School Dazed in the NV Assembled Wisdom

NV Legislature wide It’s School Daze for the Nevada Legislature and its Raucous Caucus, as AB 448 comes forward.  This is the Achievement District bailiwick in which all pretense of “local control” is pitched into oblivion

AN ACT relating to education; establishing the Achievement School District within the Department of Education; (1)  authorizing certain underperforming schools to be converted to achievement charter schools sponsored by the Achievement School District; (2)  prescribing requirements for the conversion of a public school to an achievement charter school and the operation of an achievement charter school; (3) providing for the use of certain school buildings by an achievement charter school without compensation; (4) authorizing a school district to provide services to an achievement charter school under certain circumstances; prescribing certain conditions of employment for a teacher at an achievement charter school; (5)  authorizing the conversion of an achievement charter school to a public school in a school district or a charter school; revising provisions governing the use of school buildings owned by the board of trustees of the school district by a charter school; making reassignment of the employees of an achievement charter school (6) outside the scope of collective bargaining;  [AB 488]

Let’s not bother to pretend this has anything to do with “smaller government,” or other pillars of conservative wisdom.  If a school is categorized as “underperforming” the local school district loses control of it and its operations.  That would be, of course,  the duly elected school board of a school district in this state – losing control of its facilities and operations to the state. Small government this isn’t. More on this point a bit later.

There are three ways a school can be removed from local authority:

Sec. 20. 1. A public school is eligible for conversion to an achievement charter school if: (a) Based upon the most recent annual report of the statewide system of accountability for public schools, the public school is an elementary school or middle school that was rated in the lowest 5 percent of elementary or middle schools in this State in pupil achievement and school performance for the most recent school year; (b) The public school is a high school that had a graduation rate for the immediately preceding school year of less than 60 percent; or (c) Pupil achievement and school performance at the public school is unsatisfactory as determined by the Department pursuant to the criteria established by regulation of the Department.

Let’s look at the first one, based on the annual report.  For all intents and purposes this categorization is based on standardized test scores. Growth measures of achievement,  status measure of achievement, and reduction in achievement gaps are all based on … test scores.  There is one other criterion, and only one other, to date, and that’s average daily attendance.  [NVDoE]

Here’s what I don’t see in the description of the measurements. Does the school serve a struggling socio-economic group?  Is the school over-crowded? Does the school have a teacher-student ratio that indicates some classes are overcrowded? How many of the youngsters are classified as in need of Special Education?  What is the transient rate in that particular school? Is the school adequately staffed with counselors, language specialists, social workers, psychologists, aides and other support personnel? If the school is a secondary one, then what does it mean to say the students are “ready for college?”  Let’s be honest here, not everyone is prepared for or even interested in a four year college program.  So, what does it mean to say a child is ready for… a vocational program? An apprenticeship program? A School to Work transition program?  We know that about 41% of American students continue their education beyond high school.  [NCES]

What of the other 60%? Does this mean that if a student elects to be a truck driver, construction worker, apprentice plumber, landscaper, or apprentice mechanic, or heavy equipment operator they “don’t count?”

What I do see is that if the kids show up and they test well then the school is said to be successful. The bias here appears to be that if the local school district isn’t churning out academically successful students, even if the school has prepared numerous and sundry mechanics, truck drivers, beauticians, file clerks, plumbers, etc., it isn’t “successful.”

A graduation rate? 60% is doable. The state average – one of the worst in the country is 63%. [LVSun] There are diploma options, for example in Clark County one can earn a standard diploma, an advanced diploma, or an advanced honors diploma. [CCSD] Students with learning disabilities can opt out of the “college and career readiness” track, and be evaluated according to their Individual Education Plan.

Statewide there are standard diplomas 63% receiving this form, advanced diplomas 27.2%, adjusted diplomas 4.8%, and certificates of attendance 4.9%. [NVASB pdf]

Nevada is a state with 37% white, 40% Hispanic, 9% black, and 1% Native American students. 19% of the students are classified as Limited English Proficient, 11% have diagnosed learning disabilities, and 54% are come from low income families. [NVASB pdf] By at least one standard – if the schools are majority low income, and the graduation rate is over 60% then some might call this successful? While it may not be ideal, it certainly doesn’t deserve the opprobrium of abject failure.

Item (c) is bureaucracy personified. A school may be declared “unsuccessful” based on Department of Education regulatory criteria. For those who purport to eschew “bureaucracy” and support “local control” by “locally elected officials” this ought to be enraging?  This isn’t small government, it’s grasping government, and personnel policy isn’t all it’s grasping.

Welcome to our accounting nightmare.  As set forth in Section 22.

“2. An achievement charter school must continue to operate in the same building in which the school operated before being converted to an achievement charter school. The board of trustees of the school district in which the school is located must provide such use of the building without compensation. While the school is operated as an achievement charter school, the governing body of the achievement charter school shall pay all costs related to the maintenance and operation of the building and the board of trustees shall pay all capital expenses.”

This is a go broke slowly scheme?  While the charter pays for the maintenance and operations, the local school board has lost control of its building and the capital expenses associated therewith.  If the school district approved a bond issue for the construction of the school (over which it now has no control) it must still pay off the bonds – without any compensation from the entity now using the facility.  But wait, there’s more…

Any financial operation from the lowliest back yard garage service to the most complex corporation has to deal with depreciation expenses, and accounts for capital replacement.  So, we have here a building on which  there are outstanding bonds or not, someone has to pay into accounts for depreciation expense, and into accounts for capital replacement – without any compensation from the charter management firm in charge of the building.  We’re not dealing with insignificant numbers here.

The Clark County School District reports $2,245,000 in depreciation expenses in 2012-2013.  Let’s assume that the “average” functional age of most schools is about 40 years, and that this functionality is dependent on (a) use and (b) renovation.  If we use straight line depreciation then we take the cost of original construction and divide it by the number of years the building is assumed to be serviceable.  If the school district, or any district, is functioning with fiscal intelligence, then the older the building the more must be added to the capital replacement accounts.

Clark County has 8 buildings constructed before 1949, 20 schools constructed during the 1950s, 39 during the 1960s, 31 during the 1970s, 23 during the 1980s, 98 during the 1990s and 119 constructed recently after 2000. [CCSD pdf]   In 1996 the Clark County School Board authorized $89 million in bonds for elementary schools (9), and $104.9 for four middle schools. [LVSun]   We can use these numbers to create an illustration of how expensive depreciation can get for a school district.  The CCSD numbers yield a cost of about $9,888,888 per elementary building included in that bond issue.  If the buildings have a life expectancy of 65 years then the depreciation for those would be $152,136 per building annually.

The way I’m reading this section of the proposed law, the Clark County School District would be responsible for the $152,136 annual depreciation expenses on a building over which it was forced to relinquish control if that school were to be declared “unsuccessful.” And, the charter management firm would be using the building without contributing to the depreciation expenses.

And, now the nightmare compounds.

“4. An achievement charter school may: (a) Acquire by construction, purchase, devise, gift, exchange or lease, or any combination of those methods, and construct, reconstruct, improve, maintain, equip and furnish any building, structure or property to be used for any of its educational purposes and the related appurtenances, easements, rights-of-way, improvements, paving, utilities, landscaping, parking facilities and lands; (b) Mortgage, pledge or otherwise encumber all or any part of its property or assets; (c) Borrow money and otherwise incur indebtedness; and (d) Use public money to purchase real property or buildings with the approval of the Achievement School District.”

Whoa Nelly!  The charter management firm may encumber, mortgage, or pledge any part of its property – the school building – on which the local school district is (a) still paying off capital construction bonds and/or (b) still paying for depreciation expenses?  In a nightmare scenario, the hypothetical  Chatter Charter Achievement School (formerly operated by the local school district) which is still being paid for – can be modified by the Chatter Charter NPO, and who books the depreciation on the renovations? Who’s on the hook for the mortgage if the Chatter Charter outfit goes bankrupt?  If the local school district is “still responsible” for the capital expenses, then is it also ultimately responsible for the  payment of capital outlays for renovation?

There’s something else here I’m not seeing.  The Charter may acquire all manner of equipment and furnishings – but can it sell off equipment and furnishings without the approval of the original donor – the local school district?   Buildings, furnishings, and equipment (anything not classified as supplies and personnel costs) may also be an integral part of the school districts accounting. In our good old fashioned double entry system of bookkeeping in this country, the non-perishable or consumable items are booked as ASSETS of the school district and thus any donation of those items (voluntary or involuntary) depletes the assets of the school district. Deplete enough assets and you deplete the capacity of the district to qualify for future financing.  

In short what we have here is a fiscal system in which the taxpayers who paid into the local school district make all the contributions and the charter firms take all the donations, just keep the floors mopped and the lights on.   Therefore, the penalty for having an unsuccessful school is not only the loss of policy control but the loss of financial assets to boot.

It’s a double whammy for any school district, and one that doesn’t appear to have been entirely thought through to the obvious financial conclusions.

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