Crunching the Numbers with the Cranky Taxpayer …

[The following information should be of great assistance to the members of the City of Richmond School Board and RPS Superintendent Dana Bedden as they continue to work on the budget].

By John R. Butcher

The 2011-12 data on the Education Department Web report the total disbursements for each school division. 
[The most recent data available as of Feb. 5, 2014].


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 $3,903 per student more than the state division average and $3,726 more than Norfolk. 
$/ADMv. Statev. Norfolk
Norfolk $    11,365 $        177
Richmond $    15,090 $    3,903 $    3,726
Divisions $    11,187



Notwithstanding the down economy, these differences are up by about $1,000 from last year's:
$/ADMv. Statev. Norfolk
Norfolk $     11,130 $     234
Richmond $     13,853 $  2,957 $    2,723
Divisions $     10,896



 Notes: "ADM" is "average daily membership," which is educratese for the daily average enrollment.  This VDOE report uses the end of year number.  The disbursements in the table here are 2011-12 totals divided by the ADM.  The "Divisions" number is for all school divisions; it omits the Governor's schools and regional programs.

Multiplied by our ADM (21,363), the 2012 difference calculates to $83.4 million in disbursements above the state average (and $79.6 million more than 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 the State, about $45 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 division 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 + preK + other educational + 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, adult education, pre-K, and for "other" instructional 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, O&M, pre-K, and "other" ed. predominating (and, even among those four, instruction and pre-K take the big bucks).

Most of that "pre-K" category is Head Start.  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 10.6 million dollars (plus the other $3.6 million for "other" education).  For sure, a major study suggests that Head Start doesn't do any good.

Salary Differences
One source of these excess costs might be instructional salaries.  Ours, however, are lower than the state average.
All Instructional PositionsDistrict Wide Instructional Positions
Richmond City $       51,982 $      47,565
Divisions $          53,397 $         45,672

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 $1,415 difference by our 2,208 instructional positions shows a saving of $3.12 million from Richmond's lower salaries. 
All Instructional PositionsDistrict Wide Instructional Positions
Diff $          (1,415) $           1,893
XS cost, $ meg $            (3.12) $              0.33

Note the 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."  Yet, although Richmond's regular teachers earn $1,415 per year less than the division average, our division-wide instructors earn $1,893 more than the average.  How many of Richmond's expensive bureaucrats do you suppose are masquerading as division-wide instructors?

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 (calculated from Table 19; the state's calculation in Table 17 is not yet posted as of Feb. 5, 2014):

All Instructional PositionsDistrict Wide Instructional Positions
Richmond City                103.4                   8.1
Divisions                70.90                 2.22

The division average dropped this year from 102.5 per thousand to 70.9.  Richmond, in contrast, dropped from 115.7 only to 103.4.
Compared to the division average, we have an extra 32.46 instructional personnel per thousand, i.e., 693 for the school division.  At our average salary of $51,982, that calculates to $36 million in extra cost per year. 
That's $36 million extra cost we can account for.  These numbers do not tell us whether the Richmond taxpayers are getting anything for that money.  The scores suggest we are not.
Notice that we have 3.6 times the state average number of district-wide instructors.  And, as we saw above, they are unusually expensive.  What do you think: Great teachers, or concealed bureaucrats?

Corrected for Salary Difference and Number of Teachers
Applying these corrections to the cost differences, we obtain:
CategoryXS v. State
Gross Excess83.4
Salary Diff.3.1
No.Teachers-36
Net Excess50.5

That leaves $50.5 million in excess spending unaccounted for (presuming there is an explanation for all those extra teachers; for sure, they are not doing anything for theSOL scores).

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 Excess83.4
Salary Diff.3.1
No.Teachers-36
Net XS50.5
Cost Adj.-5.0
Corr'd. XS45.5

After these adjustments we are left with an excess in our school budget of some 45 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 42.2 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 $45 million.

O&M
Richmond often claims that its infrastructure is larger than Norfolk's, reflecting Richmond's "small school" policy.  Indeed, there are 47.5 principals in Richmond but only 52 in Norfolk, although Norfolk's ADM is almost 50% larger (30,593 v. 21,363).  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 excess 4% 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 $5.9 million.  Even if all that is justified, Richmond is spending an excess $39.6 million (plus the salaries of an excess of teachers who are not contributing anything toward educating our kids).

The Bottom Line:  $40+ Million Gone Missing
Most of the $45.5 (or $42.2) million extra spending relative to the state average must be in those categories where Richmond vastly outspends the state average: Instruction and pre-K (gross excess $67.6 million).  The 2012 budget (pdf, ~1 MB download) shows about $5.9 million in grant income for the Head Start program, which would fund two thirds of the excess in pre-K activities.  There is no information to show that we are getting any value for that money or for the remaining $8.3 million excess expense of "other" and pre-K 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?

My own bang/buck analysis is here.

In the meantime, 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.