• Title: Updated Response to Jay Todd
  • Author: Michael Conlin
  • Date: 02/09/2016
  • Additional Categories: Recent Essays, Mike Conlin

Updated Response to Jay Todd

This is in response to Jay Todd’s post on Sunday entitled “ALL IS NOT TO BE BELIEVED. A MAGICIAN SUCCEEDS BY MISDIRECTION.” (see: Jay Todd's post)

Jay Todd states that “Mr. Pugh the District’s finance manager has indicated to this writer and to the public at BOE meetings that closing the Red Cedar School has saved the district money.” The calculations for this claim are located in the document at

Here

The calculations in this document indicate that the savings are ~$300k from closing a school and illustrates why ELPS is in dire need of a financial advisory committee. As a school board member who spent four years running ELPS into the ground making poor financial decisions and hearing me explain multiple times why these calculations are absurd, I would have thought Jay Todd might have educated himself with the basic financial tradeoffs associated with different school district configurations. Let me try one more time to explain the school closing issue in very simple terms.

Suppose there are two schools: School A and School B. Suppose the annual utility costs are $40,000 for each school. If the schools are both half full of students, then closing School A saves the district close to $40,000 in utility costs because having children in School B now go to School A is unlikely to appreciably affect the $40,000 in utility costs for School A. Now suppose we have the East Lansing situation in 2011 and both schools are full. Now closing School B does not save ~$40,000 in utility costs because to accommodate these displaced students, the district now has to add capacity to (close to doubling the size of) School A. This additional capacity will require heat and electricity so closing School B does not save $40,000 in utilities. Because utility costs are primarily a function of square feet and number of students, closing School B and adding on to School A will save very, very little in utility costs. The calculations in the posted document failed to account for this very simple issue and instead indicate that the utility savings from closing a school is $40,000. (See page 12.) This same point can be made about maintenance costs, janitorial services, building repair, copies and trash.

Let me now provide a simple example why the labor cost savings in the document are also silly. Suppose you again have School A and School B and each school has 3 classrooms of 4th graders – each with 30 students. Now suppose you close School B and move the children to School A but instead of having 6 classes, you hire two less teachers and have 4 classes of 45 students. Suppose the cost per teacher is $100,000. Closing School B clearly does not result in a $200,000 savings as is implied in the posted document. Keeping School A and School B open and reducing the number of 4th grade classes to two at each school would have the same financial results in terms of teacher costs. The problem is that the document mistakes a cost savings associated with closing a school with a cost savings associated with lowering education quality. (It is easy to lower costs by increasing class sizes and lowering education quality – ELPS has been doing it for years.) The same idea applies to principal and secretary costs. The point here is to illustrate that we should primarily care about how strategic decisions (like school district configuration) affect the student/teacher, student/administrator and student/staff ratios.

While there are no cost savings with closing a school, there are clearly issues involving number of schools and having sufficient number of students per grade per school. These issues were never analyzed in the past and a well-constructed financial advisory committee would have the skill set to do this.

Finally, let me state that for individuals with appropriate training, financial calculations associated with closing a school are relatively simple. Calculations associated with opening a school are much more complicated. If ELPS continues to have amateurs do the financial analysis, ELPS administration and school board will continue to make very poor decisions (propose a school bond that increases K-8 capacity by 7%, close Red Cedar, disregard any planning for the transition to a new configuration and spend over $8 million on a crazy middle school renovation). Our children will continue to bear the cost of these bad decisions.

Mike Conlin
MSU Professor of Economics

[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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