GMSD Tuition: Good Idea?

I have seen a lot of comments along the lines of “Pay your fair share” in the brief but intense discussion about the proposal to charge tuition for GMSD. Sounds like a reasonable argument to me. But when you go beyond the surface of that statement it quickly gets a lot more complicated. That is why I am asking for the Board of Education to postpone a vote on this subject until we see a solid analysis of the potential impact.

Let me show you where my questions arise. Contrary to popular belief, the City of Germantown does not provide the majority of funding for the district. In the FY19 budget, only 4.2% of GMSD’s revenues were projected to be from the City of Germantown. Nearly 90% of funding comes from the State and County sources. Did you know that those funding pools are based on student enrollment, to the tune of around $8,500 per student? Every transfer student into the district brings those funds with them.

First and foremost, GMSD is for the education of Germantown Students. Don’t confuse any of my discussions of school finance or transfers to be anything else. My concern is that we offer the best district for our community and to do that we need to make decisions that are financially responsible. We are talking about specific schools where we have some excess capacity. We should never allow transfer population to drive need for an additional facility.

The proposal I have seen is for tuition not to exceed $1,000 per family. Admittedly, I have not had time to do the level of research I would like in order to write about something like this, but given the vote is Tuesday I feel a need to share my concerns. If we charge $1,000 per student, more than 8 students have to sign up to pay that tuition to make up for the lost state and county funding of just one student leaving the system. In other words if more than 12% of transfers opt not to pay the fee and leave GMSD, the district loses money. If you charge a lower tuition fee that number just gets worse. At a $400 tuition level, only 5% can leave before the financial impact is negative.

This math looks break even at best to me and detrimental at worst. The upside potential is marginal and more analysis is needed to determine if it is worth the risk of losing the State and County revenues associated with these students. We potentially put programs like our Leadership, Fine Arts and Honors academies at risk. From what I am told there are over 200 transfer students in these programs at HHS. If the families of these students are unwilling or unable to pay tuition how will it impact these programs? The students in these academies are also high achieving and required to meet higher academic standards to transfer in.

Is this a good decision? I don’t know. We need more analysis on the financial and programmatic impacts of this proposal. Please join me in asking the board to hold off on approving this until we see a real analysis of all of the potential impacts of approving this proposal.

Additional thoughts on Financial Impacts:

For years I have professionally worked on costing and pricing. If you think back to those high school economics classes, you will remember conversations about fixed and variable costs. For the school district the fixed costs are buildings, administration, utilities and support functions that don’t vary materially based on student population.

The variable costs for the district are basically teachers salaries and other forms of direct student support. My quick analysis (like I said I would like more time to review this) shows that the district’s expenses are roughly 60/40 variable to fixed. The budgeted cost for “Regular Instruction” is $84k per teacher for salaries, wages and benefits. So, just ten transfer students cover the cost of a teacher and while class size varies based on grade, our lowest targeted optimal class size is 18 students for Kindergarten.

If 90% of our funding is tied to student enrollment and we know 60% of our cost is variable, that means each student who transfers in makes a positive contribution to the fixed costs of running our system. These are the funds that help make our academies and extra curricular programs available. Losing these students potentially shifts financial burden to the City of Germantown and your property taxes. If these are decisions we want to make as a community, then we just need to be sure we understand the impact before we cast a vote.

I am concerned that we don’t have the research to understand potential unintended consequences of this decision.

Author: Brian Ueleke

Husband, Father and Germantown resident. Offering experienced perspective with a Finance degree, MBA and 15 years of Corporate Finance experience in budgeting, operational and capital project analysis. View all posts by Brian Ueleke