JCPS Financial Transparency Improving

The usually dry and technical business of overseeing school budgets generated some controversy over the last several months:

  • On May 21, Kentucky’s State Auditor reported that JCPS spent less in the classroom than comparable public school districts, maintained a “bloated” administrative structure, and was governed by a board that neither understood District finances nor demanded information to help it do so.
  • One week later, two school board members (including me) voted against adoption of a proposed JCPS budget on the grounds that management’s presentation, due to a lack of standard financial analysis like trend data or tying shifts in spending within large categories to the board’s strategic plan, did not adequately facilitate a critical evaluation of the proposed budget.

In the five months since the State Auditor’s report, JCPS has taken several noteworthy steps toward improvement from that low point.

  • On June 23, Superintendent Hargens proposed, and the board approved, a set of responses to the deficiencies reported by the State Auditor.  Most responses called for change in procedures or quality of administrative work, and all identified both a deadline and the executive(s) responsible for delivering.
  • On August 25, the board considered the tax rate for the coming year.   Unlike a year earlier, JCPS management presented a clear case for the amount of revenue needed to fund plans for the coming year. The Superintendent and her CFO made clear that an improving economy coupled with additional state appropriations were producing new revenue (to the tune of 3.5%-or $34mm–above the prior year) at current tax rates, and recommended that no rate increase was needed.  The board unanimously approved this recommendation.
  • In early September, Dr. Hargens announced a “citizen transparency” website that will enable anyone to dig through JCPS financial data, including both spending in each school and the actual salary of every JCPS employee by name and title.  JCPS’ original announcement projected the tool to go live by the end of September and, although software implementation issues seem to have delayed the start-date it’s my expectation that this tool will bring many new eyes and analytical skills to considering how our education dollars are spent.
  • Finally, on September 22, Dr. Hargens and her team presented the 2014-15 budget to the school board in a new format that included, for the first time, trend analysis for major categories of spending, and a narrative that tied spending decisions to District strategy. I joined the rest of the board in unanimously adopting this budget.

It’s clear to me that JCPS has made important changes both to improve the transparency of its finances and to sharpen how the analytical skills of its executives are applied to finding and deploying funding for our schools.  The work of Superintendent Hargens and CFO Cordelia Hardin, along with other leaders, has given me new insight into several important facts and trends about our school system.

For instance, management’s clearer presentation of financial facts shows that spending in schools has grown significantly (5.5% per year since 2010!), and faster than overhead spending (shown to have grown at 4.4% per year).  Using management’s numbers from this year’s budget presentation (CFO’s PowerPoint of 9/22/14), the following graph shows spending growth over the past five years, plus the just-adopted budget.

GFE Trend

This helpful analysis shows an astounding increase $220 million! — in annual spending on “schools and support” between 2010 and 2015, whereas spending on “business office and overhead” increased by $15 million.  Dr. Hargens’ freeze on central office hiring and movement of several hundred teachers from central positions back into the schools as “Goal Clarity Coaches” likely explains the relative slowdown in overhead spending.

However (and appropriately), new and important questions have also crystallized thanks to this welcome increase in transparency:

First, the categorization of only 7.5% of JCPS expenses as “business offices” or “overhead” conflicts sharply with the State Auditor’s finding that only 53% of JCPS spending was on “instruction.”  It is obvious that financial officers at different levels — State Auditor’s office and local school district — disagree sharply on how to categorize expenses.  The onus is on JCPS to explain itself in the face of the Auditor’s aggressively different interpretation if citizens and board members are to have confidence in the seemingly positive story told in the graph above.

Second, the fact that spending from the General Fund has grown at 5.4% per year since 2010 fairly begs for questioning of the frequent contention that our schools are “underfunded.” At the same time, inclusion of rapidly rising payments under state pension and health benefit plans in the “schools and support” category may mask how Frankfort’s past mismanagement of retirement obligations siphons funds today from the District.  The role of state pension and health benefit payments is a subject I need to learn more about due to its potentially monumental impact on future budgets.

Third, it is now clear that District management considers the end goal of its financing activity to be equitable allocation of funds to school councils, i.e. the “School-Based Decision Making” councils called SBDMs.  This is highlighted in the organization of the new Budget Booklet, which directed primary attention to “Allocations to School Councils” and to “School-Added” categories.

I found this narrative quite striking, since virtually none of the board’s work involves reviewing the efficacy or efficiency of these councils, or the Principals they select, in achieving the District’s mission.  The lack of such oversight is highlighted by the fact that, despite the great effort and history which lies behind the board’s attempt to fund individual school councils adequately and equitably, student outcomes still vary widely both between and within schools.  The State Auditor’s attention to teachers’ spending of personal funds on school supplies called attention to school-level decisions to spend District supply allocations on other things (or not at all), and others have pointed out that some school councils choose not to spend District funds allocated for textbooks, to “trade out” teacher positions for teaching assistant positions, or to take other steps that are at odds with District strategy.

As a school board member, I have found the allocation of authority between central office and school councils confusing and a frequent source of blame-shifting.  Our new budget narrative invites attention to this issue.  What data does JCPS have on the effectiveness of school-level leadership, and what tools do we deploy where this leadership is not getting the job done?  How should the elected board hold management accountable when decision-making authority is disbursed, and sometimes opaque, under state law and practice?

In sum, I believe JCPS has made important progress since the State Auditor’s constructive report, and as a board member I acknowledge the difficult and creative work that has gone into rethinking how to tell the complex financial story of this big organization.  All involved agree that steps to date are only the beginning, and that further improvement is both possible and required.  My hope and expectation is that ever better analysis will sharpen the focus on how to direct spending to best serve our kids.