| Subject: My Response to Mr. Plummer's AnalysisLowell Sun Article about Busing Costs |
Author:
Dennis
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Date Posted: 21:40:57 08/16/03 Sat
In reply to:
Dennis
's message, "Lowell Sun Article about Busing Costs" on 21:30:24 08/16/03 Sat
August 15, 2003
Mr. Don Plummer
[Address Redacted]
Dracut, Massachusetts 01826
Dracut Board of Selectmen
Dracut School Committee
Dear Mr. Plummer and Colleagues:
At the last meeting, Jack DiTillio asked that Mr. Plummer’s memo and attached analysis be sent to the Dracut School Committee for a reasoned reply. He did so as the Chairman, with no vote or action on the part of the other members. Such action can happen without objection – and I did not object because I had just received the letter and did not know its contents.
Having now read Mr. Plummer’s letter and reviewed his analysis, I must object most strenuously to our asking the School Committee to respond. I find the methodology used by Mr. Plummer to be completely fallacious and unsupportable. Specifically:
· Percentage applied incorrectly: As I read Mr. Plummer’s model, I note that the estimated percentages are applied to the total number of private students, not just to those who currently use the bus. I can think of no logical reason to do this. It says, “This is completely irrelevant to me because I don’t use it, but if you change it for someone else, it will affect my own marginal utility and change my behavior, too.” The effect of this one miscalculation is to more than triple (832/250) the effect of Mr. Plummer’s calculations – assuming you buy all the other assumptions, which, of course, I do not.
· Supply shift continuous: This is the most egregious miscalculation in my opinion. It says that if you make something cost more to somebody one time (as in increasing the cost to send students to private schools by adding in the transportation costs) the resulting shift in the supply cost curve will continue and reverberate and compound on itself for ten years. Why? It’s a one-time cost increase. In order for Mr. Plummer’s methodology to be true here, not only would we have to stop paying for the transportation in the first year, we would have to then charge the consumers an additional $300 in the second year (for no reason), $600 in the third year, and so on. That would be the only way to justify a model that assumes behavior will continue to shift for ten years.
· Elasticity overstated: If private-school tuition costs $8,000 to $11,000 per year, and transportation costs are $200 to $500 per year, then how can this increase in cost account for a 30 or 40% shift in demand for the service? I believe Mr. Plummer has grossly overestimated the price-elasticity for this product, which, if anything, is probably less elastic than most things, given that one’s children’s education and future are involved. (And because of an unwillingness to have a child change schools midstream.) Now the fact is, I don’t know what the effect of the “price increase” will be either. The average price elasticity (by definition) would be about 3% one time. I have to believe that in actuality, it would be even less for this private-schooling decision.
· Ignores funding realities: This may seem trivial to those in the private sector, but how a program is funded by the state and by the town, and the laws that control that funding, matter a lot. That’s because the legislature wants it to matter. The superintendent’s main source of financing – some $27,000,000 in Net School Spending funding:
1. Is funded roughly 50-50 by the state.
2. Automatically goes up relative to other communities when enrollment goes up.
3. Allows for great flexibility between objects of expenditure.
4. Must be spent or else.
5. Does not compete with other public services such as police, fire, public works, library, etc.
On the other hand, transportation costs are part of a separate excludible budget where they represent 95% or more of that budget of some $1.5 to $2 million. The excludable budget:
1. Marginally, is funded 100% by the Town.
2. Does not go up; in fact the legislature and the Governor specifically cut it.
3. Has zero flexibility because it is just about its own budget all by itself.
4. Does not have to be spent; in fact the legislature wants less spent.
5. Competes directly with other public services such as police, fire, public works, library, etc.
A model that treats dollars from these two sources equally, given the above scenario, cannot possibly be correct.
I want to emphasize that I have no opinion about the School Committees actions one way or another, at least as a Selectman. Personally, it was never an issue for me: two of my children graduated from Dracut High, and we paid the third’s transportation cost to High School.
As a member of the Board of Selectmen, I am perfectly happy to wrangle about overall resource allocation at each of the two Town Meetings each year. Sometimes I have sided with the School Committee, sometimes not. But this issue is so clearly in the sole purview of the School Committee (and not ours) that I must insist that we as a Board stay out of it. What each of us might say or do at the Town Meeting as individuals is completely okay. Our acting as a Board -- and using this methodology of Mr. Plummer’s to ask for answers -- is not okay.
As for my colleagues on the School Committee, let me say that you should handle this as you see fit. I for one cannot insist that you respond to Mr. Plummer’s position, because I believe it is completely wrong.
How wrong? Very wrong. Here’s a simple example, not intended to be perfect, but just so you get what I’m saying. This 3% increase in cost to send a child to a private school will create a 2% shift in demand to our schools. That’s 2% of 250 kids, not 832 kids. One time, not repeatedly. That’s five kids. At a per pupil cost of some $6,000, that’s $30,000. But that includes sunk and fixed costs that do not apply at the margins, so decrease that by 20% to $24,000. The state pays half; our cost is $12,000. Our transportation cost saving is much more. It’s an easy decision (cost-wise, anyway!).
Hope this is useful.
Sincerely,
Dennis A. Williams
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