In 1980, the State of Massachusetts recognized the limitations and threats of relying too heavily on expanding property taxes to fund our public education systems. Proposition 2 ½ was passed to limit the increases a town could levy through its property taxes each year. Named for the enacted cap of 2.5%, any town that needed to increase its levy beyond it could do so, but only through a town wide referendum. For the last 35 years or so, Massachusetts has tamed its property taxes and runaway school spending.
Rhode Island enacted our own, lighter version, of a tax cap. Unfortunately we chose 4% as our limit and waited almost 30 years to implement it. During the lead up to the cap, can you imagine what districts did? In South Kingstown, we ramped our baseline spending up between 6% to 12% each year despite losing about 100 kids per year from our enrollment.
The chart here shows how this played out over the last 2 decades. Beneath it are some bullets to clarify:
- Orange Bars are actual spending. Most of that data comes from this document. More detail is also available in our financial town reports found here.
- The Blue Bars are the simple modeling of what we might have spent if we simply bumped up our spending by ~2.5% every year since the 2000 baseline. That’s basically the real cost of living, inflation, or CPI increases that were experienced. According to the Federal Reserve, average CPI since 2000 has been about 2.25%.
- The Red Trend Line is a 5 year smoothed average. The slope of that trend is notable. When it’s flat as it has been for the last several years, comparable districts begin “catching up” with our spending excesses of the past.
- The Black Line is PK-12 enrollment data from RIDE. That steady decline is based on children born in South Kingstown and is expected to continue.
Had we simply mirrored our Massachusetts counterparts, our budget could be between $45 to $50 million, instead of the $64 million Pro Forma budget we have today. With our declining enrollment, we would have been able to manage that spending while providing inflationary adjustments to employee compensation.
The tax side of the equation is often the most visible and contested, but it is this spending side that really drives the trends. The budget cycle is very predictable and almost always loses sight of the longer term objectives. It is not unique to the public sector either. But the underlying assumption is always that last year’s budget was perfect, and next year’s must require an increase because of inflation. Plus we’ll need to grab a little extra because we’re losing money from the state. Sound familiar?
Suppose alternatively that we take a 10 year strategic approach. From a board level (Town Council or School Committee), it is not necessary to examine every general ledger account and predict what it might look like 10 years out. All that need happen, is for the approving body to take the long term vision and limit the spending increases. In our case, if we simply keep spending level, we’ll reach competitive levels in 7 to 10 years. And rather than weather the annual “Cut List”, we ask our operations people to do the “Keep, Stop, Fix” approach to all of our spending. When they recommend “stopping” something, listen and help them navigate any political fallout from such a recommendation.
The plan that was in place prior to the 2018 election created the framework to address the biggest factor limiting our ability to maintain and overhaul our facilities. The abrupt departure from the key spending containment elements (consolidating at the middle school and elementary school levels) of that plan inhibits our ability to fund the needed improvements to our physical structures. There is a very real argument that South Kingstown has a greater capacity to pay for these things as one of the wealthier towns in Rhode Island. But it always comes with a tradeoff. Do we raise tax revenue by selling off our pristine coastline for development? Do we ignore our forest management obligations? Do we force our seniors out of of town by pushing tax levels beyond their ability to pay? All of these and many more are the consequences of the decisions we make in our schools. We might argue their severity, but not their existence.
In upcoming pieces, I will show a comparison of a similar sized district in Massachusetts. Ultimately I will tie this in to our Facility discussion and why the single driving factor limiting our investment is our operating expenditure. In November, South Kingstown Schools jumped from a strategic plan to a tactical, reactive one. As such we’ll need to reconsider our major investment decisions.