Tactics Often Used to Form and Sell Budgets

The following is a resource that can be used to become aware of (and be armed to counter) tactics sometimes used by officials as they form and try to sell their proposed budgets.

1. Salaries account for most of the budget. In selling the budget, officials often say the salaries are fixed by contract. What they don’t say is salaries are fixed only if no turnover in staff is assumed. But turnover does occur. When it does, any staff member who leaves is usually replaced by a more junior hire that is paid less money. For example, replacing a teacher at the top of the salary scale with one at the bottom of the scale can save up to $35,000 a year. Typical staff turnover is 10%. For a system with 150 teachers, that means a turnover of 15 teachers. If only $10,000 were saved per departing teacher, the salary account would be over budgeted by $150,000. This might be acceptable IF the resulting surplus funds were returned at the end of the year. But the surplus is invariably spent on other items. Officials should be asked if the salary account includes any savings resulting from expected staff turnover. And, equally important, how does the budgeted saving compare with past turnover savings experience.

2. The salary line item in the education budget is often presented as one massive number. When pressed for details, one finds that it includes expenditures for substitutes, stipends, and overtime all items that are not necessarily fixed.

3. There are adopted budgets, amended budgets, and actual education budgets. Adopted budgets are those approved by the voters. Amended budgets are those reflecting internal transfers among the line items that are made near the end of the fiscal year. Such transfers apply surplus funds in one line item to other line items. Although, such transfers may sometimes be required, they often may simply be a way of making sure all available money is spent. Spending potential surplus funds impacts taxes for the next year because it inflates the baseline budget and reduces General Fund monies available. Actual budgets reflect the audited actual expenditures at the end of the year. Often, when proposing the next fiscal year budget, comparisons are made of actual budgets with amended budgets for the preceding year to demonstrate the accuracy of the budgeting process. This can be very misleading. The actual budget must be compared with the budget originally adopted. Further, when one or two adopted budget line items are found to be significantly under spent while many other line items are overspent (by about the same total amount), a warning flag should be raised because this means potential surpluses probably existed in the adopted budget and were spent.

4. It may be stated that taxpayers questioning the education budget are anti-education, and/or anti-children and/or anti-teacher. These are ludicrous statements. Most taxpayers are parents and grandparents. Taxpayers simply want to see pay linked to performance if at all possible. Taxpayers want to see open and honest dialog about how best to educate children and resent the perceived arrogance of an education establishment that has given us unsuccessful programs such as creative spelling, new math, no homework, open classrooms, and creative reading, team teaching, and collaborative learning.

5. It may be stated that taxpayers favoring controlled spending want to destroy the quality of life or have no vision for the future of the town. On the contrary, they simply wish to advance toward a rational vision effectively and efficiently.

6. It may be stated that taxpayers favoring controlled spending are just selfish old people.  Senior citizens who have paid taxes over many years and continue to pay taxes rightly have special concerns and have every right to have their tax dollars spent wisely and efficiently.

7. It may be stated that taxpayers favoring controlled spending are just being negative and offer nothing constructive. Those who never met a proposed budget they didn’t like usually define "constructive" as agreeing with their proposals, or at least not speaking out against them. The slightest hint of opposition to the establishment often leads to hysterical comments, personal attacks, and misrepresentations in public, in private and in the press. Constructive participation means providing the other side in the debate. Most elected officials are quickly captured by the establishments they are supposed to oversee in part due to trying to maintain collegial relationships with fellow officials. As a result their ability to resist spending requests and to question new proposals seems to diminish proportionally in relation to the time they have been in office.

8. When possible reductions in a proposed budget are being debated, the argument against such reductions will be offered. “But the amount of money that would be cut is only a few dollars a month, or a week, or a day.” The time increment quoted will be selected as required to get to the few dollar level. The counter is that over the years, these few dollars have added up to a tax bill of several thousand dollars each year and to well over a hundred thousand dollars in total.

9. It will be stated, “It’s for the children.” The bulk of the money at issue is not directly for the children it is for staff salaries and benefits.

10. Often education officials wont tell you where potential cuts will come from. Instead they claim, “This is a bare bones or maintenance budget.” This is usually done when there are built-in surpluses that they don’t wish to identify but which will be sacrificed (if forced to) by cuts to the budget resulting from Bd. of Finance action or referendum vote.

11. Or they may tell you that sports or some other hot-button item will be cut. This will be said if they think they can scare the voters. Usually, such cuts never come to pass because other sources of extra funds are found to exist in the budget.

12. It will be said that additional teachers are needed to avoid larger class sizes. However, when enrollment falls, layoffs are never appropriate. This philosophy guarantees that class size is always reduced; and that the school is always filled to capacity (with smaller classes). Therefore, when the next enrollment-increase cycle occurs, a new or expanded school is always the required solution to the overcrowding.

13. Class size benefits have not been conclusively proven. Over 1300 studies have been performed with varying results. Studies tend to show benefits when teachers are aware they are being studied. Some researchers say that the best that can be said is that “reducing class size offers the opportunity for improved results, but when teachers continue to operate in the same way, little or no benefits result.” See http://www.nber.org/papers/w6869 for additional details.

14. It may be claimed that the General Fund (surplus money received by the town) needs to be built up to protect bond rating. Money in this fund represents over taxation in one form or the other. Data show that there is little or no correlation between the size of the General Fund and the town’s bond rating. Other factors are more important, including Alan Greenspan actions on interest rates, taxpayer-controlled spending, and town historical fiscal experience. Also, State binding arbitration law states that General Fund money exceeding 5% of the budget is an indication of a town’s ability to pay for salary increases.

15. Budgeted medical insurance costs may be based on the assumption that all staff are married with x number of children. This may artificially raise this budget line item depending on the mix of staff present. This is not necessarily bad IF any surplus that results on the basis of actual experience is NOT spent elsewhere.

16. Data may be presented that only tell half the story. Providing the other half of the story so that the public is fully informed is one of the principal tasks for any taxpayer group. A few examples are given below.

17. It may be stated that teacher salaries are below average. This may or may not be true. Average teacher salaries are greatly dependent on the average length of service of the staff and the salary scale offered. A younger-than-average staff will have a lower-than-average salary for a given salary scale. However, the salary scale itself could be above average. Comparing salary scales provides a more accurate picture.

18. It may be stated that teaching staff costs per pupil are below average. This may or many not be true. Staff costs per pupil depend on the age of the staff, the pupil-teacher ratio and the salary scale offered. Again, comparing salary scales provides a more accurate picture.

19. It may be said that the taxpayers should be paying more because taxes per capita are lower than those of surrounding towns. Using tax per capita as a measure can be misleading if the towns being compared have significantly different business tax base.

20. It may be said that there is an impending teacher shortage requires significant increases in teacher salary scales to compete for qualified new hires. The salary scale is only one factor in the ability to hire new staff. Other community-related factors are very important. The best indicator of any pending shortage and ability to compete is the number of qualified applicants for a given position. It should be noted that if every town increased their salary scale in an attempt to gain a competitive advantage, there would be no change in the relative ability to compete - the only change would be higher salaries (and taxes) for all. Finally, should a teacher shortage ever materialize, it might be a good thing since it could break the certification strangle hold of the unions and, if all else fails, class size could always be increased.
21. It may be stated that dollars per pupil or dollars per capita are below average to imply that the tax effort being made by the public is below par. Spending is not the proper measure of tax effort. Better measures are spending in relation to the town’s income wealth or Grand List wealth. This means that the ability to pay must also be considered as well as the willingness to pay.

22. Dollars per pupil based on operating education budget (Net Current Expenditures per Pupil) may be emphasized, particularly if it is below average. This measure neglects expenditures for transportation and to service the debt incurred for any new school-building program. In addition, some towns may book keep certain education-related expenses (e.g. maintenance) under the general government part of the budget. All education-related spending should be considered. Finally, it should be noted that in the business sector having the lowest cost to provide a service is considered good. Only in the public sector is doing the job for the lowest cost is considered bad. If high spending were good, large districts such as Hartford, New Haven, etc. would be good since they spend the most per pupil.
23. It may be stated that test scores are above average and, therefore, staff deserves an above average rate of increase to the budget. This might be valid if the corollary were accepted, namely that below average scores were reason to reduce the rate of increase of the budget. Regrettably, the argument will be made that below average scores demonstrate the need to spend even more. However, it should be realized that towns are grouped by the State into different Education Reference Groups (ERGs) based on socioeconomic factors, not by how much they spend. Test scores within each ERG are largely independent of the amount of money spent. Test scores are driven by socioeconomic factors not money spent by the district. It is also important to note that test scores are usually quoted with respect to the ERG average. Thus, for example, Hartford scores can be said to be above their ERG average and still be poor in an absolute sense.
24. It may be stated that the Bd. of Finance has scrutinized all items in a proposed budget and is proposing only what is absolutely needed. In reality, that is impossible to do. There simply isn’t the time or the expertise to do that. Even if a requested line item is thought to be out-of-line, Board members cannot successfully debate the staff expert making the request. The expert knows too many details, knows the required jargon, and is a skilled advocate. And there is usually a vocal interest group supporting the expert’s opinion. The board member ultimately must either accept the expert’s position or fall back on some other philosophy or gut feel in making the final (and often arbitrary) decision. It is this difficulty that ultimately leads the Board to simply define an overall limit to the total expenditures. Setting such a limit is referred to as a top down approach to the budget. The Board will not necessarily tell the public on what rationale they base their limit or even admit that they have set a limit at all. But, rest assured, a limit is always set. That is why it is vital for a taxpayer group to have a rational and reasonable top down limit of their own to communicate to the voters. A top down budget considers total spending first and lets mill rate be a fall-out. Spending is always the driver of taxes and it is critical to get it right based on some rational, publicized philosophy that the public can understand and support.

25. Rankings may be cited to prove that the taxpayers are not making enough of an effort. Be aware that rankings are an extremely sensitive measure and are subject to potential abuse. They are used primarily for psychological impact. Rankings should not be used when a very small change in expenditures can make a large difference in ranking. To illustrate, consider 10 towns spending the following dollar per pupil amounts: $8950, 8940, 8930, 8920, 8910, 8900, 8890, 8880, 8870, and 8860. The average expenditure is $8905. The town spending $8860 dollars is ranked last even though it is only spending 0.5% less than average. Clearly saying that one is ranked LAST has a greater psychological impact than saying one is within 0.5% of average. Imagine the psychological impact a superintendent would have if he said, "We ranked last in spending but first in test scores" when in reality spending and scores were both very close to average. Taxpayers could equally abuse rankings by saying "We ranked last in scores despite being first in spending" when in reality the differences from average were extremely small.
26. The term mill rate is common but can be used confuse and/or to not stir up the public. Who normally thinks of their taxes in terms of total town property taxes divided by town grand list times 1000 times the market value of their property times its assessment ratio???? People relate to their tax dollars, but mill rate is a smaller number and has a smaller impact psychologically.
27. The published cost per year of new bonded projects often neglects interest costs and the likely added operational costs. These costs must be included for the public to be fully informed.