Internal Review of Organizational Efficiency Presented March 9, 2016 Revised March 11, 2016 Note on Revisions This report was presented at the March 9, 2016 Board of Education meeting. The presentation generated a tremendous level of discussion. Some of the discussion resulted in the need to clarify certain topics. This revised report reflects the following changes: The chart comparing County budget data on page 6 has been revised to include fiscal year 2009 data; A section has been added beginning on page 11 to clarify a discussion regarding the number of students in Carroll County who do not attend public schools; and An error on page 16 to correct a reference to current per pupil funding ranking. Background On February 4, 2016, in response to a request from the Board of County Commissioners, Superintendent Guthrie released a public statement and document detailing initiatives implemented by the school system to address revenue shortfalls over the prior seven fiscal years. Those items totaled over $30 million in expenditure reductions beginning in fiscal year (FY) 2009. Many items are not only reductions in cost, but also organizational improvements and efficiencies. The complete document may be viewed here: https://www.carrollk12.org/admin/financeservices/budget/documents/reductions.pdf. Ongoing discussions among the Board of Education Members and with the Board of County Commissioners throughout the FY2017 budget development process led to continued discussions about the overall efficiency of the organization. Various individual data points have been raised in isolation. However, a comprehensive approach to examining organizational efficiency has not been considered. This report is intended to serve that purpose by examining efficiencies through data analysis and comparisons to other related organizations. Wherever possible, data from external sources is applied. Other Maryland School Systems Staffing Analysis Throughout the budget development process, attention has been given to various school system positions. For instance, questions have been asked about the ratio of teachers to students and the importance of positions in terms of how they support the classroom. In isolation, a comparison of teacher-student ratio does not completely describe the overall structure and efficiency of the school system.
A comparison of all 24 Maryland school systems reveals that CCPS ranks near the bottom of the state in overall staffing per 1000 students. This comparison suggests that from an overall staffing standpoint, the system operates with high efficiency. These data also suggest that the budgetary position reductions have outpaced declining student enrollment. The chart below shows the comparison. While the total staff to student ratio suggests general efficiency in the system, disaggregation of the data highlights efficiency by demonstration staffing priorities. The chart below separates total staffing into teachers, school-based administrators and central office administrators. Internal Review of Organizational Efficiency 2
CCPS is second in the state with teachers representing 59.1% of total staff. In the two administrator groups, CCPS ranks higher across the state. In order to explore what this may represent in terms of organizational efficiency, these percentages are examined within the entire workforce and in comparison to other school systems. The following chart comprehensively examines the staffing throughout the school system and compares staffing to the other Maryland school systems based on the Maryland State Department of Education (MSDE) broad staffing categories. Internal Review of Organizational Efficiency 3
These data reveal the complete picture of staffing across CCPS. They also reflect the staffing budget reductions that have been undertaken beginning in FY 2009. The Board of Education has been committed to reductions that impact the teacher in the classroom as little as possible. While that has become increasingly difficult with each year, an effort has been made to reduce teaching positions in alignment with the annual declines in student enrollment. It is worth noting that the most recent data available is FY 2015 and does not include the results of the teacher retirement incentive plan implemented this year. As a result of this approach, CCPS maintains a competitive teacher-student ratio across the state ranking 10 th out of the 24 jurisdictions. However, by examining staffing as a whole and not from one data point, the data illustrate the impact of the staffing reductions. CCPS ranks 18 th in two of the other three categories. In the third category, Other Instructional Personnel, CCPS ranks last in Maryland. This data element sheds further light on the percentages in the previous chart. As CCPS essentially lacks an entire employee group prevalent in the other systems, the percentages of administrators are inflated as a result. When considered from the perspective of efficiency, these data are favorable. From any data standpoint, CCPS focuses its human resources in the teaching workforce. However, from the perspective of organizational development, the data raise concerns. We know from our Human Resources reports to the Board that our teaching workforce is increasingly skewed to newer and less experienced teachers. Research and experience conclude that newer teachers in the induction stage require professional development, mentoring and classroom support to ensure the greatest success. With our 24 th ranking in Other Instructional Personnel, CCPS is providing the fewest resources in these areas. Internal Review of Organizational Efficiency 4
Comparison to Carroll County Government Another opportunity to measure organizational efficiency is to compare similar aspects of CCPS to the Carroll County Government (CCG). Although CCPS is a much larger organization, there are overlaps and similarities. For instance, both organizations provide service to the county and follow similar public processes for budgeting, finance, procurement, etc. Additionally, both perform certain functions that are similar. Therefore, comparisons may be made between the common departments shared by the two organizations. For all of the comparisons that follow, data were compiled from the annual budget documents for both CCG and CCPS. This study was intended to compare FTE change, budget growth, comparable department size, and annual increases to salary, benefits, and commodities. A data request submitted to CCG, which has been made in the past, went unanswered, making it impossible to complete the comparisons for benefits and commodities. The chart that follows examines data from FY 2010 regarding the overall size of CCPS and CCG, the operating budget managed, employee raises and the proportion of healthcare paid. Internal Review of Organizational Efficiency 5
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CCPS is almost four times the size of CCG with 3,326.83 full-time equivalent (FTE) positions to 888.11. Since FY 2010 CCPS has reduced 202 FTE while CCG has increased by 6.38. Both entities helped balance their respective budgets by not awarding or limiting employee compensation. CCG granted a total recurring raise of 4.25% and three step increments, while in the same time CCPS has granted a 2.5% COLA and two steps. The overall operating budget for CCPS is $3,503,614 less in FY 2016 than FY 2010, a reduction of 1.05%. The CCG operating increased $20,108,430, or 11.6%. Finally, common departments and functions within both agencies are compared. The following charts compare FTE at the management, professional and non-exempt levels. As noted, CCPS is a significantly larger organization than CCG. However, for similar departments and functions, CCPS appears very lean in terms of total FTE. Other Maryland Counties Revenue and Funding Comparisons The final area of analysis is available revenue to CCPS and how it is being applied. State aid to public education is driven by the state foundation formula, which is primarily driven by student enrollment and secondarily by relative wealth. Due to a birthrate 400 lower than during peak growth and no net migration, CCPS is in a period of sustained declining student enrollment. Combined with stable relative wealth, CCPS is suffering annual losses in state aid. The following five charts compare birth rates, net migration, relative wealth and state aid for all Maryland counties. Internal Review of Organizational Efficiency 7
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The data sets above illustrate CCPS recent losses in state aid as a byproduct of declining enrollment and relative wealth. The $11.5 million in state aid reduction is the highest total for the state. Given that net migration is flat with no indication of positive change and relative wealth is stable, barring some significant, unforeseen change this will be a recurring annual deficit. CCPS will remain in an annual position of requesting additional County funding to offset loss in state aid and inflationary increases. Without increased local funding, CCPS will need to meet these offsets by continued reductions to positions and programs. The overall challenge of declining enrollment is particularly troublesome for CCPS. The overall county population remains relatively stable. Domestic migration is flat and international migration is statistically non-existent. These two factors, particularly the latter, are critical to reverse the trend of declining enrollment. Essentially, Carroll is a county that is aging in place. Without a positive net migration, student enrollment cannot increase. All of the major Maryland school systems that are experiencing growth in student enrollment are seeing a significant net international migration in the county. While the Board of Education is on the receiving end of the budgetary impact of declining enrollment, the Board has no authority or ability to address county-level public policy on revenue or population growth. Rather than react on an annual basis to the budgetary challenge, it would be more prudent for the County to develop a policy position on net migration. If the County wishes to grow population, then a comprehensive study of public policy in jurisdictions Internal Review of Organizational Efficiency 10
that have fostered positive growth may be an important first step to reversing the trend. If the County does not wish to foster population growth, then the trends will continue and a different type of planning will be required to comprehensively address the consequences of perpetual declining enrollment. It was suggested at the March 9, 2016 Board of Education meeting that, in light of the fact that Carroll experiences no new growth, that the Board of Education must attract more students residing in Carroll who are not presently enrolled in public schools. A figure of 20% was quoted for this population. The most recent external data reveal that this figure is inaccurate. Only 10% of student who reside in Carroll do not attend public schools. Additionally, based on the data, the percentage of Carroll students not enrolled in public schools has declined between 2009 and 2014. Sustained declining enrollment also has a disproportionate impact on per pupil funding. The base of the State foundation formula is a per pupil allotment. The rest of the formula, such as relative wealth, is built upon that base. As CCPS enrollment continues to decline, the state per pupil amount and overall percentage of budget will be reduced annually barring a significant change to the formula. Likewise, as CCPS calls upon the County for offsetting local revenue, the local per pupil allotment will increase if funding is provided. The following chart shows the FY16 per pupil funding allotments from all sources and the state ranking. Internal Review of Organizational Efficiency 11
The chart below traces the percentage change to local education funding from FY 2011 for each Maryland school system. For three of the six fiscal years, local funding to CCPS declined from the prior year. Although in the aggregate, local revenue to CCPS increased by 4.7%, there were up and down years. This annual variance did not allow for any meaningful long-term planning and forced the Board to react annually. The overall aggregate increase to funding over those six fiscal years was not enough to offset the losses to state aid and inflationary increases resulting in the $30 million in expenditure reductions detailed by Superintendent Guthrie. For CCPS to overcome declining enrollment in an ongoing way, the local per pupil allocation will need to rise to the level found in other counties who have perpetual declining enrollment and/or high relative wealth. Internal Review of Organizational Efficiency 12
In order to understand the scale of comparative revenue available to the counties, it is necessary to review tax rates and the amount of revenue raised by taxes in each county. The next three charts examine the one-cent yield in property tax by county, the local income tax rates and the local property tax rates. Internal Review of Organizational Efficiency 13
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This series of data shows that other comparable counties, such as Washington, Harford and Frederick, have not lowered either the local property or income tax rates during the same time period. Charles, another comparably sized county, raised both tax rates in the same time period. The initial chart establishes a scale in millions of dollars for the one-cent yield on property tax. In contrast, in this time period, Carroll County lowered both tax rates. The impact can be measured by the scale in the first chart. It is also detailed on pages 12-14 of the Superintendent s Final School Closure and Boundary Adjustment Plan. The charts below are repeated from the plan. Internal Review of Organizational Efficiency 15
The impact of this revenue reduction has challenged the County s ability to offset aid to CCPS. The chart below, also copied from the Superintendent s Final School Closure and Boundary Adjustment Plan, shows the decline of public education as a percentage of County revenue. With little in the local economic forecast to indicate positive turn in local revenue to CCPS, the remaining factor to consider in terms of measuring efficiency is how and where the revenue received is spent. This final examination of efficiency uses MSDE data to examine per pupil expenditures by budget categories. The data show that while CCPS ranks 17 th in total per pupil funding, the funding received is largely focused on the students and schools. CCPS ranks 24 th, or last, in the category of administration. However, with the exception of wages, CCPS ranks very favorably in the other categories. Where CCPS does not rank as well are areas already identified in prior budget requests and this report as places for improvement, such as special education and other instructional costs. Internal Review of Organizational Efficiency 16
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Overall Conclusions 1. CCPS has undertaken major expenditure reductions and efficiency improvements to offset declining revenue. Out of necessity, through FY 2016 expenditure reductions total $30 million, many of which are system efficiencies. With the closure of three schools in FY 2017, that total reduction will grow by another $5 million. This amount of reduction is unprecedented. Modest increases from the County have not offset declines in state aid and inflationary increases. Moreover, County revenue has been up and down since FY 2010 rendering the Board unable to develop any long-range plan. Whereas the County-managed operating budget has grown with inflationary increases and program changes since FY 2010, the CCPS budget has been reduced by 1.05%. The Board has had to absorb losses in revenue and inflationary impacts within its own budget through expenditure reductions and efficiencies. After successive years of reductions, there are no remaining identified reductions or organizational efficiencies to offset subsequent recurring losses and inflation. 2. CCPS staffing, while among the lowest in the state, is efficiently focused in the classroom. CCPS ranks 19 th in the state in total staff per 1000 students. However, 59.1% of staff members are classroom teachers, which ranks 2 nd in the state as a percentage of overall staff. 3. CCPS has a significant staffing void comparable to other school systems. CCPS ranks last at 24 th in the state for other instructional personnel. This category represents the types of positions that directly support teachers in the classroom including staff developers, teacher specialists, mentors, and instructional assistants. While the low ranking may be seen by some as an efficiency, this staffing gap presents great challenges recruiting, retaining, and developing new teachers. It also skews other data such as comparing only the teacher ratio to other systems and artificially inflates the percentages of staff in other categories. While this study focuses on efficient use of revenue and resources, this reality in the organization presents a major challenge in achieving goals of educational improvement and efficiency. Compared to other Maryland school systems, CCPS simply does not have the structure in place to provide the same levels of support to classroom teachers. 4. CCPS manages its budget efficiently. CCPS manages an operating budget almost double that of CCG on annual basis. The money is accounted for, dedicated predominantly to schools and students, and spent efficiently on an annual basis. CCPS has addressed an overall decrease of 1.05% of operating budget through the array of expenditure reductions and organizational efficiencies detailed above. 5. CCPS compares favorably to CCG in other efficiencies. CCPS compares favorably in a side-by-side comparison to CCG in areas of similarity. While CCPS has almost four times the employees of CCG, CCPS departments tend to be similarly sized, if not smaller, than CCG. There do not appear to be efficiencies available for CCPS by further comparing staffing models. 6. CCPS revenue outlook remains very concerning at the state and local levels. Internal Review of Organizational Efficiency 18
The ongoing revenue outlook for CCPS remains of great concern. Without a significant change to the state education aid formula, or an unforeseen growth in net migration, annual losses in state aid will continue. Combined with annual inflationary increases, the reduction in state aid must be offset with local revenue. CCG will need to spend closer to the per pupil rate of other local governments whose local systems are suffering protracted enrollment declines, such as Garrett and Kent, or those counties who are on the lower end of state aid due to relative wealth, such as Anne Arundel, Calvert, Howard, Queen Anne s and Talbot. Without a major infusion of local revenue, the same annual pattern of expenditure reductions will be required each year. Carroll is the only county comparable in size or in perpetual declining enrollment to have reduced tax rates following the recession, which impairs its ability to fund public education. 7. CCPS is powerless to address the underlying causes of declining student enrollment. The Board of Education is left with the symptoms of declining enrollment. However, the Board has no authority or ability to address the underlying causes. Metropolitan counties with growing student enrollments generally are experiencing positive international net migration. Carroll is anomalous as a suburban county experiencing virtually no international migration. In fact, Carroll s international migration is more comparable to that of far western Maryland counties or the Eastern Shore than other suburban counties. To reverse the trend of declining student enrollment, Carroll must experience positive net migration again. While the Board must deal with the funding consequences, this cause must be addressed by the County Commissioners as a public policy issue. 8. CCPS efficiently focuses its fiscal resources on students and schools. CCPS focuses its human resources, and therefore its fiscal resources, on student needs and schools. CCPS ranks second in the state in terms of percentage of employees who are teachers. Per pupil cost per budget category confirms a focus on students and schools. Instructional supplies ranks 4 th. Health services ranks 7 th. Pupil transportation ranks 11 th. Operation and maintenance of plant rank 4 th and 10 th respectively. Conversely, central administration ranks last. Internal Review of Organizational Efficiency 19