BoE’s Marchman: Added jobs at risk if economy sours

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The business of education is a partnership between our paying customers (the taxpayers) and our employees. The product that our customers demand is a highly educated student who is fully prepared for their next stage of life. Our paying customers are also our investors and they want a good return on their investment. That return comes in the form of economic development and rising home prices.

I cannot think of a single business that I have ever been involved with that had enough capital or enough revenue. There is never enough money to implement all of the great ideas generated by the incredibly talented and gifted employees of a corporation or of the Fayette county school system.

Most corporations do not have the ability to demand more revenue from their customers. As a result, they have to make choices and be very creative. They have to look very hard at programs and products and then cull the inefficient. They have to make hard choices about cancelling good programs or product lines so that they will have the resources to create even better programs or product lines. With better product, there will be more customers and higher revenue.

Every government entity should be bound by the same discipline. When property values rise, we all celebrate the economic prosperity – until we realize that local governments see this prosperity as an opportunity to extract even more revenue from their customers. It shouldn’t be that way. We all want to fund the proper functions of government and education, but we also want our governments to show some restraint.

The Board of Education, as a government entity, has an unusual situation in that about 90 percent of its budget is salary and benefits. Some would argue that the BOE is stimulating the local economy by hiring more and more people. A Keynesian economist would argue that more government spending is necessary in recessionary times to stimulate the economy.

That may be true, but the same theory requires governments to reduce spending in times of expansion. Excessive government spending slows down economic growth when the economy is “hot.”

There is also a “multiplier effect” theory in which a new job will create more economic growth than just the salary. In theory, the salary will be spent locally, trickle through the local economy, and everyone in the community benefits.

For example, if a manufacturing facility creates a new $100,000 position then that salary may result in $700,000 in economic growth. That is why we all get excited when a local company creates a lot of new jobs.

Does the same multiplier affect apply to government job creation? It may be there, but the multiplier effect for a government job is offset by the tax effect.

Job creation spurs economic growth, but high taxes attenuate economic growth. Most of the BOE jobs are funded by a combination of state revenue (mostly sales tax) and local revenue (mostly property tax).

That means for a $500 property tax “investment,” the BOE can hire a $1,000 employee. The employee is 100 percent taxpayer funded – it’s just two different taxes. For this group of employees, it can be convincingly argued that there is a net positive multiplier effect to the local economy.

Then there are employees that are 100 percent local funded. The state allocates each school system a certain number (and type) of employees based loosely on the number of students. The tax effect is much higher for these locally funded employees and as such are, in my opinion (and in the opinion of economist Frederic Bastiat) a drag on the local economy and economic development.

I am not against having more employees than the state allocates, more para-pros in the classroom for example, I am just imploring the BOE to make those decisions with eyes wide open to the economic consequences. How much economic growth are we sacrificing by having one or one-hundred “local only” employees?

I also wonder if the current revenue trajectory is sustainable. We live in a world of economic cycles and we are blessed to be on the growing side of the cycle this year, but that will not always be the case. To navigate the BOE business through these cycles, there are two levers to pull — property assessment and millage rate. The BOE also has about a month’s worth of expenses in reserves.

When the lever of property assessment is pulled back, the BOE should keep the plane on a comfortable trajectory guided by the number of students and inflation rates. The BOE should dial back millage rate in times of prosperity and then pull that lever back when the next real estate bust comes. That, in my opinion, is how a sustainable operation is run – use the available levers to keep the plane on a smooth upward trajectory.

I fear that on the current revenue trajectory, there are too many risks. The BOE risks losing customer support – no one wants to feel that they are paying more than what is reasonable for a product or service. If a potential customer feels that way, they may make other choices — other school districts.

Future ESPLOST money may also be at risk if current customers feel over-charged. The BOE may be risking future economic development – it is harder to attract employers to high tax districts.

Some employees’ future may be at risk – if we hire more than is sustainable, tough decisions will have to be made at the next economic downturn. I do not think that it is necessary for the BOE to bear these risks.

With these reasons, I have been seeking to persuade my fellow board members these past few months. While I was hoping to negotiate what I felt was a much more sustainable budget and millage rate for the coming years, the other board members were not persuaded.

The final vote was to reduce the total millage rate from 20.850 to 20.521, a 0.329 reduction. That is still about a 5 percent property tax increase.

The reason that we have five board members is that none of us has all the answers. We rely on the collective wisdom of each other; we rely on the input of our community of supporters and constituents.

I know that I represent the views of many in our community, but I know that I do not represent the views of all. This time, my views were not held by the majority, but we moved the millage rate a little bit in the right direction.

I believe that all five board members make decisions based on what they think is best for our community, our customers, our employees, and most of all the children we serve.

We will continue to disagree at times on how best to balance the needs of our various stakeholders, but we will keep moving in a direction towards providing a growing economy, merging creativity and excellence, and delivering a world-class education.

Barry Marchman

District 1, Board of Education

Tyrone, Ga.