The $93 Million ELPS Bond Proposal is Excessive ...

Public Response: The $93 Million ELPS Bond Proposal Is Excessive Because It Was Significantly Influenced By Those Who Will Gain Financially From Its Passage // Michael Conlin

The $93 million bond proposal was developed by the Community bond committee and approved by the ELPS school board. While not all the committee members support the bond, all school board members appear to be promoting the bond. As committee member Steven Haider states in his public letter (https://drive.google.com/open?id=0B8BhOfPeJB23ZHVFRFdnVldSZVU), the expertise brought by the Community bond committee was modest, given that members had no significant experience in school construction. The school board and ELPS administration also lack expertise in school construction. Without expertise in school construction, the committee, school board, and ELPS administration relied on information and guidance provided by the architecture, construction and underwriting firms. These firms clearly have financial incentive to increase the scope of the project and to maximize their margins.

These financial incentives were evident in the ELPS 2012 pro-bond campaign. The construction firm, the architecture firm, the bond underwriter, and a CEO of an education consulting were four of the largest financial contributors. (See https://drive.google.com/open?id=0B8BhOfPeJB23YnhjQkp4R29qU00 for documentation. The second largest contributor on the list is employed as a bond underwriter.) In addition, employees of both Thrun law firm (the district’s bond attorney) and the CEO of the education consulting firm were some of the most vocal advocates for the bond. It is easy to see the direct financial incentives for many of these firms.

The incentives of those who gain financially with bond passage are problematic for school districts throughout Michigan. Unlike many states, Michigan does not have a state agency providing objective guidance on school construction projects including the process of selecting the project architect, construction firm and bond underwriter. This results in more affluent districts potentially spending inefficiently on capital. As I state in my 2014 Education, Finance and Policy paper, https://msu.edu/~conlinmi/EDFP_a_00142.pdf, that compares Michigan and Ohio K-12 expenditures:

“In terms of the relatively wealthy districts (i.e., districts above the medians), annual capital expenditures per pupil are $1,027 for Ohio and $1,321 for Michigan… In terms of operating expenditures, there are difficulties in making a comparison because the structure of special and vocational education, along with input prices, differs across Ohio and Michigan. It is interesting to note, however, that the student-teacher ratio in Ohio averaged 16.88 from 2002 to 2010 while averaging 18.64 in Michigan. In summary, these descriptive statistics suggest that although Michigan districts spend more per pupil on capital expenditures than Ohio districts not eligible for state capital funds, Ohio districts spend a larger fraction on teachers.”

The $294 difference in per pupil capital expenditures suggests that a school district the size of EL spends about a million dollars more per year in capital than a comparable Ohio district. I believe this contributes to the low returns Michiganders receive on their K-12 education expenditures. A Michigan State Board of Education 11-12-14 memorandum states: “[W]hile Michigan's total K-12 funding of $12,644 per pupil is the 22nd highest in the US, (8th if adjusted for per capita income), our rank on the Nation's Report Card NAEP math and English scores hover around 38th.” These data come from a report written by the Education Trust-Midwest (https://midwest.edtrust.org/resource/stalled-to-soaring-michigans-path-to-educational-recovery/ ) and paid for by the State of Michigan. The disappointing numbers in this report shocked me.

In my prior Public Response post, I compared the 2012 and the current bond proposals along several dimensions including square feet and cost per square foot. I did this to demonstrate how excessive the current bond is and not to suggest that the 2012 bond proposal was any more thoughtful than the current bond. (The scope of the current bond is clearly larger than the 2012 bond and the influence of those who would benefit financially was also clearly there in 2012.) As further evidence that recent EL spending proposals and expenditures do not reflect necessary expenditures based on objective expert input, the size of the 2012 bond was $53 million - which was the maximum ELPS could raise without increase the existing millage rate - and the $8.2 million renovations to Macdonald Middle School in 2014 was the maximum amount that could be spent from the tax revenue associated with the sinking fund millage. The “coincidence” that the numbers matched figures that would result in no immediate tax increases and that were in the sinking fund, suggests the estimated expenses were based on politics.

In my next Public Response post, I will provide suggestions on how we can partially address the financial incentives of those who benefit from the capital expenditures if the current bond passes and if the current bond fails.

Mike Conlin

[The information in this post is based on my research and represent my views. They do not necessarily represent the views of MSU.]

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April 20, 2017