Tuesday, September 16, 2008

School Board District 1 candidate oddities and redux on the fraudulent USU tuition tax study commissioned by the legislature to cook the voucher #'s

When reviewing a Paul Rolly article column this weekend for my discussion of District 8, I saw another little detail I had forgotten. He said that one of the authors of the USU tuition tax study from 2004 was running for state school board in District 1. Checking the state election site shows that Roberta Herzberg was supposedly "eliminated," but Sara Brate's rundown of the committee votes shows that she dropped out sometime previous to the June 2 committee meeting. The Rolly column is from April 16th, so she was assumably still in the race then. (No guarantees with Rolly...) Does anyone know what happened or why she dropped out?

FYI paragraph: District 1 incumbent Teresa Theurer was given a low score by the voting committee, despite getting 64% of the public vote in 2006. As that last link explains, Governor Huntsman in June just cut the person scored lowest by his biased committee from the ballot. I don't personally know anything about Teresa Theurer. Tom at KVNU, whose commentary I valued even when I didn't agree with him, said "Teresa is one of the most brilliant public officials I’ve ever met." I think a public official should be able to stand for re-election. A politically appointed committee filtering the candidates has corrupted the process in my opinion. You can listen to a podcast of a KVNU interview with Theurer on June 3rd here--I think I remember it's in the 2nd hour. I'll try and listen again soon and find what minute the interview starts.

So I found the entire process in District 1 frustrating. I'm personally glad Roberta Herzberg dropped out, and I want to highlight her study again. Here's the link to the study, posted at the Parent's for Choice in Education website. The authoring information is on page 4. The Executive summary begins by explaining the fight over vouchers and tuition tax credits in 2003 and 2004. It argues the Legislative Fiscal Analyst's (LFA) estimates of "switch rates" and cost are faulty. They said the LFA set the variable or marginal cost per student in 2003 at $2,793.

The next paragraph reads:
While these estimates flowed from the best existing information available under the time constraints, they were deemed inadequate to inform debate on such a critical issue. Based on the desire to have a more complete measure of the impact of the proposed policy change, Utah’s Legislative Management Committee commissioned this study. Over the course of the last four months, a team of scholars from Utah State University and Southern Utah University designed an econometric simulation model and qualitative studies of the effects of implementing tuition tax credits (TTC) on Utah educational demand and supply decisions. This report contains the results of that effort.

Translation: The legislature didn't like the truth so casually stated by their own employees (the legislative fiscal analysts), so they found some professors willing to cook up something a little more complicated. I don't know what exactly an econometric simulation model is, but I do know "qualitative" studies are not appropriate measures of exact figures of dollars and cents. "Quantitative" studies, as you might guess from the name, are the types of studies that can measure exact numbers and figures.

Focusing just on the financial aspects of the study, here is the cost conclusion from the Executive Summary (I underlined two sentences for emphasis):
A second consideration critical to good decision making with respect to this policy is an estimate of the costs associated with a student coming into or leaving the public school system. The legislature needs to know how much will be saved, at the margin, if a student is induced to make an educational choice outside of the Utah public school system. This value is known to economists as marginal cost. We estimate marginal cost per weighted pupil unit (WPU) in 2002-2003 to be $8,675 for the typical Utah school district. All Utah school districts have estimated marginal costs in the range of $7,700 to $10,350. It is a testament to the worthiness of our schools that they invest so much in each additional student. But, this is then also the value that the state and local districts can be expected to save from public school appropriations if a single student leaves a publicly funded school. This figure significantly exceeds per student spending (which was about $6,500 in 2002) or spending per WPU which was just under $6,000 in 2003 (economists call these measures average total cost). This is to be expected and is a natural result of school district managers doing their job well. The principle behind marginal cost is the cost of producing one additional (or one less) unit of output from the current level of production. This is critical to decision making because all decisions are fundamentally about changing production from one level to another. In this case, Utah is concerned about how a tuition tax credit will change enrollments and costs from their current level. The cost of those changes is the basis for making decisions. Costs not related to that change are irrelevant to a decision about change; however, they may be important for evaluating overall business performance.

The authors throw around the term WPU very casually. To clarify, the Weighted Pupil Unit (WPU) is the amount the state government sends each district per student. (Be sure to read the 2nd paragraph of that link closely. In 2002, it was $2116 per student. Substantially more is sent for Special Ed. and ESL students. The $6500 per student spending figure above is calculated the same way the Utah Taxpayer’s Association calculated the $7200 per student for the voucher debate last year: it includes money not gathered by the state and costs spent on every imaginable expense related to education, including fixed costs such as those incurred by individual districts to build new schools. For example, they divide out the $20 million or so being spent to build the new high school in Saratoga Springs into a portion per student for the entire state and pretend that the state somehow saves that money by a kid from St. George going to private school.

So follow the logic. In 2002, the state of Utah sent each district $2116 for the average student. If you throw in all of the federal, district, and trustlands money NOT sent by the state, but spent on fixed cost programs throughout the entire state, you can get a total spent per student figure of $6200. (See the argument about school construction above, or think of this: when the school buys a computer for a lab, it does not get a pro-rated refund when one of the hundreds of kids who use that computer leaves the school. The money is spent.) This study actually claimed that when that same student left the district to attend private school, the district magically saved $8675. Wow. It’s easy!! Just enroll kids in the district and pay them $2116. Then take the kids back out and charge the district $8675. Budget crisis solved, plenty of money to fund vouchers, and public school system severely weakened or dissolved as this “magic money” keeps being deducted. If you want to see the abstracted figures the authors use to destroy logic, it starts around page 45 of the study.

I saw the $1 billion savings figure floated regularly in PCE ads and in letters from Senator Valentine and Representative Curtis. (The blog that had the copy of the letter deleted all of its voucher stuff. Does anyone have a link or copy of that letter lying around? The one in the last day or two before the vote.) They were based on these lies. Many voucher supporters believe them still today. Senator Dayton never read the study. I'm doubting many other legislators did either. I used a strong word in my title and I stand by it: educational fraud.

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16 comments:

Anonymous said...

You are not being accurate. The WPU amount does not come close to including everything the state sends to districts. The WPU excludes Social Security, retirement, transportation, recent pay increases ("educator salary adjustments", block grants, etc.

The WPU covers slightly less than 60% of total Minimum School Program expenditures.

Some of the WPU money comes from local property taxes so it's not accurate to say that the WPU is just "state" money.

In FY09, state funding for the MSP will be about $2.5 billion. The WPU-driven amount is $1.8 billion

Anonymous said...

Your fixed cost item is misleading as well, especially when you say that a kid in St. George doesn't save tax dollars in Alpine. There are at least two problems with your line of "reasoning".

1. Vouchers were never just about "one" child but tens of thousands. So to say that you don't save any money when one child leaves is irrelevant anyway.

2. You say that construction costs are fixed, but where are the fixed costs of schools that haven't been built yet? Alpine is going to be spending hundreds of millions of dollars over the next decade or so to handle GROWTH. Fixed costs are not even an issue when we are talking about diverting growth.

Mr. Sirh said...

Here is what I know about Roberta Herzberg. She submitted a 3 page letter to the State Board Nominating Committee on April 11, 2008. Attached to the letter was a 3 page vita which listed her flawed voucher study among 13 other publications.

She was interviewed by the nominating committee at 10 a.m. on May 8th, 2008. Shortly after being interviewed I believe she withdrew.

Roberta at least took it more seriously than drop-out Leah Barker who didn't even submit a letter and wasn't interviewed. She was overheard saying, "It was just a joke." I love a good joke.

UtahTeacher said...

Mr. Sirh,

Thank you very much for that information about Dr. Herzberg.

Anonymous,

Thanks for commenting. Most or all of those other expenditures outside of WPU are not flexible or pro-rated per student. (e.g. Social Security costs, transportation, block grants, etc. don't decrease unless large blocks of students leave from one area.) So the WPU which is distributed per student is the only state expenditure that decreases when a student doesn't enroll in public school. I know the FY 2008 MSP was just over $2.5 billion:
http://le.utah.gov/interim/2007/pdf/00000363.pdf

I'm not sure about the WPU percentage, but if your numbers are correct that it's 1.8 of $2.5 billion, WPU makes up 72% of all MSP spending.

And it absolutely was and is about the cost of just "one" student leaving a school. The cookie commercial, the PCE flyers I have filed, and the literature I received from the legislature's lobbying group, Vote4One, all used the fallacious $5500 savings per individual student argument, yes, based on redistributing fixed costs like Saratoga Springs High School, to make their point.

The philosophical arguments for vouchers and eventual total privatization have been around for decades, at least since Friedman, been the subject of a national vote in the late 70's, and fodder for various debates and referendums in different states since 1988. The voucher rationale here in Utah was based on their false savings arguments and the notion of increased competition improving our "broken" system. The intro to the Herzberg study discusses those very issues. The wave of new kids overwhelming our system and vouchers being the last defense against massive tax increases was a last minute message change by the movement last October and bolstered by the Utah Taxpayer's Association scary movie.

The legislature's own fiscal analysts estimated 2000 something kids would switch the first year, and fewer than a dozen in subsequent years, while 20,000+ kids who would attend private school anyway would use vouchers once fully implemented at pure cost to the system. I heard legislators dispute that figure, and the study does as well, but they couldn't give reasons why the LFA's estimate had to be multiplied by 10 to reach acceptable switch rates. Plus, those switches have to all be from the same small area and grade to realize the savings they claim. The scatter-shot pattern of private school attenders does not divert enough students from individual areas within Alpine District to actually relieve the need for new schools to meet the growth in North and Northwestern Utah Valley.

Anonymous said...

You've switched denominators in your example.

Here are the numbers:

WPU = $1.84 billion
Total MSP = $3.12 billion
WPU = 59% of MSP

State funding = $2.5 billion which is not the same as but is a part of MSP funding.

Anonymous said...

No, it's not about "one" student because we are talking about thousands of students. Every cost savings in any enterprise, including business, could be dismissed if the basis were just "one" of something.

For example, if a company were to save costs by reducing material costs, the production manager could not say "we don't save money by cutting the material cost of ONE production unit". Of course, this would be fallacious since it's not just ONE unit we are talking about.

Anonymous said...

Your arguments about discounting the below-the-line items are not valid. Again, if you rely on the fallacious "one" student argument, you could dismiss any savings in any endeavor.

But again, it's not just ONE student we're talking about.

You parrot the UEA's "25 students from the same grade and school need to leave before there are savings" argument. However, this is not accurate as demonstrated by school consolidations in SLC and Ogden. Over time due to GRADUAL enrollment declines, these districts have been able to consolidate enrollment even though 25 students from the same grade and same school did not disappear all at once.

Moreover, in a growing student environment, we don't have to worry about base enrollments anyway.

UtahTeacher said...

Ouch on the math anon. I'll blame late night posting. =) I think it also came from the 2008 total being close to $2.5 billion. Which leads to an honest question: Where are you getting your current year's info? My link for 2008 shows a total MSP of just under $2.6 billion. Is funding really jumping 17% at the overall MSP level to $3.12 billion?

Thanks for making your points in a rational, respectful way. I don't think the question of marginal cost is a UEA driven issue. In fact, I was frustrated during the referendum media battles that the Utahns for Public Schools and others were not more specific about the funding problems with vouchers and debunking the Oreo lies.

As to the relevance, did you read the introduction to the study I am specifically addressing in this post? The whole argument of the study is that the individual marginal savings was $8675 per student. PCE still has it on their website because they stand by that number. The driving media piece of the Eyre's Oreo commercial was based on false marginal savings.

The cost of small numbers of students is the issue because all the realistic estimates of students switching because of vouchers were of small scattered groups. Each one makes school funding less efficient as we take large chunks of money that were allocated on a shared basis and divert them to a private school on behalf of an individual.

As you are kind of tacitly arguing, the only way vouchers save money for schools is if extremely large numbers of students leave allowing schools to release or not hire teachers, cut busses, buy fewer capital improvements--computers, tools, buildings, etc. All of the realistic predictions allow for very little of that. Scattered students leave, draining funds each time, while allowing for little to no cutting of costs. The marginal savings are basically a few bucks in paper until you can cut a teacher. Also, the size of the vouchers still made the financial loss bigger than the gain since you lose 30+ voucher costs before you cut the cost of a teacher. Finally, the specific bill last year allowing more grades of private school students to get a voucher each passing year was a further drain surpassing any estimated savings.

It seems to me, that you are arguing from a viewpoint of thousands of students fleeing the "horrible" public schools which does seem to reflect the current reality.

Barbara said...

Anon,
I think even Mr. Friedman would agree that Utah Teacher is correct that fixed costs are not included in marginal costs. At least, that's the way it was explained to me while earning a BA in Economics. Public education is a prime example of this because even if you have a student leave a public ed class, the system has to be ready and willing to accept that student back at any time--like the Woodland Hills converted to USC proves. Thus, a voucher student never reduces fixed costs.

This leads to another problem with the voucher proposal. Private schools would have been paid quarterly based on enrollment but School Districts would have still be funded on a one time enrollment picture of Oct. 1. So, if a school, like USC, went out of business during a school year, (instead of during the summer), the public system would get an influx of students without funding, marginal or otherwise. That is poor public policy making. Thank goodness voters said no thanks.

Anonymous said...

Barbara,

In the long costs, virtually all costs are variable. Friedman would agree on that.

Since Utah is experiencing tremendous enrollment growth, fixed costs even in the short term aren't really an issue. Where are the fixed costs for teachers that have not been hired? Schools that have not been built? Equipment that has not been purchased?

But even in situations with declining or stable enrollment, costs are not as fixed as voucher opponents would think. Several districts with declining enrollments such as Salt Lake, Granite, and Ogden, have consolidated schools which allows them to reduce costs that you consider fixed.

Anonymous said...

Teacher,

The high vs. low enrollment shift is speculative. A properly structured voucher (high dollar amount for low income and zero for high income) can shift significant numbers to private schools.

Regarding the specifics of the USU study, I'm not defending that.

My FY09 numbers come from the LFA's Appropriations Report.

Anonymous said...

Barbara,

I meant to start off my comments with "In the long RUN,..."

UtahTeacher said...

You can't count potential savings as though they are real. I can calculate right now how vouchers would take money from my school and my district while still having to be ready to re-enroll that kid later in the year if need be, as Barbara explained. The assertion that more money would be saved because thousands will leave if the voucher amount is raised is the real speculation. The potential savings from fixed costs of future high schools is a red herring when faced with taking funds from current, real fixed costs. No calculation I saw from any source during the voucher debate predicted wholesale private school enrollment shifts that would allow Alpine District or any other to consolidate schools.

And remember, the higher the cost of the voucher, the worse that marginal cost gets. Utah's HB 148 was presented and passed as saving money for the state on the marginal cost of every individual student. The national movement openly admits that vouchers are meant to defund public schools as a halfway step to complete privatization. The vague supposition that we actually save money at some future moment when thousands of public school students take vouchers, removing the need for future construction, is one I've only heard during the waning days before the referendum vote and here. It seems like wildly optimistic wish projection.

The said...

If Alpine is already on the record as saying they have to spend hundreds of millions of dollars on future schools AND THIS IS UNAVOIDABLE, you are taking money from future schools, of which you will need fewer.

You have to agree that forgoing or reducing future expenses is a savings.

Besides, Salt Lake, Granite, and districts nationwide have shown that these "fixed" costs are not as fixed as you say they are, even in areas with declining enrollment.

Based on your argument, businesses and government could NEVER implement new programs to avoid future costs because they have existing fixed costs, but experience shows this to be incorrect.

UtahTeacher said...

Hello the,
Thank you for registering a handle if you are the anonymous from earlier. It makes things much more clear I think.

A business or government can make many improvements with an initial cost, but longterm savings. (e.g. investing in a more efficient computer system, solar panels, etc.), but neither the financial facts nor the population switch estimates support that assumption with vouchers. The legislative fiscal analyst estimated 2000-3000 switchers statewide the first year and less than a dozen the 2nd year. The only justification for estimates higher than that was Rep. Daw saying at a townhall meeting that they had received 4,000 requests for vouchers at the beginning of the summer. He ignored the fact that the LFA estimated 2000+ current private school students would have incomes low enough to qualify, and 2000+ incoming kindergarten students from any income bracket would qualify. So the fact that many of those 6000-7000 estimated to take advantage of vouchers had called in was not proof the LFA's estimates were drastically low, and about 4000 of those would represent straight funding decreases, dispensing funds for students whom we current pay nothing.

So paying out thousands more than the marginal savings from each student who takes a voucher with the most likely scenario being NO schools go unbuilt due to the trickle of students who would switch is a business proposition no business owner would undertake unless they were trying to weaken said business.

Anonymous said...

Let's separate this into two separate arguments: general and specific

Generally, all of the arguments I made regarding fixed costs are correct if the voucher is properly crafted. That is, high enough voucher amount at the low end of the income scale and zero amount for high income ensures enough switchers without negatively impacting district schools.

Specifically, the voucher that was proposed probably needed to be modified to ensure enough switchers. Since the voucher was going to be phased in over a 12 or 13 year period, the Legislature could have made the requisite changes.

As it is, Utah will have to wait 20 years before vouchers are pushed again. By that time, most of the rest of the country will have implemented vouchers and we'll be able to see how their programs worked out.