Greenburg: a new approach to finance at Scottsdale Schools

According to a recent report, Arizona is among 12 states that have decreased its public education funding the most since 2008 — including continued property tax cuts and per-student funding cuts in 2017 — much to the anger of educators and business leaders alike.

Jann-Michael Greenburg

By the end of 2017, these 12 states were still collectively funding their public education systems on an average of 7 percent lower than in 2008, adjusted for inflation.

These metrics, however, do not account for the rising costs of services and goods schools require, which have rendered the 2008 funding benchmark itself inadequate for today’s challenges. Federal funding available to public education institutions has likewise dropped off, increasing financial pressures on public schools to both provide excellent, high-quality education opportunities to students on the one hand, and balance their insufficient budgets on the other.

In many ways, public education is suffering a slow death by attrition, and Scottsdale Unified School District is not immune to these changes.

Countless studies show that a well-funded public education system has many benefits. It attracts the best and brightest to serve our schools; schools often see increased efficiency and better student education outcomes; and it makes it easier to follow best practices for managing school districts (e.g., increasing the ability to hire respected professionals capable of carrying out independent internal and external audits to ensure resources are being used efficiently and decrease the risk of fraud, mismanagement, and other legal and ethical violations).

Notably, such benefits tend to increase property values – a factor which should entice any property owner, not just those with children in a district.

Unfortunately, reduced funding is unlikely to change soon and, even if it did, there is nothing to prevent a reversion back to it. SUSD is not a private enterprise. It does not sell a product. It does not charge for its services. A private enterprise can attempt to boost revenue by creating new products, but SUSD’s revenue is relatively uncontrollable by the district itself.

The district can raise additional funds through voter-backed bonds and overrides. These, however, are subject to the community’s appetite for increased property taxes and the willingness to entrust SUSD with such funds. Obviously, trust in our district has been woefully undermined by our current Governing Board, the administrators it has hired, and the fraud that has occurred as a result.

This increases the probability that such additional override and bond elections will be met with resistance. Additionally, SUSD must focus on improving current courses and creating new learning opportunities (e.g., introducing computer programing in every high school, creating vocational placement schemes, and focusing resources into math and English classes), which will not only set up SUSD’s students for success in later life but will also make SUSD the top education option for all families. The more students attending SUSD, the more funding SUSD receives from the state and other sources.

There is an additional opportunity for SUSD’s community to unilaterally raise funds for the district without having to go to the voting booth, raising property taxes, or waiting for our state to act.

Community members should create an endowment and annual fund for SUSD.

Just like any university or college, our community can form a charity whose purpose would be to aid SUSD and operate endowment and annual funds for the district’s benefit. The charity would be separate and distinct from the district — no members of the Governing Board, administration, staff, or teachers would be its board members. Instead, it would be run by professionals who have a background in finance, marketing, and other relevant fields to ensure that the endowment and annual funds were properly managed.

By eliminating the possibility of SUSD board members or administrators from having input into the management of the endowment as a part of the endowment’s bylaws, the endowment would not suffer from the taint of the mismanagement and ineptitude that permeates the SUSD’s Governing Board and administration. This should greatly limit any conflicts of interest, improprieties, or risk of unqualified individuals guiding the work of professionals.

The endowment fund is not an immediate fix to the district’s financial problems, but it is a step in the right direction. The endowment would obtain monetary donations, which would be pooled together and form the endowment’s principal (i.e., the money actually donated to the fund). This principal would be invested accordingly. Interest and returns earned on the principal would then be used to purchase goods, services, and other necessities for SUSD.

For the most part, what the money could be spent on is unlimited (e.g., books for Yavapai, supplies for Tavan, computers for Mountainside, air conditioners for Coronado, athletic fields for Saguaro, buildings for Copper Ridge, and so on). At a minimum, these funds could help pay for many of our district’s maintenance and operation needs, increasing the available funds to increase teacher salaries.

Once the endowment has a large enough principal and is earning market rate returns and interest, the return on the endowment could be used to “smooth” out changes in SUSD’s funding. For example, if drastic cuts to funding were made by the state, the fund could be used to make up the difference between what SUSD would receive and what it was receiving.

Endowment funds are by no means “sure” things. Investments they make benefit and suffer just like any other. That being so, endowments that are run properly and have well-honed strategies that can actually perform rather well even in poor economic climates. Moreover, they must be scrutinized closely to avoid “outside takeovers” by harmful individuals.

Endowments are long-term strategies. The initial start-up phase of obtaining donations, employing investment managers, and generating revenue on those investments might be small from the outset. However, as more donations are made to the endowment fund and more investments are made, the revenue generated can become quite substantial.

To accommodate the long-term side of an endowment fund, a separate annual fund should be established. Currently, SUSD receives over $1 million each year in monetary and physical (e.g., computers) donation. These donations would not compete with the endowment fund. Instead, they would complement it by providing immediate funds to schools when they need it the most.

Currently, monetary donations made to our district are turned over to the county treasurer. When the district draws on the money donated (i.e., the “principal”), it can only draw on the amount actually donated, not the interest. The creation of an annual fund would in effect increase the value of monetary donations made to the district by addition of the extra interest earned while the funds are waiting to be allocated to various school or district needs (even if that amount alone is relatively insignificant).

Such a plan is ambitious, but not impossible, and I believe the constituents of the district are ambitious in their desire to have the best schools available for the children. A number of public school districts and schools across the country have managed to establish successful endowment and annual funds.

SUSD is fortunate to have a strong community backing, which might make such a project a much bigger success than seen elsewhere. SUSD covers large parts of Scottsdale, Paradise Valley, and Fountain Hills.

It is no secret that SUSD is located in and services areas that are among the most affluent in our state. Combined, these towns have a total population of over 260,000, and have median household incomes of over $73,200 (median property value of $388,000), $151,000 (median property value of $1.2 million), and $73,200 (median property value of $346,000), respectively.

Additionally, the financial and professional sectors are some of the largest areas of employment for residents living in all three towns, and therefore sourcing the talent needed to see a project of this size through should not be too great a barrier. These factors, in addition to Arizona’s general charitable mentality, places SUSD in a strong position to be able to raise the necessary donations for the annual and endowment funds.

SUSD has a proud history of providing excellent education and long list of notable alumni that is comprised of professionals, business executives, entertainment executives and entrepreneurs. The SUSD’s community is strong and willing to lend a helping hand. A financially worthwhile endowment and annual fund are not only worthwhile, they are achievable.

Editor’s note: Mr. Greenburg is a Scottsdale resident and candidate for the Scottsdale Unified School District Governing Board

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