This is a topic that has come up a lot recently.
During my working lifetime I've worked at all levels of management for private companies. I've started, grown and sold my own businesses. I've consulted for failing/changing businesses. Done marketing, day trading, union negotiations, arbitrations, written legal documents, done political consulting and I’m sure I’m forgetting a few. My non-management work consisted mostly of telephony/data.
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I will provide references for my statements, (unless it's something obvious or easily researched yourself). Any rebuttals should meet the same criteria.
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Are private schools better: No, not necessarily. There is a concept that I have employed with many struggling companies and you will notice is employed by many of your favorite companies. More money = Better quality, which isn’t always true. Apple employs this regularly, however with Apple I believe it really applies. It’s a marketing trick that usually works, it often works for private schools.
Typical private school positives – a lower teacher/student ratio, smaller class sizes, competitive atmosphere. Testing appears better.
However some of the major positives not thought of is that you don’t have many of the same government regulations intruding on the curriculum. People who don’t know about education running the system. What does the govt. know about education? In the town, you have the school committee, making most of the decisions, buying curriculum, controlling the SI (Who in Westford is also not an educator) Let me say, that is a brilliant concept. Let’s run all business like that. People who have no experience in and industry…let’s have them in direct control…smart.
Private school negatives – Expense, average nationwide expense, is between $16k-$19k [1] That is per year, per child. They often test well because they are allowed to choose students. Aside from that there is a direct correlation between socioeconomic status and school performance. If you are wealthy enough to afford private school, your kid is probably pressured to do well in school. If private schools were forced to take on special needs kids, or the poor, they would not fair well on “paper scores.” So “test scores” aren’t an apples/apples comparison. Private school teachers are often not as educated as MA public school teachers. If they are, it’s usually 80% of staff. This is how they are able to pay teachers less. But in MA, tuition to a good school is over $30k per year, per child, tuition. MA public school teachers are required by law to get a Masterss degree, at every grade level. Public schools aren’t. So on average, the teachers are not as educated. [2]
People often cite how private school teachers aren’t paid as well as public school teachers, neither do they often have the same education, same number of work days or requirements to meet. And the degree can’t be overstated. Education level must be commensurate with compensation, or the entire college system and every industry it affects falls apart. Why go be a doctor for $40k a year? You won’t. We need doctors. The balance of the system cannot fall apart w/o severe consequences. So in my assessment, private schools are not “better.” The criteria that “shows” private schools as being better is just much different than a public school. The only thing they usually have is class size student/teacher ratio, but is that worth $16k minimum? Per year, per child?
How it works financially – People want to privatize schools to lower taxes and better education. However it’s not financially possible, nor necessary in Westford.
Average Westford property tax is $7100 for the average home price of $440,000 [3] But, let’s up that a bit, let’s use a property tax rate of $10k.
Your public school cost is very close to half of your total budget, which means if you cut it, your property tax gets cut in half. Congratulations! Your property tax is now only $5k. That gives you money to send your kids to private schools. However $5k doesn’t buy much, it certainly isn’t going to buy you tuition into an existing private school. And what if you have more than one kid? If you had 2 kids you would only have $2,500 to spend. Three kids? $1700? As you will see with the math below, it is absolutely impossible for any school to meet such criteria.
Let’s be very general, the average “child per family” count is 1.31 [4] That means in order to match the $5k you saved on property taxes you have $3900 to send your kid to a private school. What sort of private school are you going to be able to send your kids to for $3900? That has to include bussing, buildings, books, compensating all the people in the system, programs etc.
There is about 5200 students in Westford. If we multiply that number by the $3900 we have to spend per student it equals $20,280,000. That’s a pretty fair number because I’m including all Westford averages. So you’ve managed to cut your taxes in half, but also cut your education costs in half. That’s amazing…and impossible. One of the few “genuine” positives of private schools, is student/teacher ratio. Westford currently has @370 full time employees. Let’s up that to 400, afterall we need the lower class count that private schools provide. (Not that 400 would even touch that number)
400 employees, and $20,280,000. Ok, we can now pay our entire staff, an AVERAGE of $50,700. However, now your $20M is all gone. You haven’t paid for ANYTHING else. No health care for your employees, no after school programs, bussing, special education, the list is endless.
However, to pay someone in the private sector, costs the employer, with all the taxes they have to match and/or pay @ 20% of that gross. [Personal experience] That means to pay someone $50,700, it costs the employer $60,840. BUT, we don’t have any more money. So we have to cut gross wages to make up that 20%. Let’s see what the average we can pay our people is. It’s @ $43,200…gross, no health insurance. This includes all your teachers, admin etc. Since we know admin makes a lot more, teachers aren’t going to make very much, and they get no health insurance. Not to mention that number above? That’s gross wages...before taxes. After taxes they will earn about $38,000. Remember we’ve only managed to pay our people, NOTHING else. What teachers are going to work for $38,000 a year with no health insurance? Only subpar teachers, that’s who. There will be no advanced degree teachers in that system. I thought we were moving to a higher quality system?
Another thing I didn’t include (intentionally) is that 52% of Westford residents do not have school age children [5]….let’s call it 50%. That means that I’m not going to be paying for your kids to go to school anymore. Afterall, why should I. You chose to have kids not me, they are your responsibility not mine, you should pay for them right?
So 50% of Westford with no school age children. That $3900 we figured before for, that’s all on you. Every year, every child. Remember you only saved $5k on your property tax. But any more than 1 child and you lose. Unless each year you can manage to send them to a private/privatized school for $2,500. What if you have 3 or more kids? Yikes. That $5k you saved on property tax isn’t looking very long now.
There is a reason even the cheapest private schools charge AT LEAST $12k per year, per child. That is the LOWEST priced private schools. Charter schools are paid a voucher for approx.. $10k so that doesn’t satisfy it. But, for a moment, imagine that. The public schools are less expensive and even the cheapest private schools cost more. By what means are private schools automatically just be able to knock $4k off their per student price? Private schools do not have some magic money genie. I haven’t even included the fact that a private school needs to make a profit. And no one is going to go through all that effort for less than $2,000,000 a year. You’ve now reduced your funds even further. It is financially IMPOSSIBLE.
What happened? Forget most of the math above, even though it is sound. Let’s assume that private schools need the same funding as a public school, which in Westford is about $9500 per student, and $50m. That is a fantastic number per student. In remember that number, $9500 per student. Let’s talk about that for a minute.
Say you needed to employ daycare for your kid, even up to the age of 18. What would that cost? In MA the going rate is $12.15 per hour [6]
So let’s say they were only in daycare for 32 hours a week, that = $389 per week. We all know that day care is always much more than 32 hours a week because most of us work a 40 hour week and then there is travel time etc. But let’s stick to the pretend and conservative $389 per week, PER KID. That’s each week in daycare, not yearly average, not 52 weeks a year, just each week you use them.
$9500 per kid divided by the number of days they are in school (180) = 36 full weeks. The weekly cost, again, just for the weeks used, is $264. And it doesn’t matter how many kids you have, that price stays the same. Massachusetts…rated as the best education in the whole USA, and Westford, one of the best school districts in that state. Daycare =$389 per kid. Education = $264 any amount of kids. We are giving our children some of the best education available for $125 less per week than daycare.
Here is where people lose me in their ideaology. Daycare is a private industry, but they need to make a profit and cover payroll taxes. They need to run a profitable business. Steven has the idea that with private schools (as if vicinity didn’t play a role) if you don’t like it, you can just choose another school…like Daycare. Daycare workers in MA make $12.15 an hour. It will fluctuate a little but from place to place, but it’s negligible. You are not going to find a place offering the same quality of service substantially cheaper. Because they all will have similar bills and fiscal obligations to meet. Steven thinks a private school system is going to operate cheaper than the existing one does (see below) and get your kids one of the best education for about half of what daycare operates at. Think about that, a big school system, thousands of kids, busses, books, employees with masters degrees, and you have to beat a tiny little daycare operation by half. Thinking people, does that seem possible? I’ll explain below why private brings cost up.
Your kids get some of the best education in the whole USA for $264 a week, $53 a day (no matter how many kids). If it was a 32 hour week, that’s $8.83 per hour. That is your cost. You have the school district educating your children for just above minimum wage ($8.00) [7] If you have two, three, four children…divide that $8.83 an hour by the number of kids. For people like Vinnie, who I believe has 3 kids, he is/was paying less than $3 an hour for them to go to school. Daycare would cost him 12X as much. Think of what other services you could purchase for $3 an hour. For all you people saying we give them $52M reasons, they don’t need more money, to do their job and be happy, and that the schools are breaking our budget etc. Cry me a river you clueless, unappreciative pawns. Boo hoo, you have absolutely no right to complain. Your cost is less than a babysitter, and you have the rest of the town taking half the hit to get your kids the best education possible. People in that category are outraged? You think the school should get no more money? Teachers can’t get raises because the school gets enough? You have never taken the time out to think about how the money breaks down, yet you are quick to pass loud, boisterous opinions with the sort of bluster and flare that garners more outrage. You make out like bandits.
So among the best education in the USA, it can’t be done for significantly cheaper, and the only people who seem to be unhappy with it are the people who are getting all the advantages. You think you can beat what we have here. Show me the math. I don’t care about the reasons, I’ve explained that private schools aren’t all that when they have to handle EVERYBODY. Show me how you are going to beat $8.83 an hour at our education level and I want a reason why we are even going to mess with it.
Back to the previous point, numerous things happened when you went private.
· You introduced the need to make a profit and with the amount of work involved, NO company is going to bother unless they can make, AT LEAST $2,000,000.
· You’ve introduced @ a 7% payroll increase. On 50m 7% is $3,500,00. So you’ve created a debt of $5,500,000 that needs to be made up in the cost.
· That cost is also no longer shared between all Westford residents (socialism) it’s only on the parents. Essentially doubling parents cost.
· That cost is also now per child, instead of a flat rate of $8.83 an hour no matter how many kids. Parents costs are already doubled, now they are per child. So if you have 2 kids, your contributions to the school system have quadrupled. If you have more than 2 kids, I feel bad for you.
I don’t care what endowments you get, grants, vouchers. You are not going to make those numbers. People who want to argue with me about capitalism, go for it. But just remember, capitalism, maneuvering, manipulating, using loopholes etc, is how I made my bones. I’ve studied it in theory, I’ve molded it in my hands, I get paid by large companies with brilliant minds to come in and help them fix their model. Do not try to argue with me until you can beat the above pricing. Privatizing must work financially to be employed, I’ve given you the numbers above. At every step they are EXTREMELY conservative. Check them yourselves. Why do you want to change that system? You think a private school is going to beat close to minimum wage while giving us a superior education than what we have? Let’s see the math. Put up or shut up. A socialist system is the only way to make school affordable for the masses, for the future of our children, to get everybody the best education the masses can afford. And I don’t hear the people with no kids complaining about it. It’s usually parents who are getting an unbelievable deal complaining about the system.
But we have private schools already- This one can be short. Look at the prices of the private schools and what they include. It’s much higher than what you contribute to the Westford School System, especially if you have more than one kid. Why is that all of a sudden going to change? How is the private school system going to start beating private daycare prices by half (that’s what it would take to make it worth it) and continue to offer exactly what you currently get?
Private schools already exist for the rich. The people who can afford a large premium for the few positives a private school offers. Look at what those private schools charge, per year, per child. You will find that it’s far higher the 50% of your property taxes that you are complaining about. Privatizing the entire system will cost parents greatly. If those parents could afford it, they would already be taking advantage of the private schools, who exist on the backs of the public schools. The reason private schools work now comes down to basic economics (capitalism) There is a small market and someone to sell product to that market. You have the money to pay $20k per year, per child..more power to you.
The existing system fills the need of both the rich, the middle class, and the poor. For starters that’s a pretty good system. Public schools sprinkled with some private = Good. Putting all the strains of a public school onto private schools diminishes the only advantages of a private school. Since we have a system that serves everybody here in Westford…serving the poor, middle class, and the rich really well. What reason is there to change it?
Schools and pensions are breaking us: I showed you the math about the schools above. Schools are not breaking you. I’ve been screaming that since day one. But people don’t care to do the math, to weigh and measure, to examine and compare. All they see is $52M and say “that’s a lot of money.” No offense meant to anybody, but that’s stupidity.
Pensions: I love this one. I group it right in with Tort reform, 401K’s, the drug war, and dirty politics. Tort reform was allegedly the cause of high insurance rates, we needed to pass laws against it. People were scamming the system (e.g. the Mcdonalds “Hot Coffee” incident, in which everyone jumped to conclusions without looking at the facts) But you know what, in reality, scammers were not breaking the system. Companies wanted more profits, political influence was used, tort reform passed in many states. Health care went down as suspected….err, woops, health care went up! malpractice insurance went up. You know who saved money? The companies who were pushing the laws through. Private companies, capitalistic companies. They increased profits, the rest of those people, didn’t get what they were promised. They got the opposite. Why? First because that is what capitalism IS. Capitalism is profit making, and anything that can be done to increase it, whether it be above board or shady. Two - Because nobody bothered to look at the statements being made. To take what someone was touting as the truth and see whether or not it was really so. Both the left and the right are great at creating talking points that invoke emotion. That is what marketing is all about. So they get people fired up and the statements spread like wildfire without anyone seeing if it’s even really true. People who think politicians are crooks and corrupt, that may be so, but they are allowed to be because the rest of us are too busy, lazy or stupid to call them on it.
The War on Drugs. Trillions of dollars wasted, millions of non-violent drug offenders incarcerated, in some states for life for three small drug charges. USA jails more than any other country. We have more prisoners than China, Russia, any country you choose to name. Drug use has increased above the rate of population growth. Drug use has increased during the Drug War. What HAS the War on Drugs accomplished? It’s taken millions of non-violent offenders and made them felons for life, altering their prospects forever. It’s taken parents away from children, creating single parent homes which has it’s own repurcussions. It’s ruined families, turned people into worse criminals than they were before entering prison. It’s a system that now feeds itself, to the detriment of society. It doesn’t work, yet we keep on doing it. The War on Drugs does not do as promised, in fact, just like tort reform, it’s hurting society in a huge way, yet we continue it. Brilliant.
Pensions are much the same. People complain they are breaking the system. Our taxes are crazy high because of pensions. We need them to go on SS and 401ks like everybody else. Alright, let’s look at it. And I don’t care about other state municipalities, a tiny bit of research will show you they are all catching up. I will talk about Massachusetts, specifically Westford.
We will operate under the assumption that all of us would prefer a pension over SS and 401ks right? Right.
In MA someone found that the average pension contribution was 7%. The reason for this is that the laws changed in 1996-2001 forcing many/most public employees to contribute 11% towards pensions. Employees prior to ‘96’ were grandfathered in to the old rates which brings the average down. I don’t really care about that. Steps were taken nearly 20 years ago to insure the future is much more in line with reality. I’m not going to declare pensions system broken when work is clearly being done to rectify it. So it’s now 11%, sometimes a little more, sometimes a little less, but 11% is a more than fair average. That money is contributed completely by the employees. The town/states are exempt from matching contributions. That is one of the ways the public system can do what they do so cheaply. They are non-profit, and they aren’t subject to the same payroll taxes.
This is not the case with private companies. 12.4% of your gross is contributed to SS. However, YOU only pay half of that. Your employer pays the other half…how nice of them. So currently, pensioners pay 70% more than you do into their system. So before you go pulling out statistics showing how the poor average Joe fairs in comparison to the lucrative pensioners, keep in mind you are not contributing ANYWHERE NEAR the same amount. Expect the results to be in favor of the pension system.
Let’s use some apples/apples (or as close as we can get) This table done by a non-partison think tank shows SS input vs. output.[8]
We will leave medicare out of it because MA teachers have the same system as private sector in that regard. For simplicity we will use averages for a single man. This man retired in 2011 at age 65 at a final Salary of $43,500. This is a national average and obviously lower than Westford’s general salary and contributions but it’s as close as we can get. Keep in mind the table includes total SS contributions, that means it includes the 6.2% your employer put in for you. Well, we don’t want to use that number. Municipal employees contribute 100% of their total requirement. So let’s use 100% of what the average worker contributed. That’s $149,000 to SS and average lifetime benefits of $266,000, retiring at a yearly income of $17,500.
So right now average SS retires at a yearly benefit of $17,500. MA pensions retire at an average of $27,500 [9] Pensioners retire at 57% higher pay. They contribute 70% more. That number is off to help fund future retirees.
BUT with SS, when you average in that your employer is also contributing 6.2% towards your retirement, total contributions towards SS are $299,000. You get back $266,000. You heard me right, including you AND your employers contributions. So $33,000 went in for future retirees. In neither system did they contribute what they got out. But in one system a lot more was contributed but a lot less paid out. That is not because it’s funding the future, it’s because congress borrows from it, directly or indirectly all the time. There is supposed to be interest growth, inflation growth etc. Why would we switch to SS? This is the “better” option, the “fairer” option, the “moral option? It should be clear to anyone with a brain that this is a stupid option. [10]
So what happened to that $33k? After all, your investment is supposed to grow with interest and inflation and you didn’t even get back what was put in? Yours went the other direction.
This is why companies switched entirely to SS and 401K’s. It’s to save money, that’s what capitalism is all about, money. 401K’s are supposedly a helpful retirement vehicle…for the good of the employee, how kind of them. 401k’s are a scam. You fund 100% of it (Employer matches are a tax deduction so even the most generous match is small for the company. You take 100% of the risk, your investment options are limited, often left up to you (what do you know about investing) and most often consist of high fee investment vehicles. Your employer gets kickbacks for choosing the investment options they do. They are solicited just like medical companies solicit their latest medication to Doctors offices. How many of you have had doctors visits and seen a medicine rep walk in. They buy the doctors lunch, give free samples etc. Why? Because they are trying to “buy” the doctors to use their medicine, because it makes their company money.
401K’s are an investment vehicle by which the investment company makes money, a lot of money, from all of the fees they put on you. 401k’s are not a help to you, they are a help to the company. Capitalism at work, anywhere you can make a buck you will find these types of “schemes.” Are all these aspects of capitalism that I’ve mentioned concepts we want introduced into the school system?
Take a compound calculator and see what your investment grows to with a 2.5% fee vs. .5% The difference is hundreds of thousands of dollars. That’s hundreds of thousands of your hard earned money, going to investment companies in fees. Compound interest makes your investment 67% less by adding 2.5% fees. That money goes to investment companies who wined and dined their way into your company. It’s a great system for capitalism. Your employer saves a ton of dough, another company makes a ton of dough. All off your dollars. I would invite you all to watch the documentary “The Flaw” which will explain it a lot better than I can sum up here. It’s available on Netflix, possibly even on streaming, not sure. Side note > [11]
Now, of course I am not including your employer contributed for you because that is an not an apples/apples comparison. I’m comparing what you personally contribute and get paid out vs. what pensioners personally contribute and get paid out. The fact you’re your employer contributes for you is really a socialist arrangement. But currently between your employer and yourself, you are contributing almost the same amount towards whatever retirement mechanism you are enrolled in as a MA pensioner.
The interesting thing is that municipalities are not subject to this matching law. In MA, workers since 2001 contribute 11% of gross wages, with nothing given by the town. This is part of the privatization problem. The moment you privatize, the private company must match social security at 6.2% On total gross payroll that is a large sum.
People claim the pensions are breaking the State. I dare you to ask them, how much it’s breaking the State. I mean really, “you” say it’s breaking the State/taxpayer. Ok, how much are we being raped because this is crazy!?!?!? Is it like 10% of the budget?!!? How much? For teachers, in the entire state, it’s about $20m. [12] Go to open checkbook link – education. We are talking pennies on your overall taxes. That is what is breaking the state? No. Is it breaking your town? No. But as far retirement amounts, were you to contribute 11% of your wages your entire career, you would see that you can retire at the same salary a teacher can. If you invest smartly.
What about unfunded OPEB, that is what is killing us: Again, no it’s not. Social security keeps making changes to make it financially stable and viable for the future. [13] So do pensions. However which is easier to manage and change. A federal system? Or a State system? It’s obviously the state system.
Were the town to put in 5% of the budget and invest it smartly in low fee index funds they are virtually guaranteed to come out on top. 99% will grow beyond inflation, interest and management fees of managed mutual funds. That money would completely fund OPEB 30 years down the line (which is the figure most people quote) The town still makes out better than if they had to match the 6.2% like SS does. If the town doesn’t want to do that let’s change what pensioners have to contribute. At first they don’t make enough money, so keep it at 11% and as they make more money graduate it up. There are many of solutions that a smart person could come up with. My main point is that it isn’t breaking the state or the town. What amount is contributed by the town needs to be managed by them as the alternative is SS under which payroll goes up 6.2% If I were to consult with such a company I would say put that 6.2% away to cover your OPEB (as it does, completely) because your only other retirement option is going to cost you that much anyway. But pensions are not any more broken than SS, in fact, they are less broken. There is less loss, less cost passed on to others, and a better payout. It’s also easier to fix being a state system. Saying we need to switch to SS because pensions are breaking us is incorrect. Make pension adjustments.
Westford has some serious problems. But it’s not your police, your schools, your firemen, etc. That is what is being fed to us by the town. I’ve examined it all, thoroughly. Compared it to other towns, created spread sheets to share with all who asked, charts, graphs, side by side. What the town is feeding us is categorically false. It’s just the current hot topic scapegoat. It’s the hot topic because all across the country pensions are just starting to be brought up to the speed that MA has been at for 20 years. So we don’t need to fix other states problems, they will figure it out. Check out the striking Chicago teachers compensation system, and compare it to what we do. The outrage over these issues doesn’t belong here.
[1] http://www.ehow.com/info_7972510_tuition-private-high-schools.html
[2] http://www.ehow.com/list_6598175_private-schools-ma.html
[3]http://www.wickedlocal.com/westford/newsnow/x1156347679/Property-tax-rate-in-Westford-inches-up
[4] http://www.city-data.com/city/Westford-Massachusetts.html
[6]http://www.boston.com/lifestyle/articles/2010/12/12/the_day_care_squeeze/?p1=News_links
[7] ) http://www.minimum-wage.org/states.asp?state=Massachusetts
[8] http://www.urban.org/UploadedPDF/social-security-medicare-benefits-over-lifetime.pdf
[9]http://www.mass.gov/treasury/docs/retirement/annualstatement2011.pdf
