September 3, 1997

Mr. Arthur Purves, President
The Fairfax County Taxpayers Alliance
P.O. Box 356
Fairfax, VA 22030

Dear Mr. Purves:

Thank you for your interest in the financial management practices of Fairfax County Public Schools (FCPS). Your letter of August 11, 1997, addressed to County Chairman Hanley and myself, posed questions pertaining to both the County government and the school system. This response will address only those questions pertinent to the school system.

You expressed a concern that roughly two thirds of the proposed $233 million school bond referendum is for renewals. You questioned the need for funding "school maintenance" from bond revenues. The school system has pursued a consistent, long-term approach to funding school renewals. This approach is articulated in School Board Policy 8258, adopted July 20, 1989, as well as 8260.1, adopted July 1, 1986. Copies of these policies are provided in Attachment A. Policy 8258 states, "It shall be the goal of the Fairfax County School Board that school facilities be renewed on a 20 to 25 year cycle." The policy goes on to state that a renewal should serve two purposes, namely, "to meet the needs of the educational program" and "to extend the useful life of a facility by 20 or more years." The first objective is essential to ensuring that students are taught in buildings suitable to accommodate state-of-the-art technology and provide reasonable access to individuals with disabilities. This objective also helps the system meet its cost containment objectives by providing for installation of energy-efficient heating, ventilation, and air-conditioning systems. The second objective, to significantly extend the useful life of a facility, meets the test of a capital improvement in accordance with generally accepted accounting principles. The fact that the school system views a renewal as a capital improvement is made explicit in Policy 8260.1: "A program for the renewal and updating of substandard older schools shall be an integral part of the Capital Improvement Program." Since your organization is concerned about tax equity, you may appreciate the fact that bonding for the renewal of a school spreads the tax funding burden among all the citizens benefiting from the facility services over its extended life span. A policy to fund a renewal in one year, in addition to prompting a tax rate increase, would compel current taxpayers to subsidize the benefits enjoyed by future citizens.

In your question about the operating budget, you sought an explanation for budgetary growth in excess of that attributable to inflation and enrollment increases. You identified "inflation" as the measurement provided by the Bureau of Labor Statistics to describe changes in the price of a hypothetical fixed market basket of goods and services of constant quantity and quality consumed by a typical resident of the Washington metropolitan area. In fact, the cost components of a public school system differ significantly from those in a typical ísconsumer "market basket of goods." Attachment B displays the "Public Elementary and Secondary School Price Indices" from 1975 to 1994. You may note that the mix of goods in the school íssystem market basket bears little resemblance to that of a typical household. You may also note that the rate of school inflation for the period from 1975 to 1994 was 217% [(166.8 ¸ 52.7 x 100)-100], an amount much higher than the Washington area Consumer Price Index (CPI) increase of 178% for the same period. Fringe benefit costs nearly quintupled in the

18-year period, while prices for library materials and textbooks roughly quadrupled. In fact, as the excerpt from the 1997 Universal Almanac (Attachment B) shows, "Expenditures on public elementary and secondary schools have been increasing faster than inflation in almost every year since figures were first kept in 1900."

Attachment C compares per-pupil expenditures for FCPS with those of the average Virginia and United States school systems for Fiscal Years 1975 and 1995. The rate of expenditure growth for Fairfax during the 20-year period was 397%, almost identical to the 403% growth for the average system in Virginia. The average system in the country experienced an increase of 336% in per-pupil costs during the same period. While this rate of growth was below that of Fairfax, it still dramatically exceeded the 183% increase in the national consumer price index for the 20-year interval.

Reconciliation of Changes in FCPS Operating Budget, FY 1975 to FY 1998:

The chart presented in Attachment D is designed to estimate the financial impact of significant factors underlying the change in size of the operating budget for FCPS during the period from FY 1975 to

FY 1998. The chart should be regarded as an overview which attempts to convey a sense of the magnitude of key factors impacting the budget. It is not a precise itemization of all factors affecting the size of the budget. A line-by-line explanation of the chart is provided.

FY 1975 Operating Budget:

The number "178.1" indicates that the size of the operating budget in Fiscal Year 1975 amounted to approximately $178.1 million.

Effect of 10.7% Increase in Enrollment, FY 1975 to FY 1998:

This factor is based on a comparison of the projected enrollment (also known as "membership") for Fiscal Year 1998 (149,830) to the Fiscal Year 1975 enrollment level of 135,348. There are 10.7% more students to be educated than there were 23 years ago. The number "19.1" on this line is an

indication that if enrollment in 1975 had been the same as it is now, then presumably the 1975 budget would have been 10.7% higher than it was. The figure of $19.1 million is 10.7% of the $178.1 million actual budget.

Effect of Inflation, FY 1975 to FY 1998:

The number "408.2" reflects the impact of 23 years of inflation on the dollar amounts presented on the first two lines of the chart. The Washington Metropolitan Area CPI-Urban data provided by The ísTaxpayer Alliance was used to arrive at a cumulative inflation rate of 207% for the 23-year period. The chart indicates that the Fiscal Year 1975 budget would have been $408.2 million higher if ístoday cost of living had existed at that time.

Effect of Pay Increases in Excess of Inflation, to Keep Pace with Regional Job Market Competition:

The expression "pay increase" as used here is broad, encompassing both wages and benefits. During the 23-year period in question, rapid escalation of FICA and health care costs prompted a rise in benefit expenses above and beyond the general inflation rate. Benefits costs accounted for the majority of the increase reflected on this line. A significant consideration in evaluating salary increases is the influence of market competition on employee recruitment. The chart in Attachment E, "Comparison of Average Salary of Classroom Teaching Positions," offers a perspective on the impact that some neighboring jurisdictions have had on salary expectations of our largest employee class. It should be noted that the data presented in this chart covers a 16-year period, from FY1981 to FY1997, as opposed to the full 23 years analyzed on the main chart.

Increase in Percentage of Enrollment Involved with Special Education Self-Contained:

A higher percentage of students require placement in special education self-contained programs today than was the case in 1975. The applicable percentages are 6.40 and 1.52, respectively. The number "58.9" on the chart reflects the cost, in millions of dollars, of educating an "extra 4.88%" of the student population in this program in FY 1998.

Increase in Percentage of Enrollment Involved with Special Education Resource:

The percentage of the student population enrolled in this program was 4.96 in 1975, as opposed to 11.82 now, an increase of 6.86. The cost of educating the additional 6.86% is estimated on the chart as $41.4 million.

Increase in Percentage of Enrollment Involved with the English as a Second Language (ESL) Program:

The percentage of the student population enrolled in this program has grown from 0.61 in 1975 to 6.34 in 1998. The cost of educating the additional 5.73% is estimated on the chart as $22.2 million.

Increase in Percentage of Enrollment Involved with the Family and Early Childhood Education Program (FECEP):

The percentage of the student population enrolled in this program increased from .092% in 1975 to .641% in 1998. The cost of educating the additional 0.549% is estimated on the chart as $5.9 million.

Reduction in Elementary School Class Sizes:

In response to state regulations, FCPS enacted the following reductions in class size during the 23-year period:

Grade

1 from 28-1 to 24.5-1
2 from 28-1 to 24.5-1
3 from 30-1 to 24.5-1
4 from 30-1 to 24.5-1
5 from 30-1 to 26.5-1
6 from 30-1 to 26.5-1

The chart estimates a $20.0 million impact in Fiscal Year 1998 attributable to the fact that proportionally more teachers are needed than in 1975 to achieve smaller class sizes.

Cost of Restructured Secondary Instruction:

This item represents a number of changes made in the íssystem approach to middle and high school instruction. The most significant components of these changes were the implementation of the seven-period day and the switch to block scheduling. The current cost impact of restructured secondary instruction was reported as $27.1 million in the Fiscal Year 1998 Approved Budget.

Elementary School Guidance Counselors:

In the late 1980s, the State required that elementary schools be staffed with guidance counselors. The cost of this service was listed as $9.0 million in the 1991 approved budget document, and the $12.8 million estimate listed on the chart for 1998 was derived by factoring in subsequent changes in enrollment and inflation.

Special Needs Schools:

The cost of this program was listed as $9.7 million in the Fiscal Year 1998 Approved Budget.

Grade One Reduced Ratio:

The FY 1998 Approved Budget reports a cost of $6.3 million for this program.

Student Intervention Program:

This program, dealing with the provision of alternative high schools, substance abuse prevention, and related matters, is listed at a current year cost of $17.8 million in the FY 1998 Approved Budget.

Foreign Language Immersion Program:

This program is listed in the Fiscal Year 1998 Approved Budget at a cost of $1.2 million.

Elementary Magnet Schools:

This program has a current year cost of $0.6 million according to the Fiscal Year 1998 Approved Budget.

Focus Schools:

The Fiscal Year 1998 Approved Budget reflects a cost of $0.8 million for this program.

International Baccalaureate Program:

This program is listed at a cost of $0.5 million in the Fiscal Year 1998 Approved Budget.

Effect of Increasing Bus Fleet Size in Proportion to Ridership:

Throughout the 1980s, a number of policy decisions with respect to bus stops, transportation of students to magnet schools, and related matters combined to prompt an increase in the size of the school bus fleet in proportion to the number of riders. The estimated annual cost impact attributable to this incremental level of bus service is shown in the chart as $5.9 million.

Effect of Textbook Costs Rising Faster than Inflation:

Attachment B shows a high rate of cost increases for textbooks since 1975. This trend has been primarily attributable to rapid escalation of paper prices. The average textbook allocation per student in 1975 was multiplied by the general inflation rate of 207% and then compared to the average allocation in 1998. The excess amount was multiplied by the number of students to arrive at the $10.2 million amount reported on the chart.

Effect of Instructional Supplies Costs Rising Faster than Inflation:

Due to the high rate of paper inflation, as well as incorporation of some higher-cost instructional materials (such as VCR tapes or compact discs), this cost area has outpaced inflation by roughly $8.9 million over the past 23 years.

Effect of Increasing Secondary School Class Size by One:

In response to recessionary pressures a few years ago, FCPS increased average class sizes for middle and high schools by one. The impact of this move is estimated as a $5.4 million reduction in FY 1998.

Costs Associated with Expanded Technology Use:

The use of technology in educational service delivery was not extensive in 1975. Therefore, even if the cost of such use had grown in proportion to inflation and enrollment trends, it would amount to a fraction of what is being spent today. The cost attributable to the increased prominence of technology over the past 23 years is estimated at a level of $38.7 million.

Effects of Increase in non-Teaching Positions in Proportion to Enrollment:

The ratio of non teaching positions in proportion to enrollment increased over the past 23 years, primarily due to an increase in support expertise for curriculum programs. The number of non teaching positions in FY 1998 (minus technology positions factored into the preceding line) was measured against the number which would exist if the 1975 ratio of non teaching positions to enrollment existed today. The payroll cost per position in 1975 was then adjusted for inflation and multiplied by the increased number of positions to yield an estimate of $25.6 million in FY 1998 attributable to the proportional increase in staffing.

Transfer to County of Cost of Private School Placements:

Some ístudents needs cannot be met with the resources of FCPS. Private sector service providers are used in such cases. A few years ago, the cost burden of this program was shifted to the County on the advice of legal counsel. Based on the amount spent in FY 1975, adjusted for inflation, this change has reduced the cost of FY 1998 operations by $7.2 million.

Portable Classrooms:

Portable classrooms, to address the problem of individual school populations in excess of capacity, were unnecessary in FY 1975. This year, they will cost $2.5 million.

Increase in Excess of Cost of Inflation of Electricity, Natural Gas, Telephone Service:

Costs for these critical utilities have increased at a faster pace than inflation over the past 23 years. The combined effect on the current year budget is $16.6 million.

Professional Services:

The annual outlay for professional services (i.e., attorneys, accountants, architects, engineers, consultants, etc.) has grown faster than the rate of inflation. The effect of this trend is to add $5.3 million to the cost of FY 1998 operations.

FY 1998 Operating Budget:

The number "1,139.3" indicates that the budget for Fiscal Year 1998 is $1.1393 billion.

Conclusion:

I hope this information has been helpful. If you have further questions, please feel free to contact me.

Sincerely,

Kristen J. Amundson

Chairman
/pg

Attachment A had photocopies of:

School Board Policy 8258, "Facilities Design and Construction: Building Renewal and Infrastructure Maintenance"

School Board Policy 8260.1, "Facilities Design and Construction: Building Evaluation and Renewal"

ATTACHMENT B

Attachment B had photocopies of:

Table 258 ("Public Elementary and Secondary School Price Indexes: 1975 to 1994") and

Table 259 ("Finances of Public Elementary and Secondary School Systems, by Enrollment-Size Group: 1990-91")

from an unspecified source, probably the Statistical Abstract of the United States

It also had a photocopy of page 245 from the 1997 Universal Almanac.

COMPARISON OF COSTS PER PUPIL, 1975-1995

(1) Source: 1977 World Almanac
(2) Source: Fiscal Year 1975 Adopted Budget, Fairfax County Public Schools
(3) Source: 1997 Universal Almanac
(2) Source: Fiscal Year 1995 Adopted Budget, Fairfax County Public Schools

RECONCILIATION OF CHANGES IN FCPS OPERATING BUDGET, FY 75 TO FY 98

	Cost (millions of dollars)
FY 75 Operating Budget	178.1
Effect of 10.7% Increase in Enrollment, FY 75 to FY 98	19.1
Effect of Inflation, FY 75 to FY 98	408.2
Effect of Pay Increases in Excess of Inflation, to Keep Pace with Market Competition	207.6
Subtotal	813.0

Changes in Composition of Student Body:

Increase in % of Enrollment Involved with Special Ed. Self-Contained	58.9
Increase in % of Enrollment Involved with Special Ed. Resource	41.4
Increase in % of Enrollment Involved with ESL	22.2
Increase in % of Enrollment Involved with FECEP	5.9
Subtotal	941.4

Expansion of Services:

Reduction in Elementary School Class Sizes	20.0
Cost of Restructured Secondary Instruction	27.1
Elementary School Guidance Counselors	12.8
Special Needs Schools	9.7
Grade One Reduced Ratio	6.3
Student Intervention Program	17.8
Foreign Language Immersion Program	1.2
Elementary Magnet Schools	0.6
Focus Schools	0.8
International Baccalaureate Program	0.5
Effecting of Increasing Bus Fleet Size in Proportion to Ridership	5.9
Subtotal	1,044.1

Effect of Textbook Costs Rising Faster than Inflation	10.2
Effect of Instructional Supplies Costs Rising Faster than Inflation	8.9
Effect of Increasing Secondary School Class Size by One	-5.4
Costs Associated with Expanded Technology Use	38.7
Effect of Increase in Non teaching Positions in Proportion to Enrollment	25.6
Transfer to County of Cost of Private School Placements	-7.2
Portable Classrooms	2.5
Increases in Excess of Inflation for Electricity, Natural Gas, and Telephone Service	16.6
Increase in Excess of Inflation for Professional Services	5.3
FY 98 Operating Budget	1,139.3

COMPARISON OF AVERAGE SALARY OF CLASSROOM TEACHING POSITIONS

JURISDICTION	AVERAGE SALARY FY 1981	AVERAGE SALARY FY 1997	PERCENT INCREASE, FY 81-97
FAIRFAX	21,468	44,924	109.3%
ALEXANDRIA	22,659	46,059	103.3%
ARLINGTON	23,369	47,116	101.6%
LONDON	14,327	39,343	174.6%
PRINCE WILLIAM	17,992	40,173	123.3%
NOVA AVERAGE	19,963	43,523	118.0%
FAIRFAX AS % OF NOVA AVERAGE	107.5		103.2

SOURCES:
"Statistical Data On Virginia Public Schools," Virginia Dept. of Education, 1980-81, 1988-89
"FY 1997 Metropolitan Area Boards of Education Guide."