautiful and simple which makes it an attractive tool.
It is not the only tool.
The priorities of our community are simpler than our state or nation but we all can’t agree on every issue all the time just because the math seems right.
Sometimes tradition, history, culture, society, emotion, psychology, health, happiness and a whole list of other human wants and needs balance the math.
My accountant will never run my life.
He makes his recommendation and I make my decisions.
I love him but I am the visionary of my life and set my own priorities just as The People, by their collective assent, set the priorities our representatives should follow.
Hard a pill though it is to swallow, we are a diverse society and it is possible we may have functional morons running it at any given moment.
It is a grave responsibility our Founding Fathers gave us.
We must be an activist people or lose our freedom.
Keep fighting Steve!
Just consider math may not be the only rubric by which a great nation and community may be measured.
Priest, I appreciate your sentiments. And you are correct, my tools cannot address such issues as goals or priorities.
My goal was much simpler: to provide people with quick, easy, useful tools to tell when governments are way off base.
When one government spends 50% more, or 100% more, or 300% more than other governments that do exactly the same thing, people should know that.
And governments should explain why, and they should have a tremendously strong explanation or they should cut spending.
That doesn’t happen: Governments NEVER provide unflattering comparisons for the voters.
In my 35+ years in municipal finance, I have found that most governments, and especially special purpose units of government have two common traits:
(1) the people who run them think every other government is stupid and wasteful; and
(2) they think THEIR government is special and different.
And the Crystal Lake Library is a prime example.
It is run by, and I quote the library’s own newsletter, “a passionate library advocate” and “a champion for a new Library facility.”
In other words, zealots and cheerleaders, not taxpayer watchdogs.
If the library wants to offer a selection of children’s movies and classics, I’m okay with that.
They don’t need seven copies of the ‘tween romance Twilight.
They don’t need the torture movie Saw.
They don’t need the violent video game Grand Theft Auto.
On the side of the Boston Public Library, the first publicly funded municipal library in America, an inscription reads, “The Commonwealth requires the education of the people as the safeguard of order and liberty.”
It doesn’t read, “The library shall be a bloated, taxpayer subsidized competitor for video stores.”
As for cost, I fundamentally disagree with you.
I think the comparison with a profit making business that offers exactly the same service at a lower price is exactly right.
You are correct, there are some specialized libraries that have unique and historic collections.
That is NOT what the Crystal Lake library does, and so it cannot justify the Crystal Lake Library costing almost three times as much as a private business that does the same thing.
Nor can it justify the Crystal Lake Library costing twice, per family, what the Woodstock Library spends, twice what the Cary Library spends, twice what the Rockford Library spends.
Are the citizens of Crystal Lake twice as happy with their library as people in Woodstock?
I think not.
And the new addition they propose would require a 40% increase in their budget, and which point they will cost almost THREE times as much as neighboring libraries.
The addition they want is outrageously priced.
Yet even if it were cheap, why do we need it?
Will we all borrow more books if the library is bigger?
No.
So the addition fails its most fundamental function.
For meeting space?
When did it become the job of the library to offer meeting space?
Heck, why not hotel rooms, too?
Besides which, by their own numbers, the meeting rooms are booked only a fraction of the time.
Circulation is also down and as we move to eBooks, the library’s need for space will diminish further.
And Crystal Lake itself is almost completely built out.
Population is no longer growing like it once did.
Their arguments hold as much water as MCC’s did, or the park district when they built a putt-putt golf course and promptly put the local putt-putt golf course out of business.
So, yes, I agree with you, my tools are not directly about priorities, and people have to make decisions.
But dollars and “sense” should be part of those decisions, especially when the dollars are in the form of higher taxes.
And when any local government is spending huge amounts more than other governments doing the same thing, and a multiple of what private businesses charge to do exactly the same thing, then they are not meeting high priorities.
After you have the basics, don’t stop.
In the case of school districts, there is a hidden state subsidy.
It’s the state contribution to the TRS pension fund.
Ditto for the state contribution to the TRIP / THIS retiree healthcare fund.
Looking beyond current year expenditures, there are more hidden costs.
The bond debt service (bond repayment schedule).
There is a trick often played with the bond repayment schedule.
Sometimes the repayment schedule is not like a fixed rate mortgage.
Sometimes the repayment schedule increases every year.
There are sometimes good reasons for an escalating bond repayment schedule.
Other times it’s just to give a lowball figure to taxpayers, not explaining their payments will increase over time.
Moving on.
Another hidden cost.
The unfunded pension liability.
Ditto unfunded retiree healthcare liability.
That’s money that should be in the pension fund today, but is not.
To figure out your taxing districts unfunded pension liability, requires knowledge of which pension funds your taxing district contributes to.
There are 18 pension funds in the Illinois Pension Code.
The taxing district may contribute to one or more of those 18 pension funds, or none at all, circumstances vary.
After you figure out the unfunded pension liability, you still likely haven’t figured out all the costs and all the money taxpayers have been obligated to pay.
Why not?
Because of actuarial insufficiency past and present.
Here is a great article on the topic.
Society of Actuaries
In the Public Interest
Putting the Public in Public Plan Actuarial Work
By Tia Goss Sawhney
http://www.soa.org/Library/Newsletters/In-Public-Interest/2014/july/ipi-2014-iss10.pdf
If the document does not open, it may be because you do not have an Adobe Reader, which can be downloaded for free from Adobe.com, search “Adobe Reader” in the search bar on the Adobe website.
The Senate Bill 3341 “clarifying” that McHenry County Conservation District can issue non-referendum bonds is what prompted this latest transparency conversation.
Looking at the McHenry County Conservation District (MCCD) website, and the McHenry County website since MCCD falls under the county, scant financial information is found about MCCD.
So here McHenry County State Legislators sponsor and vote for a bill to “clarifying” how MCCD can obtain more taxpayer money, yet without a call to MCCD or a FOIA we don’t know how they are spending the money they are already obtaining from taxpayers.
The MCCD financial information such as audited financial reports, salary and benefit information, etc. should not have to be requested by the taxpayer.
It should be posted on the MCCD website.
For whatever reason financial transparency laws that apply to school districts and other government bodies do not apply to the conservation district.
And using the excuse the Conservation District falls under the county doesn’t fly because the county doesn’t have the information on its website either (or if it does it’s not too easy to find).
Hmmm… Excellent arguments all around.
They seemed to travel a bit so I’ll try to address them.
To be clear, I wasn’t espousing a particular policy position(yet), merely offering another perspective as is my wont.
It is my belief this type of discussion helps to suss out the strengths and weaknesses of any given position and offers us all the best chance of successfully moving forward as a community and culture.
The difference in funding between governments being a good way to tell if one is bloated vs another being well run: Yes. And no.
Of course this is an analytic to look at when evaluating performance.
I may argue cultures throughout history were made fun of for spending insane amounts of time, energy and money on some thing or another.
Thank God those cultures continued with their endeavors or we wouldn’t have the Wonders of the World or any decent historical science whatsoever (anthropology, archeology, linguistics, literature…).
The United States, as a nation, spent inordinate amounts of money to win the Space Race.
What has this offered our society?
Seventy years of leading the world in technology.
Comparative monetary policies of government may not be bulletproof by itself.
As it pertains to local jurisdictions this type of analysis is a little clearer and more useful but still not the only tool to use as priorities and needs in different areas may vary radically.
Your experience in municipal finance is unassailable and is my exact experience from other perspectives.
The people in all levels of government are naturally myopic, arrogant and believe what they are doing is “for the good of the people”.
This is absolutely the reason The People need to use your tools to begin critically thinking about what we even need government to do.
Critical thinking is what we need as a society.
Circling back…
The advocate for the library and its building is only a salesperson.
The Taxpayer is the potential buyer.
There is a whole jurisdiction south of here completely up in arms over their library offering unrestricted access to the internet, including porn.
The library is making the argument for free speech.
Into what have our libraries degenerated?
The library at Alexandria was burned and it was a loss for the people of the world forever.
Whole cultures worth of study and information was lost to the ages.
Do I think burning this library down south or the Crystal Lake library would net the same loss?
Thankfully, no.
We have diversity of information sources and media which hopefully saves the world from another catastrophic loss like Alexandria.
However, you are fully within your rights as a citizen to question your area library’s spending priorities.
A few tweens may argue over the cultural relevance of Twilight.
A couple horror aficionados may argue how Saw began a renaissance in horror offerings.
I don’t know about the reasons for the choices and, frankly, I don’t care as a matter of course.
In the specific I don’t believe a video game killing hookers and stealing their money is what I want my taxpayer dollar going toward but I also know who is on the library board and I can have a discussion with the library administrator if I believe there is a sociopathic leaning in my public library which lays waste to our common culture rather than furthering it.
Comparing private business to governmental business: If the economic comparison is to have any teeth then the comparison must be apples to apples.
Or at the least pears to apple pears.
Libraries perform, and have historically performed, a wide array of functions which are available in pieces to the general public through private means but aren’t all encapsulated in one environment, without cost.
Can you afford any book you please through your Kindle?
Sure.
May I rent any Kurasawa film I wish through Netflix?
Of course.
May everyone do this?
No.
Therein lies the rub with private/public comparisons.
What do we value as a society?
A culture?
A community?
In any unit of government we must ask whether what they do furthers our society and culture.
Can private industry do the job government is trying to do better without detrimental effect to our society and culture?
“The Commonwealth requires the education of the people as the safeguard of order and liberty.”
Is this our common value?
Does this mean the same thing to everyone who reads this?
Clearly not.
Some clearly value porn in the public square to the point of losing their jobs and being jailed to protect it.
Some value totally inefficient use of space vs a 70% or above usage and build accordingly.
Would you do this in your home or business?
Of course not.
Fight this.
Argue as passionately for it as the advocate to the MCCD or the library or the MCC addition or the stadium or the sports facility or whatever the boondoggle du jour is in the public square.
I don’t mind zealots and cheerleaders.
They move the conversation forward.
There have been more than a few on this blogs comment section and they are, at the least, offering a case study in how not to argue your position.
You offer excellent arguments against government competing with local business.
I’m a little concerned about wholesaling the entirety of government due to the excesses of a few morons.
I believe strongly in an activist public with government transparency and ruthless oversight of all public government.
FYI. Around fifteen years ago there was a huckster running around trying to get a new library built by the Post Office.
He wanted some outrageous amount of money with no assurance the current library building was inadequate, unable to be improved to serve the need or sold to help offset the cost of the new library.
After close questioning by a few leaders in the community this effort died a quiet death in spite of the urgent and apparent need with dire consequences should this avenue not be pursued.
Today’s effort will either justify itself far better or will die the same death due to people in the community like you who ask the tough questions.
I believe we all value the library and its functions within our culture.
I believe we all value public conservation of land.
I think my favorite argument of yours lately was, (something like)
Therein lies the horror show of democracy or a representative republic.
The damnable people who don’t agree with me about what the proper taxpayer funding of or proper role of government truly should be.
Good thing there are still a couple smart people left in the world with whom to discuss these issues.
Agree fully?
Not likely.
But it is the discussion which betters us all and I, like you, have watched my positions evolve through the excellent and intelligent engagement I occasionally find.
Priest, I like you.
I think we would have some enjoyable philosophical discussions about the proper scope of government.
And I appreciate your historical comments.
But at some point, the rubber has to meet the road.
I believe in a clear, understandable, and objective approach to decisions about government budgets because budgets ARE policy.
My approach starts with the question, “What SHOULD this particular government be doing?” and then moves to “Are they doing those things efficiently and effectively?”
Too many bad decisions hide behind high sounding platitudes.
How do these platitudes help us decide how much to spend on one function or another?
They don’t.
They are put forward only to stifle dialogue and investigation, in some cases by those of good if misguided intentions (“beware men of zeal”, to quote Justice Brandeis), too often, however, simply by those with a vested interest.
We must oppose such people.
We must demand clarity and the publication of real measures of productivity because as money is not unlimited, when we overspend on one task, there is less left for another, an inevitable opportunity cost.
In short, we MUST make decisions on what to do, what NOT to do, and how much to spend on each priority.
And not to make a decision is to make a decision.
Within my experience, the big decisions occur to the left of the decimal place, not the right.
When governments spend 50%, 100%, 300% more than they should, we are not discussing subtle differences of opinion, we are discussing wholesale fraud on the voters.
Is the comparative level of government spending a perfect metric?
No, but it is highly indicative, and right a lot more often than it’s wrong.
It tells us where to start looking.
And it is, most importantly, a useful tool for voters, for taxpayers.
Specifically because it is simple, it puts power in their hands.
If you can clearly articulate a superior approach, I am all ears.
Budgets are not policy just like the accounting department doesn’t run the company.
Policy is dictated by the the visionary’s willing to sacrifice to see the vision through.
In the founding of our country there is the original vision.
Throughout our history we’ve had many in leadership at all levels of government and business who have pushed this nation further than any nation in the history of the world with money and without.
We have only ever been constrained as a culture by our ability to dream and then work toward this dream. Sometimes using money.
Most times using American ingenuity and sweat.
In all discussions of how to right the wrongs of government people intelligently say “Follow the money”.
A while back Susan, in a hopeless moment, asked us all how we can stop the train of a completely out of control government at all levels.
Her conclusion was to starve the beast to kill it and start over again(by not giving the government another dime).
The decision tree does seem to always come down to the money.
It seems an attractive place to look for answers to the question of whether governments are working well and efficiently.
This, however, is not the only question.
I believe your question of “What SHOULD government be doing?” is far more relevant.
Mission creep in governmental duty to The People has been continuous since the beginning of governments.
There is a momentum to their voracious desire for more power deriving from larger budgets.
Madigan has written government growth into the Illinois Constitution.
Our Illinois government has taught the world how to give the appearance of freedom while stealing every man, woman and child’s future for generations.
It is brilliant.
It is corrosively evil.
Pull the government back from insinuating itself into every facet of our lives and the money will take care of itself.
What’s a better approach to analyzing government?
Money is a fantastic start.
Comparative analytics between similar government bodies or a government body and private industry are useful.
The difficulty is none of this money trail following ameliorates the hopeless cry which escapes the lips of so many I talk to, very much like Susan, “What went wrong with my government and how do I fix it?”
We still live under a representative government.
They like to act as though they are an oligarchy and this present day governmental interpretation is a fait accompli but there is weakness in any centrally controlled government.
Marry the rubber meets the road money analysis with the vision to propose a better path for government which makes it serve The People rather than enslaving The People.
What’s the superior approach?
Engage with the representatives.
Engage with their bosses, The People.
Teach them history, tradition, American culture, money management, sound decision making processes, logic, values…
No one I know is one dimensional.
Money is only one indicator and one way to give information.
You are a mathematician and this form of logic reaches you.
It reaches me.
But it really is beyond many people to understand so they “don’t care”.
That is code for they don’t want to admit the conversation isn’t reaching them.
We must use all the educational tools at our disposal and pray one of them wakes up the average person enough to get them to realize they are enslaved, body(look at police over reach) and wallet.
Nothing is the superior approach.
All avenues to educate should be pursued and then pray to have engaged something more than a monkey who’s only form of political expression is to fling poo.
50% 100% 300%
We are discussing wholesale fraud on the voters.
(My) Hopelessness is not a strategy.
By commutative property neither is hope.
My rationale for conceding hope is personal experience that nearly every human in (governmental) position of control over publics funds expresses either righteous entitlement to spend as they do, or helplessness to reduce expenditures
(citing pressures of fiduciary responsibility under strictures created by PTELL).
Without limits to the amount of prey(taxpayer funding), predators (those who feed on taxpayer money) will flourish and multiply.
Prey will be consumed at an accelerated rate, and at some point die off to the point whereby their diminution begins to adversely affect the predator population.
My belief is that we have reached that point of death spiral.
MCCD and also Woodstock District 200 are borrowing in excess of statutory ratio caps(maybe other taxing bodies also, I have only looked at these two so far).
Rather than exploring spending reduction strategies, they are constantly asking for more money and skirting the spirit of the law to get it.
So what is the suggested strategy?
I never meant to advocate “starving ” government to the extent of “not giving another dime”, and was sure that what I wrote did not imply that, but I must have been inarticulate . Let me try to state more clearly what I meant to say: replace the word “starve” with “enforce a healthy and sustainable diet”.
As far as “not ‘giving’ more to the government”, that is impractical and illogical and not something I would suggest or think possible.
What I advocated was plowing under our homes.
The value of our homes diminishes sharply as taxing bodies extract annual payments which are wildly higher than for other homes all over America, so that is our only chance to retain any value (survive predation).
The vacant lots may be taxed, but vacant lots require few services provided by taxing bodies ( no humans requiring schools, libraries, or hiking in the forest).
Let the remaining predators fight amongst themselves for ascendancy of rights to feed on the diminished pool of funds, and decrease to the point whereby prey may return to populate the region.
Overall analysis and strategy, in my opinion, should start NOT with the subjective and debatable question : “What SHOULD government be doing?”
But with this objective and precisely definable quantity: What (property) tax rate is the maximum sustainable rate in order to not destroy the taxable population?
Priest, when you give one department twice as much as another department, you have made policy.
Financial metrics are used to evaluate charitable causes too.
Such transparency helps one determine if their charitable contributions are being put to good use.
Good time for a reminder of this Rauner transition team memo.
To: Governor – elect Bruce Rauner
From: Tim Nuding, Budget Director for the Transition
Date: December 30, 2014
Re: Sins of the Past and Dishonest State Budgets
The following practices and obstacles deserve special mention:
– Borrowing to “Replace” Revenue
* Potential Repayment of Interfund Borrowing – $650 million.
* Pension Obligation Bond Debt Service Payments – $1.4 billion.
– Ignoring Additional Balanced Budget Requirements
– Giving Away Unaffordable Benefits and Kicking the Can D own the Road
* Payments on Unfunded Pension Liabilities – $4.6 billion
Read all about it.
http://makeillinoisgreat.com/wp-content/uploads/Memo-Sins-of-the-Past.pdf
The fact that those commenting and writing on this issue is an outgrowth of a system – which we all support, through our tax dollars and many other resources – which educated us all is not a point that appears here.
Libraries help educate people.
So do teachers.
In this discussion, I don’t see a lot of thanking or recognizing this simple fact and certainly I see no recognition for the people who actually do such work.
Funny isn’t it, since everyone here is reading and writing.
Did those skills emerge by some magic?
Or…by math?
Nope.
They were fostered by….educated people.
And a system that delivered that education via schools and libraries.
Keep taking money away from these institutions and watch what happens….crime rates soar (oops, more property values down the drain), unemployment and poverty rates climb… all while people piss and moan.
Oh and nobody will read blogs or respond to them…because they cannot read.
Now if you will excuse me, today is a “day off” for me and many other public servants due to weather.
But if people really knew what I and thousands of other educators like me are REALLY doing today, they might halt their hate-filled rhetoric.
Hint: I’ll be snuggled up with materials I procured from my local library.
In other words, I’ll keep feeding my mind by thinking, writing, and reading.
At What Cost?
How is it intellectually honest to advocate that people paying the bills should be characterized as ‘hate speakers’ when scrutinizing the use of taxpayer money?
How many children could go on to college but will not be able to afford it when the K-12 District extracts an amount from each household budget far in excess of peers across America?
Education is only education when Cost is considered. When it is inflicted by the narrow will of the few in charge of administering it, and given ability to extract all funding by law, then it is not education it is indoctrination.
Here’s some education about public sector pensions.
Bury Pensions Blog
How did State / Local Plans become underfunded.
January 6, 2015
https://burypensions.wordpress.com/2015/01/06/how-did-statelocal-plans-become-underfunded
That blog is by John Bury, an actuary.
Here’s another actuary talking about public sector pensions.
Society of Actuaries
Putting the “Public” in Public Plan Actuarial Work
July 2014
By Tia Goss Sawhney
https://www.soa.org/Library/Newsletters/In-Public-Interest/2014/july/ipi-2014-iss10.pdf
Another way to figure out how the government is spending your money, is to unravel the Illinois public sector pension scheme, assign those costs to taxing districts, figure out how that transfers to your property tax bill and income tax bill and fees and all the other government sources of revenue, and how that compares to your social security, 401K or whatever retirement plan you have.
Here’s some education about your child’s performance in the Illinois public education system based on the ISAT tests.
You were mislead.
The Illinois State Achievement Tests (ISAT’s) were dumbed down to over the years to hike test scores so parents and taxpayers thought their kids were improving more than they really were.
Here’s some education about college readiness.
When is the last time your child’s teachers or administrators or anyone talked to you about how well your child is tracking to avoid remedial level classes in college?
Many parents and kids don’t have a clue until the college tells them they need a remedial level class.
Educators who know how to interpret test scores know this long before the ACT test scores are revealed.
In fact, there are high school teachers who will tell you that to a large extent a child’s destiny is already determined by the time they reach high school.
Yet we had fluffy ISAT scores in elementary and middle school which were counter productive to a true picture of student academic success.
And yes we all know there are kids who don’t want to learn.
There are also kids who do want to learn.
There are parents who were and are being told their kids are doing “just fine” and low and behold that means the kid is tracking to remedial level classes in college which means the classes have to be paid for and taken but don’t count to college credit because the college has determined the child should have learned that knowledge in high school.
So you have been mislead about public education current and future costs, you have been misled about public education performance, and you have been mislead about public education preparing kids for college.
And if there is any profession that is more appreciated than teachers, we would like to hear about it.
Maybe fire or police.
So what’s the deal.
If they are so appreciated, why do some think they are not appreciated?
But what happened behind the scenes.
Teacher, fire, and police unions conspired with politicians to deceive the public to hike their pay and benefits.
White lies.
Nice.
So how teachers think they are not appreciated is beyond me.
Is it because they think a blog comment or newspaper article represents society at large?
Is it because the unions tell the rank and file they are under appreciated and under attack in their union newsletter articles and union meetings?
Is it because they are playing public sector workers are playing victim so people will feel sorry for them?
Is it because a few parents or citizens complain?
The fact of that matter is the public sector pay and benefit schemes were allowed to perpetuate in no small extent due to the public’s trust of teachers, fire, police, and other public sector workers and to a much lesser extent the politicians.
People in general don’t want to hear public sector workers are deceiving the public.
Well maybe an individual worker is not deceiving the public, but the unions and politicians certainly did deceive the public.
How about this.
Why does the individual public sector worker not educate the public about the pay and benefit schemes.
Well for one they benefit form the pay and benefit schemes.
And two they may be ostracized by their peers.
Maybe the individual public sector worker doesn’t know what is happening and just believes the spin being told.
Which gets right back to education and how to figure out if the government is wasting your money.
Re: “Why does the individual public sector worker not educate the public about the pay and benefit schemes.”
Some of us do this.
In schools.
And in publishing books that can be found… in libraries.
In fact, many of us do this work for those very reasons.
I cannot speak for others, but I know a LOT about the mischief that goes on in my school.
I speak up, I speak out….and not a lot changes.
Frankly, I am not empowered with decision-making authority in my institution – which my tax dollars pays for. (Remember? Public servants also pay taxes!!)
I also pay with my time and energy and expertise.
Oh, and I do not make a living wage in my profession, either.
Over 70% of instructors at schools like MCC are part-time, no benefits, no job security.
That situation is only getting worse.
Kudos to those reporting on such stories.
So yes, by all means please continue to educate yourselves and look into waste.
But you could also ask those of us on the front lines…we’ll tell you stories that will make your eyes roll back into your head.
You could do this instead of telling us we *should* feel appreciated.
Or not.
It’s up to you.
You could also try doing our jobs to see what it’s like.
Oh wait, oops.
Many can’t.
Because they’re not qualified and lack expertise and credentials like professional teachers do.
I’ll be sure to try to feel more appreciated when I’m not otherwise too busy babysitting your children for hours on end each day, listening to uneducated opinions, and/or cleaning up the intellectual messes that others have passed along to us.
You mentioned that 70% of the instructors at institutions like MCC are adjuncts.
Are you an adjunct?
More specifically are you an adjunct at MCC?
No one is attacking teachers. No one is attacking any person.
Attacking a person is intellectual dishonesty.
It is the system and execution of governmental authority which is under scrutiny.
Not being attacked, but being asked to defend specific behavior which is proving harmful to all citizens under its rule.
We are similar in feeling unappreciated: we all work hard for what we have and don’t want to be spoken to-or-about disrespectfully. We don’t want our contribution to society diminished or exploited.
Many commenters here are spending exhausting amounts of time reading, think, writing about difficult subject matter: CAFRs, bond issue statements, State statutes, Board meeting agendae and minutes, records of land sales, public pension actuarial documents, etc….
Our comments may be opinions but most commenters here cite sources (or have in prior postings)supporting those opinions.
And the culmination of (I would guess hundreds of) hours of work by the author of this post is a guideline for readers to start with in using critical thinking to analyze government spending.
We are in a 3%-4% property tax county compared to a 1.25% national average, which is really hurting many of our neighbors and fellow citizens.
That is a very serious problem for every resident of this County.
We should all use our educations, and our moral discipline to examine WHY we are spending so much more relative to other counties in America, and figure out ways to stop spending so much.
The alternative is to say loud and clear to all the people who can’t afford both property taxes and food, or both property taxes and money for children’s’ college, that they can just leave town if they don’t like it–and sell their house at fire sale prices, because no one wants to buy property in a county with 4% property taxes..
I personally do not enjoy walking on a forest preserve path, or reading a library book “free”, knowing that it has cost people their homes.
I personally think it is obscene to operate a school budget such that it comes at the expense of every household’s ability to save money for the children’s higher education.
It would be very productive if we could collaborate to discover systemic flaws and work to discover solutions.
MTea1 – I think most people appreciate teachers, libraries and public servants in general.
The obligatory salutation to over-worked, underpaid and underpaid teachers may have been left out.
MTea, you are wrong on two counts.
First, there has been no “hate-filled rhetoric” here, just a discussion of how much is enough. To equate questioning costs with hate is itself hateful.
Second, you speak exactly to my point about platitudes not equally arguments.
I think we should have libraries.
And I support publicly funded education.
Neither of those statements is the same as saying that more is always better.
When you find identical cars at two dealers, you buy from the one with the lower price.
When you are considering hiring a painter, and two are indistinguishable in terms of ability, you hire the one who charges less.
So here we are saying when two open space districts appear to do the same thing, and one charges quite literally four times what the other charges, there is legitimate reason to ask the higher-taxing district to explain why.
And, similarly, when one school district spends 40% more per pupil than another district less than ten miles away, and their scores are essenitally identical, it is legitimate to question why.
When one school district pays its teachers 50% more than another district less than ten miles away, it is legitimate to ask why.
So, please, MTea, explain why that is wrong.
We will all be looking for your response.
I guess it doesn’t count if I assert that I feel attacked, eh?
Let the pity party begin!
I can just go back to reading Twilight and playing violent video games to round out my day…
Want to check my facts?
It’s not about me personally re: MCC (again, more attack?).
Perhaps a FOIA can support my statements? (Cal?)
By the way, why don’t I model something about appreciation beginning with Cal Skinner.
I do not usually agree with his premises, but the fact that he reports and allows for such forums on this blog is to be applauded.
So little of that is happening in our world. We need more of it.
Thank you, Cal.
I’ll support Priest’s earlier assertions (which I forgot to thank him/her for, so thanks) as my final comment with one addition: math is beautiful, symmetrical, balanced.
Life is not.
Life is not math, and neither is learning.
All arguments reducing learning (and life) thusly are deeply flawed.
But they make me march into my classroom with more conviction than ever because there’s something more to teach.
And learn.
So thank you all.
How could such a conversation really continue in an impactful way?
Is anyone seriously interested?
Anyone care to rent out meeting space at CL library and see what happens?
It’s been fun, and I do mean that.
But…these are just arguments in net space.
What will it take to change?
Can we all agree that it is needed?
And desired?
It is absolutely stupid for the public to support the expansion of Library kingdoms.
Clear out all the old books, etc. that are never used. The world is moving into e-books, which must scare librarians half to death.
How will they justify their jobs in the future?
Why are libraries even in the movie/DVD business? Certain documentaries?
OK.
All the entertainment movies?
Not a necessity public service, and also unfair competition for movie rental businesses.
What’s left?
Redbox. Netflix.
Look at Woodstock’s failed library building and the unnecessary re-roofing cost that the library district must bear, far earlier than it reasonably should have.
What corners were cut when the building addition was built?
I love being able to rent a $29 book, read it, return it and get another, for nothing. (Not really for nothing, but for a little in property tax.) But is it a good deal financially?
MTea, you are correct: asserting that you feel attacked is not evidence.
And I am having a difficult time figuring out where you argue with the point that when two governments charge radically different amounts for the same service, there is something wrong with citizens asking for justification.
Please clarify.
Oh, and as for your last comment, MTea, some of us are trying to change things.
That’s why I wrote my essay: to show voters there is an easy way for them to find government waste, to empower them.
That’s why I was involved in the campaign to stop the unnecessary expansion at MCC, which ultimately resulted in a state law being changed. (Thank you, Rep. McSweeney.)
And why I worked on MCC board members’ campaigns and County Board member campaigns.
That’s why I raised the alarm about the ridiculously expensive Randall Road expansion project.
That’s why I have written letters to the editor about the library addition, and successfully encouraged others to do the same.
That’s why I rebutted the Herald’s editorial for extending Amtrak to Rockford at a cost of $400 per ticket when there are nine buses a day for $22.
And I know at least some of the other people on this site are also active in civic affairs, investigating budgets, sounding the alarm, and helping on campaigns.
These are civic minded folks, MTea, and to denigrate the comments of the people here as “just arguments in net space” is an insult to all of them.
I would be interested to meet at CL library ( or better yet, restaurant with liquor license) to discuss particulars of the extraordinarily high property tax rate in McH County, and what can be done to arrest the parabolic rising rate curve.
I WAS a teacher, and in actuality a librarian!
Kudos to Steve and his “friends”.
I agree 150%!
Especially on the library.
(It should be renamed entertainment center. It is certainly not a library.)
MTea1, our tax dollars are not for you to “babysit” our children, they are for you to educate them.
You discredit yourself and earn no respect by expressing your role as that of a babysitter instead of an educator.
Further, your statement
doesn’t make you any more special than one who has different credentials.
This is arrogance.
You could not do my job, nor do I expect you to.
If you cannot make a living wage in your profession then look for a new position or a new career.
And as Steve stated, please do not associate questioning with hate.
A thriving democracy depends upon it.
What kind of teacher at what kind of employment status (full / part time / # of classes taught if part-time) at what kind of facility (public schools, private school, community college) in what geographic area (Chicago, suburbs, downstate rural, Wisconsin) does not make a living wage?
Full-time teachers in the Chicago area K-12 system typically start out at $40 – $55K plus benefits.
And please tell us about the problems instead of just telling us there are problems.
Be sure to read the articles by the actuaries about the pensions.
They are eye openers.
Will someone please explain ‘Capital Appreciation Bonds’?
1. Why would a school district issue Capital Appreciation Bonds in the amount of $13,886,940 which require a total payback of $63,700,000 after 20 years?
(In the same year of that issue, other bonds were issued for $52,600,000 which require total payback of $67,908,950 after 27 years).
2. Who makes the money selling these bonds?
3. When will the public be made aware of the balloon payment due or spiked payment obligations?
4. How is this debt accounted for in calculating total debt obligations of District relative to borrowing caps?
(Is this considered a debt obligation of citizens of $13,886,940, or $$63,700,000?
There are many ways to educate yourself on salary issues for teachers:
Follow through on the FOIA to MCC.
Ask specific questions about numbers/ratios, pay bands, etc.
At the very least, they should be able to tell you about hiring trends at MCC (number of part-time faculty vs full-time).
Check out MCC’s adjunct faculty contract.
Charts at the end of the page show matrices for calculating pay.
Section 9.1 of that contract clearly spells out how adjuncts at MCC are limited in terms of work hours: https://mccafa.wordpress.com/new-contract-201112-201415/
Check out this impressive report about nationwide trends for college instructors: http://www.thechangingfaculty.org/#sthash.LNFcrHHS.dpuf
Simply Google “adjunct college instructors.”
These sources only speak to college teachers, but it will give you a start.
You can also ask a librarian.
Or heck, while you’re at it, ask a teacher.
Surely we all know neighbors, family, friends, co-workers, or have kids in the schools.
Ask real questions of these people, and ask a lot.
Suggestions include:
What is your work day like?
Do you really get summers off?
Do you ever feel disrespected?
Do you ever get angry e-mails from parents who complain about your work yet have never once seen you do your job?
Do you like your principal/administrator?
Have you always liked your bosses in these jobs?
More importantly, do you respect that person and feel s/he respects you as a professional?
Happy reading!
What school district did this?
I’m not sure I understand the question, Cal. If you are referring to my suggested list of questions to ask of teachers, my answer would be “most or all in my 10+ years of working as a teacher.” But I cannot speak for everyone. Get teachers talking and you’ll learn a lot. You may also feel sick to your stomach (I’m just warning in advance here). Personally, I have experienced all of those things and more in multiple districts where I have worked – public K-12 and higher ed, private higher ed, you name it. It’s everywhere.
http://patimes.org/poor-decision-worse-capital-appreciation-bonds-school-districts/
Capital appreciation bonds are one of the many types of bonds.
They can be issued to build capital assets such as buildings.
Steve Wilson is in the municipal bond industry so it is best for him to address many of these issues first as it is his exprtise.
The public will not be made aware of the bond debt service schedule (repayment schedule) unless you make them aware of it.
Bond debt service, and underfunded pensions, and Illinois legislators and Governors making their own bogus actuarial rules are fying under the radar.
Keep up the good work.
She is looking into Woodstock district 200.
Mtea1
I hear what you are saying, and will try to research this.
Maybe you would post some of the issues which are most relevant to taxpayers, quantified in dollars?
Certainly a comparison of salary+benefit remuneration for high level administration juxtaposed against poor remuneration for rank-file would raise my indignation even higher.
Also, thanks for staying with this in the face of …adverse conditions.
Cal, Lakewood TIF had better not try to stick new residents’ children created by their annexation into Woodstock District 200. We cannot subsidize more students at the cost-per-student and debt load incurred by this District 200 Administration. If the TIF creates new housing in Dist. 200, that raises the EAV (from zero to whatever the homes are valued) and that allows Dist 200 to borrow more and escape the borrowing cap) (like MCCD, Woodstock District 200 has now borrowed in excess of statutory maximums. Raising EAV will allow them to sell more bonds, incur more debt.)
The numbers I’m finding …I’ll come to Jan 13 meeting, in case there are reporters there, rather than just salivating developers and municipal rulers.
Thanks for your support, Susan. I like your line of thinking here, but as I am not best qualified to answer such questions (as they relate to MCC in this case), directing such issues to MCC board members may yield answers you are looking for. I say this because it’s my understanding the board is privy to such data (often, teachers and staff are kept in the dark about this even when we ask and ask and ask)- you can imagine how well that sits with (tax-paying) faculty/staff. Many of simply do not have much time or energy to look deeper into these issues because we’re, ya know, doing our jobs; often, our jobs are also threatened when we do so. So we all need to work together if things are going to change.
Adverse conditions are what teachers are used to. But your support is appreciated.
Expose the issues you know about commenter.
The ISBE Teacher Service Record has the pay data 2002 – 2012 I will send it to you Susan for Woodstock tonite or tomorrow.
The rank and file in public k-12 schools are well paid.
Part time instructors at community colleges are not as well paid.
Some part time instructors at community colleges have full time careers and just supplement their income by teaching a college class or two, or teach because they enjoy it.
Openthebooks.com has salary data for MCC under state colleges and university’s.
Openthebooks also has snapshot spending reports for local school districts.
Capital Appreciation Bonds are also known as Zero Coupon Bonds.
Normal bonds pay interest every six months and principal at maturity.
CABs compound every six months and pay all interest and principal at maturity.
Let’s take a simplified example using annual compounding.
Bond 1 pays 5% per annum for five years.
Year 1 $5.00
Year 2 $5.00
Year 3 $5.00
Year 4 $5.00
Year 5 $105.00
Bond 2 pays 5% compounded annually for five years.
Years 1-4, $0.00
Year 5 $127.63
Why do municipalities use CABs?
To kick the can down the road.
Excuse me, I mean “to spread debt service out”.
Suppose you have bonds coming due over the next ten years.
You sell CABs maturing in years 11-20.
Voila, no increase in debt service for 10 years, yet you, as an elected official, get to spend money today!
Why was there such a large discrepancy between principal and total payback in the two bond issuances in Susan’s example?
So how do we compare Capital Appreciation Bonds in the amount of $13,886,940 which require a total payback of $63,700,000 after 20 years
to:
same year of that issue General Bonds: $52,600,000 which require total payback of $67,908,950 after 27 years.
Intuitively it looks like I’d rather have $52 million today and pay back $68 million in 27 year, rather than: get only $14 million today and pay back $64 million after 20 years.
I know the value of money decreases each year going forward, but that also applies to calculating value of the traditional bond repayment.
Susan, maybe list some more details about those bond here.
Whatever you think might be relevant.
School district CUSIP 581158
Official Statement of latest bonds issued: General Obligation School Refunding Bonds Series 2014, (about $35 million).
debt service schedule (statement) pages 222, 223.
Date of Issue June 1 2006: Amount of Original Issue :$52,600,000
Total of all payments due thru 2023: $67,908,950.
Date of Issue June 2 2006: Amount of Original Issue : $13886940
Total of all payments due thru 2026: $63,700,000
J.P. Morgan, John D. Rockefeller and Albert Einstein are all reputed to have called compound interest the eighth wonder of the world.
At 5.00%, after fourteen years, the original amount doubles; after 28 years, it quadruples.
You compare CABs to regular bonds using the interest rate at which they were sold.
Regular bonds sold at 5.00% yields and CABs sold at 5% yields have the same present value: whatever the issuer got today.
However, I consider CABs to be bad public policy for the reason noted above: they allow office holders to sell debt today, spend the money, and hide the cost for many years, i.e., until they’re gone.
It frankly has a lot in common with underfunding pensions.
Steve does it provide a mechanism to evade tax cap (statutory max borrowing ability pegged to EAV)?
Also, the CABs show interest rate 8.5%?
So Susan you will want to add the interest rate to your example above.
And what is the interest rate on the other bonds?
Interest rate changes, 8% 2014, 7.5%2016, 4.45%2018, 5.25%2021, end date 2023.
Balloon principal payment in 2022 higher than other years.
Principal paid 2013-2023 total: 49450000 of 52600000 original issue.
( since I’m reading this from the 2014 official statement of new bonds, I’m not seeing prior years payments? So there must have been payments of interest and a little principal between 2006-2013, to account for part of big discrepancy. Should have caught that before, sorry.)
I need to look at official,statement for 2006 bonds.
Just started.
Interesting comparisons. our EAV is lower now than in 2005, the school tax levy has increased 50%, and the total school debt is higher now than then (including that new 2006 bond issue for building.)
Tax rates were of course much lower in 2006.
MCCD shows up in the overlapping debt section, with $86 million.
Record it all on a spreadsheet and keep asking questions.
The goal is to consolidate the information and present it to the public in the easiest possible to understand format.
And to create a process that can be replicated by anyone to leverage resources.
There are thousands of taxing districts in Illinois each one which should be subject to this same scrutiny.
Noone else we know of is presenting this information so no need for apologies.
It is a marathon not a sprint.
Great job.
To that point, look on the school district website under business office, finance, administration, board,FOIA, public documents, those are the most likely locations to see if there are any presentations from the districts financial advisor to the board, You can also try Google search.
PMA is a common financial advisor to school districts.
There are others.
If you cannot find such a presentation, call or email the business office asking for it.
If they claim the financial advisor has not given a presentation to the board in the last 5years, that is highly unlikely.
In a school district the size of Woodstock, it is common for the board to get at least one update percyear from their financial advisor.
If the district asks what you are looking for, you are looking for any presentation from the financial advisor to the board or administration in electronic format, preferably searchable electronic format, not a non-searchable image format.
A phone call is more personable, but depending on the district, they may for whatever reason not give you the information you are looking for.
FOIA they are required by law to give you the information.
The taxing district may require you to FOIA the information, or may unbeknownst to you until you receive the information turn your request into a FOIA.
Taxing districts are all over the map in how they handle informal requests for information.
You are not required by FOIA law to tell them why you are looking for information, but the obvious answer if you choose to respond to such a request is you are a citizen wanting to better understand the finances of the school district.
Better Government Association has good information on its website about FOIA, and Citizens Advocacy Center in Elmhurst is also helpful if you run into FOIA questionsand roadblocks.
T
The financial adviser may also provide letters, emails, other documentation to the school district, over and above a presentation.
Just think it through what kind of information you are looking for, as it does not make sense for them to spend any more time on the task than is necessary.
But be sure to ask for electronic documents, as there can be charges for paper and who wants paper anyways.
There was a new FOIA laws enacted recently, and it applies to how frequently you can request information without getting charged, when charges apply for electronic documents, more.
Be sure to specify preferably searchable documents, who wants non searchable.
If a tax district gives one a problem saying one is asking for too much information, have a friend make the request.