The Cost of Doing Business

A recent comment asked me to nail down what percentage of the school budget was comprised of salaries. Before I answer, I want to point out that we have not up to now, (but hopefully will going forward), provided the actual expense and revenue figures of the real costs of operating our schools. The reason for this is simple, but in the long run, provides a misleading view of the actuals.

Most health benefits are covered by the City-side of the budget. To my understanding, they are not reflected in the full salary amounts we report out; items like sick leave buy-back are reflected each year as an expense of the year when they are paid out. Several years ago, we discovered that the City was running a deficit in the Health benefits line item, as a result of... well, let's just say they ran a deficit. We paid that deficit out of our School Choice account.

Also, our revenue side of the budget does not reflect both the cash contributions made by PTO's and the in-kind donation of time they put in as volunteers. Over the past fifteen years, there has been a tremendous shifting of the burden for covering expenses that used to be part of the school budget- cultural arts, field trips, equipment purchases, supply purchases for special projects, etc. This represents a significant investment by parents in the schools, compensating for the ebbing of school district funding of these areas. Replacing these assets would add, in my estimate, another $500,000 to $700,000 to the true cost of doing business.

G-d bless the parents.

Finally, and I have no idea how one calculates this, but I haven't met a teacher in the Newburyport School system who hasn't spent money out of their own pocket to bring things into their classroom, ranging from books to supplies. I know as a teacher myself, I spent something in the range of $500 to $750 per year, unreimbursed; I would expect Newburyport teachers would not differ much from that range. 200 or so teachers; you can do the math.

All caveats having been caveated, in 2008:

Salary: $ 15,869,961
Expenses: $ 6,129,884
Total budget: $ 21,999,845

About 72% of the total budget paid out through the School District reflects salary costs.
I don't have the exact figures at my fingertips right now for the health costs on the City-side of the budget; it is hard to imagine them not pushing salaries up into the low 80% range of the budget.

Given that the buildings are City owned, and that the City is responsible for all capital expenses involved with them, (remember that there was a discussion this past year as to whether or not re-welding the Kelley School fire escape to the wall, a problem that had been identified in a 2001 Engineering report commissioned by the City to identify the capital needs of the Schools, was a maintenance or capital expense. In 2001 it was a capital expense, by 2007, it was considered a maintenance-- i.e., the schools covered the $9,000 bill), the School operating expenses cover supplies, HVAC, utilities and other costs associated with operations.

As to whether that is the norm or not, it compares fairly with most other school systems; which should be an unmistakable indication that major reform is needed in the area of health benefits, addressing capital needs in a timely enough fashion to avoid spending tens of thousands of dollars a year patching roofs, and more creative options to assist communities to address their revenue needs.

Most professional human service operations, at least the ones I ran considered that an 80/20 split between salaries and operations/administration was good. I tended to run with 10% admin overhead, but I had about .05% of the paperwork and regulatory burden that the schools have.

Some non-profits ran as lean or leaner than I did; places like soup kitchens and meals programs, which rely almost completely on donations and volunteers.

I'll try to capture that missing piece (health care costs in the next few days).

Good question.