Anchorage School District’s Spending Dilemma

During the recent legislative session we heard cries of “Increase the BSA, $404 this year, and $125 for each of the next two years”. Unheard from the vocal supporters of spending more money on public education was, “Let’s increase student achievement”. The chant of “Send us more money” resonated from the halls of the legislature and was amplified by the Anchorage Daily News and other media outlets throughout Alaska.

The most vocal group, Great Alaska Schools, spent countless hours in Juneau lobbying for more money to spend on public education. They even recruited ASD students in their crusade. Unfortunately, the GAS people did not adequately research the issue and only had one bit of data to support their cause. This data, provided by the Legislative Finance Office, was cherry picked so that the GAS group could cheer, “The BSA has been flat funded for four years”. Great sound bite, but that’s all. For more data that contradicts the inadequate funding of education, go here.

To further shed light on the issue of how much funding has gone to education, we did a comparison on the ASD budget for the years 2004 and 2014. We used the final adopted budgets here and here as our working documents.

We focused on three specific areas of operating costs: utilities, transportation, and total salaries and benefits. These include any cost savings due to energy efficiency and other cost control measures adopted by the ASD.

Much of the testimony given in the recent legislative session by the education community told of the great increases in energy and inflation. The public was constantly told the cost of educating our children was ever increasing due to the rising cost of energy and inflation, over which there was no control. Of course in Anchorage, since we also have many more thousands of square feet of buildings to heat and ventilate, this makes some sense.

The results of our analysis were not what we expected. If one looks at the data below, we think it can be safely said that controlling costs for employees is less successful than controlling costs for other day-to-day expenses.

Here are a few examples of operating cost savings beating inflation:

(For reference, inflation since 2004 was 27.2% per State of Alaska Department of Labor and Workforce Development)

Utility Costs

There is no doubt the ASD energy savings program is working well.

Now let’s take a look at the costs in other areas. Controlling non- energy costs was less encouraging.

Two years ago, the Alaska Policy Forum asked why the ASD maintained two separate bus transportation systems: one contractor and one ASD. About sixty percent of the students are bused on Reliant contractor-provided buses. The remaining students are bused on ASD buses, operated by ASD employees. In addition, the ASD buses are maintained by school district employees in an ASD maintenance shop. The District’s policy is there would be buses available if the contractor went out on strike. This may be understandable but no other district in the state has two separate bus systems. If this is good policy, maybe the District should have two different sets of teachers, one district employees and one contractor teachers in case the District teachers went out on strike). The policy of two separate bus systems should be reviewed for currency and cost savings.

This contract is up for renewal and should be investigated as a place to save on operating expenses. One highly questionable cost is the $2,000,000 placed in the Teamsters Pension Trust over the last 10 years-a trust which is severely underfunded. And it is highly unlikely employees will see much benefit from this Trust. Apparently, this is a carryover from the pipeline boom days and has continued today without question. The funding of this Trust should be discontinued with the next contract. Here is a listing of the expenses for the ASD bus transportation operations:

ASD Bus System Costs

We recommend that the District analyze the cost savings of doing away with the two separate bus transportation systems. A thorough analysis should be done to determine the cost-effectiveness of contracting out the entire bus transportation requirement. Reviews of other large Alaska school districts’ contracts may be helpful. As a minimum, the District should look into the feasibility of consolidating its fleet maintenance with the Municipality. In the future, every dollar saved in support areas will ensure that we can sustain teachers in the classroom.

The final area we looked at was the overall cost of salaries and benefits and the school board and superintendent’s office. As one can see, the ability to control costs in these areas is lacking, especially in benefits. Most of this increase in benefits can be attributed to the rapidly increasing cost of health benefits.

Salaries and Benefits

Of course, salaries and benefits are negotiated cost items over which the District has control. If the District is to get itself on a sound financial footing, it must control these costs. One means of controlling the ASD’s costs would be to require the employees to shoulder more of the health benefit costs. Another means would be to have all employees participate in the State’s employee health plan. A bill was introduced into the legislature the last session to require all school districts to participate in the State’s plan. Many of the state’s school districts approved of this plan as a cost-saving remedy.

The District has shown that it can control costs in the utilities in spite of increasing rates. To control costs in transportation, it should consider contracting out the entire bus system as the other major school districts in Alaska have done. The District must get a handle on personnel costs, especially health care benefits. Otherwise, fewer dollars will be available to put teachers in the classroom, the pupil/teacher ratio will worsen, and Anchorage taxpayers may have to shoulder more and more of the burden. Next year we will hear the same refrain: “Increase the BSA, it’s been flat funded for five years”.