Tuesday, October 14, 2008

281 Referendum YES281 : School Funding vs COLA/CPI)

In a business finance course, I asked an instructor why college and school costs seem to increase at a rate that is higher than the "Consumer Price Index" or "Cost of Living Adjustment". The answer, though intuitive was still interesting to me. In summary: It is very difficult to make person to person interactions more productive.

In specific, CPI & COLA are average price change measures. They are made up of hundreds of goods and services that increase/decrease in cost at different rates. The productivity can be continually increased in the areas of manufacturing, data processing and others, which reduces the CPI & COLA. However, this is not the case with teaching children. Since we have not yet found a way to program them with knowledge and social skills, learning still needs to be done through individual attention given by families, teachers and interaction with their peers. Therefore, educational costs will increase faster than the CPI/COLA.

So I calculated RAS revenues as increasing by 2.7%/yr since 1996. (1996:~97mil, 2007:~130mil) Then I adjusted for a more realistic 4.3% to determine what their revenues should be ~$155 mil, in order to provide an equivalent quality of eductation. Then I reduced it by 10% ($15 mil) due to there being fewer students in the district. This leaves a gap of $10 mil in 2008/9 that grows with time. And this assumes that "No Child Left Behind" had minimal cost impact, which many people would argue. (ie stds have increased) Please Vote YES for option 1 & 2.


rdalekids said...

You may what to check the amount of increase given to the RAS's employees. RAS provided their employees with a 11% increase over the last four years (FY 2005-06 to 2008-09). This is approximately the same increase they received from the State of MN in revenue. A GOOD fiscally responsible entity would know that it has other cost that will be increasing and not pay-off all its revenue increase to its employees and still stay in business.

John said...

11% over 4 years would be about 2.75%/yr. This appears to be aligned with the SSA's COLA. (see link)


Per one of my ealier entries, we citizen's get what we pay for and the market sets the acceptable wage. If your company does not raise wages with the market, the most capable employees will move to greener pastures and your company will fail/flounder. In this case, failing to keep the best teachers is not acceptable.

Thanks for the comment

John said...

An addition, I agree with you that a company can hold wages for a short period as long as they can offer their employees hope of an upturn. Unfortunately as we have seen, raising school revenues in 281 is very challenging and the employees know it. So I believe the district is therefore better off small slow consistent increases.