Follow the Money ...

Dear Mayor Dwight C. Jones, Robert Bobb, Members of the Mayor's Advisory Task Force on the RPS Budget,  Members of Richmond City Council,  Dr. Yvonne Brandon and the members of the City of Richmond School Board:

In the hope that this information can be used to help improve the schools for Richmond's children, I am forwarding to you a cost analysis of RPS  researched by John R. Butcher, a Richmond attorney and former chemistry professor at Hampden-Sydney.  Mr. Butcher's expertise in number crunching and translating educratese helped me understand the budget process and proved invaluable during the three terms I served the City of Richmond School Board [2002-2008].

During that time, thanks to Butcher's help, I made it my job to understand the budget.  I asked hard questions and expected coherent answers.  When I discovered that RPS was not filing for the medicaid/medicare reimbursement for medical and administrative services provided to our students with disabilities, I asked why not?  I was told by RPS administrators that it was complicated and not worth the effort.  I checked it out and discovered that the state of Maryland was filing for an average of $800-plus reimbursement, while Virginia was barely getting back $5 (five) dollars per child.  Since that time, millions of dollars have been reimbursed to RPS and to DMAS.

I share this story to illustrate that you must pay attention to the numbers that you see in front of your faces as well as the ones you don't see.  Please take a moment and read Butcher's analysis of RPS costs below. I trust you will find some useful information that will be of value to you.

Respectfully,

Carol A.O. Wolf

The Cranky Taxpayer

Last updated 12/08/11
Please send questions or comments to John Butcher

The 2009-10 data on the Education Department Web report the total disbursements for each school division.

In terms of the total disbursements (corrected to remove payments to and from reserves, payments to upgrade or construct facilities, and debt service, the latter of which we are told Norfolk does not pay from the school budget) and the end-of-year ADM, we spent $3,525 per student more than the state average and $2,743 more than Norfolk. 

Division$/ADMv. Statev. Norfolk
Norfolk $ 11,928 $     782
Richmond $ 14,672 $  3,525 $    2,743
All $ 11,146


Notes: "ADM" is "average daily membership," which is educratese for the average daily enrollment.  This VDOE report uses the end of year number.  The disbursements in the table here are 2009-10 totals divided by the ADM.  The "All" number is for all school divisions; it omits the Governor's schools and other regional programs.
You might well ask why I am using 2010 data when writing this five months past the end of the 2011 fiscal year.  The answer is VDOE will not post the 2011 data until about next March.  Please be my guest and ask them why it takes so long.

Multiplied by our ADM (21,466), that difference calculates to $75.7 million in disbursements above the state average (and $58.9 million above Norfolk).
 

Explanations Please!

How shall we explain the very high cost of the Richmond system?  It turns out that, even if we correct for all major differences between Richmond and Norfolk (and, to an extent, the State), about $51 million of excess Richmond school expense is just that: Excess.  The data (and a string of audits) suggest that Richmond is wasting that very large amount of money.


Follow the Money
Let's start by looking at the categories in the State report.  Here are the Richmond and Norfolk expenditures by category (with debt service, contingency, and facilities removed), expressed as percentages of the State average disbursement.
Note: The total disbursements are the day school expenditures (administration, instruction, attendance & health, pupil transportation, and O&M) + food service + summer school + adult education + facilities + debt service + contingency reserve, if any.  See the footnotes to the State's Table 13 for the details about these categories.  The numbers above omit facilities, debt service, and contingency reserve.
Richmond's costs are well above average for every category except administration and transportation; our costs are extraordinarily high for summer school and for other instructional programs (mostly preschool programs).
If we recast the data in terms of dollars, we see attendance, food, summer school, and adult ed. to be relatively minor players, with the excess costs of instruction, other ed., and O&M predominating.

Excess $, Millions
NorfolkRichmond
Admin5.8-0.6
Instr.12.750.2
Attend.-2.23.1
Transport.-8.0-2.9
O&M1.57.3
Food1.91.6
Summer Sch.1.01.0
Adult0.70.5
Other Ed.11.215.5
Total24.575.7
Restating those data in a graph:
Most of that "Other" category is Head Start and other preschool spending.  In the context of the current debate about funding public preschool education, it would be interesting to find out what, if anything, Richmond is getting for the extra 15.5 million dollars.

Salary Differences
One source of these excess costs might be instructional salaries.  Ours, however, are lower than the state average.
PrincipalsAss't. PrincipalsTeaching PositionsAll Instr. PositionsDist. Wide Instr.
Norfolk   $  92,547 $   68,799 $  46,862 $49,222 $   45,740
Richmond $  93,845 $   72,538 $  51,756 $50,935 $   51,548
 State  $  92,043 $   75,624 $  52,840 $53,206 $   48,009

Note: The State defines (fn 3) "all instructional positions" to include "classroom teachers, guidance counselors, librarians, principals, and assistant principals."
Versus the State, multiplication of the $2,271 difference by our 2,243.5 instructional positions shows a saving of $5.1 million from Richmond's lower salaries. 
Last year there was an interesting anomaly in the salary data: The "District-Wide" salary is for "division-wide technology instructors and instructors in programs such as summer school and adult education."  That is, teachers.  One would expect the district-wide salary to be near the average salary in the division for classroom teachers.  For Norfolk and the State the division-wide salaries were, in fact, lower than the average teacher salary.  But in Richmond, the division-wide salary was $3,540 higher than the average for all instructional positions and $5,341 higher than than the average salary for teachers.  How many of Richmond's expensive bureaucrats do you suppose were masquerading as division-wide instructors?  Indeed, the district-wide excess over the state average, $8,090, suggested that Richmond was concealing ca. $1.6 million worth of administrative salary as "district-wide instructors."
This year, in contrast, Richmond's district-wide average is just over $200 lower than the teaching positions average.  Could it be that somebody at RPS has been reading my analysis and now they are hiding those bureaucrats somewhere else (such as the larger "instruction" category)?

Number of Teachers
As to the state average, another source of excess cost is number of teachers.  Here are the State's numbers per 1,000 kids:
Division Principals and Ass't Principals   Teachers  Guidance Counselors and Librarians Dist. Wide Instructors Total Instr. Positions
Norfolk  3.3183.295.16.47117.43
Richmond4.62875.328.72117.57
State3.5776.664.722.71104.27
Compared to the state average, we have an extra 13.3 instructional personnel per thousand, i.e., 305 for the school division.  At our average salary of $50,935, that calculates to $15.5 million in extra cost per year. 
Notice that we have 3.2 times the state average number of district-wide instructors.  We saw above that in Richmond those folks last year were paid some $5,300 per year more than the average teacher, while state-wide such folks were paid some $5,600 less.  This year, suddenly, we have as many district-wide positions but the salary is slightly less than the teachers' average.  Do you suppose somebody is juggling the numbers to hide those expensive bureaucrats?

Corrected for Salary Difference and Number of Teachers
Applying these corrections to the cost differences, we obtain:

CategoryXS v. State
Gross Excess75.7
Salary Diff.5.1
No. of Teachers-15.5
Net Excess65.3
That leaves $65.3 million in excess spending unaccounted for.

Special Education, Poverty, and Geography
We often hear that special education and poverty are major contributors to Richmond's higher costs.  It is difficult to come by numbers to quantify that so I turn to SchoolDataDirect, the now defunct data service from Standard & Poors that was supported by the Gates Foundation.
S&P calculated adjustments to spending on core operating activities to account for poverty, special education, and geographic factors.  On the 2006 data, here are their numbers
Core Spending, $/kidCore Spending AdjustedFactor, %v. State
Norfolk $       8,400 $        5,00060%0.7%
Richmond $     11,181 $        5,92753%-5.8%
State $       8,598 $        5,05959%

The difference in the adjustments is 5.8%, or 9.9% of the State correction.  In short, on core educational spending, SchoolDataDirect calculates that Richmond is 9.9% more expensive to run than the State average (and 11% more expensive than Norfolk).
What we are doing here is broad-brush approximations, so let's apply the 9.9% to the total expenditures, after correction for the differences in salary and number of teachers:

CategoryXS v. State
Gross Excess75.7
Salary Diff.5.1
No. of Teachers-15.5
Net Excess65.3
Cost Adjustment-6.5
Corrected XS58.8
After these adjustments we are left with an excess in our school budget of some 58.8 million compared to the state average (recall that this does not account for disbursements for facilities, debt, or contingency).  (If we were to apply the 9.9% to the gross excess, it would reduce the corrected excess to 57.8 million).  Until the RPS can explain where all that money is going and what we are getting for it, there is no reason at all to increase the school budget.  To the contrary, these data make a good case to cut the budget by at least $58 million.

O&M
Richmond often claims that its infrastructure is larger than Norfolk's, reflecting Richmond's "small school" policy.  Indeed, there are 106 principals and assistant principals in Richmond but only 110 in Norfolk, although Norfolk's ADM is almost 50% larger (33,322 v. 22,926).  


Richmond has never demonstrated any educational benefit from this relatively larger number of schools, however.  And they've been right slow to do anything about the excess4% of the capacity in elementary schools and 19% in middle and high schools
The empty seats in the Richmond system suggest that much of Richmond's extra infrastructure is wasted space.  Thus, much of Richmond's extra cost for infrastructure probably is wasted money.
In any event, Richmond's excess expenditure for O&M is $7.3 million.  Even if all that is justified, Richmond is spending an excess $51 million.

The Bottom Line:  $51+ Million Gone Missing


Most of the $51 (or $58) million extra spending relative to the state average must be in those categories where Richmond vastly outspends the state average: Instruction and "Other" educational spending (gross excess $65.7 million).  The 09-10  budget (pdf, ~1 MB download) shows about $6.8 million in grant income for the Head Start program, which would fund just over a third of the excess "Other" activities.  There is no information to show that we are getting any value for that money or for the remaining $8.7 million excess expense of "other" instruction that apparently comes out of local and state taxes.  In any event, the largest pools of unexplained expenditures are in the instructional budgets and those should be the first places to look for savings. 
Without a zero based budget, it probably is impossible to find the waste in the instructional categories.  


Doubtless that is the reason that the City Auditor's forays into the RPS budget have targeted the low-hanging fruit in the administrative operation: In June, 2007, the City Auditor released an audit that identified potential savings of $16.7 to $19.8 million.  About 20% of that ($3.4 to $5.3 million) was in non-teacher instructional staffing; most of the rest was non-instructional categories (notably custodial outsourcing and vehicle replacements).  In April, 2008, the City Auditor released an audit that found a further $6.7 million of waste in the RPS' purchasing and accounts payable operation.  A December 2008 audit concluded that RPS fleet maintenance contract lacked provisions that would allow RPS to make necessary cost control and other operational decisions.  A February, 2009 audit contains a four-page list of deficiencies in the Schools' IT program, including an absence of monitoring procedures that would assure that RPS was receiving proper value for its IT budget.  An August, 2009 audit of RPS's grants administration found that the lack of proper monitoring of grants poses a "major risk."  If the auditor would look at the incompetent (or worse) expenditures for ADA compliance (see the discussions here and here), he would find still more waste.  Even so, the (very rough) estimate here suggests there is lots more waste to be found and that the instruction budget is the place to find it.
Before Council gives any more money to the schools, don't you think they should demand to know exactly where all of that extra money is going and what we are getting back for it?
The now defunct S&P website at Schooldatadirect.org had two measures of the educational return for expenditure.   First, they calculated the average test performance per $1,000 expenditure.  Their "RoSI" index, adjusted for geographic costs and for student needs (populations of economically disadvantaged, special education, and English language learners) for Norfolk was 14.4 and for Richmond, 11.8 (2007 data).  They also reported the index the other way, as cost per unit of performance.  Again adjusted for geography and student needs, Norfolk has a "PCI" of 70 while Richmond is 21% more costly at 85.  Here are those data, including the State:
 

RoSIPCI
Norfolk14.470
Richmond11.885
All Divisions15.865

In short, Richmond, on the '07 data, was spending big bucks for much less bang.  My own bang/buck analysis is here.
In the meantime, you can follow this link to learn about the financial disarray in the exceptional education (the local euphemism for "special education") program.  Or you can follow this link to read about the dysfunctional leadership that has served to prevent reform of Richmond's dysfunctional school system.  Or you can follow this link to read about incompetence, or worse, in the procurement operation.  Or you can follow this link to read about the disabled parking money fountain.