Arlington Heights School District 25’s $75 million referendum: Six reasons to vote no

Arlington Heights School District 25 is asking voters to approve $75 million in new spending over 20 years.  The money will be used

  • to add new classrooms to most elementary schools to provide all-day kindergarten, with the largest expansion 10 new classrooms at Westgate,
  • to expand gyms at Westgate and Dryden, and
  • to fund general building improvements, such as replacements of roofs, flooring, fire alarm systems, lighting, HVAC boilers, piping, parking lots, etc.

The district’s materials do not provide details on the split of costs among these three categories of expenditures.  What’s more, though I’ve seen additional details on such matters as future enrollment projections being shared by supporters, these are not available at the D25 website.

I am a parent in the district, and, though I (full disclosure) sent my children to the local Catholic school, I certainly believe that all children deserve a quality education — and that is already the case with D25 schools, which already offer a strong curriculum with many “extras,” provision of tech, fine arts and athletic activities.  In the run-up to the 2021 school board election, I discussed the district with parents and, outside of Covid-related decision-making, the only significant concerns I heard were a belief that kids with special needs were not being offered as high-quality an education as they should have received.

With that in mind, here are my objections to the bond proposal:

First, I do not believe that all-day kindergarten is a necessity for children educationally unless they have special needs, are at-risk due to their family situation, etc.  The regular outcry that “everyone else has it” fails to take into account the fact that SD25 is significantly different than its neighboring districts in its demographics; there are far fewer at-risk kids here in D25 than in neighboring areas with significantly more immigrant families.  When it comes to the dual-earner middle-class families which make up the largest part of the district, it is of course a cost savings to have one year less of daycare, and to avoid the logistical difficulties of half-days (day care centers typically provide transportation to nearby schools but there are challenges if one’s prior provider was located further away).  But when there are costs to be managed — and especially if special needs kids are already getting the short end of the stick, why is it more important to lighten parents’ cost burden in this one way, when other parents have costs around before/aftercare, summer care, and, of course, pre-kindergarten child care?

Second, the district’s materials vaguely reference “future enrollment growth.”  In an environment when birth rates are declining, I would be far more persuaded that D25 is an exception if they had provided concrete reasons to believe this.  There will be no enrollment growth due to new construction.  It is possible that housing cost increases may mean more families living in apartment complexes in units now occupied by singles or couples, but this is speculative.  There are no neighborhoods which are new enough for there to be a widescale turnover from original owners to new, young families — neighborhoods are established enough to be a mix of families of all types, and, if anything, family sizes are shrinking — homes which once housed a family with three kids now have two or one.  Are there reasons to believe that D25 is becoming more popular with young families and is an exception to the rule?  Maybe, but the district had the responsibility to demonstrate this rather than asking voters to take it on faith.

Third, the district plans to spend the money on a combination of new classrooms for all-day kindergarten as well as other building maintenance costs.  This is a serious red flag, and really, despite its appearance as #3 on the list, is really my top concern. These sorts of expenses should be covered by our ongoing tax money and should not require a separate referendum.  To ask for this raises a serious concern that the school district is not managing its money prudently, deferring expenses instead of planning for them.

Fourth, the district is planning to build these new classrooms without even having identified the source for the needed additional funds for the operational costs of an all-day kindergarten.  Again, this is a serious concern, especially since (no link here; I’ve been told this by a parent who has reviewed district finances) the district is already running a deficit and using reserves to cover $3 million in expenditures for the year.  Previous polling and surveys had discussed the possibility of a tuition-paying all-day extension — if that’s the case, why wouldn’t the projected tuition cover the construction costs over time?  And why wouldn’t the district share these plans?

Fifth, the district touts its status having the second-lowest tax rate of 8 neighboring districts, and the third-lowest operating expense.  But both of these will increase with the new referendum and the new kindergarten expansion, so it is misleading not to share how the tax increase will affect these.  Based on a review of our own tax bill, when it comes to tax rates, it looks like the district would become the third-highest of the eight comparator districts.  And, again, we don’t know what the operating expense will look like.

And finally, back to the educational question, my sixth concern:  I know that the “common core” demands for kindergarteners have escalated significantly even in the decade since my youngest was a kindergartner.  They are expected to be able to sound out words, and to have memorized sight words, and to be able to do “seatwork” as if they were first graders.  To reference my children’s experience, the school operated both half- and full-day programs, and I believe this expectation that the academic work for the full-day kids should not exceed half-day kept expectations in check.  Now I am seeing, from parents of D25 kids in local Facebook groups, discussions of tutoring help or summer school for children who aren’t reading at the end of kindergarten.  Pushing academics this early is especially a problem for boys, who are ready to sit down and do “seatwork” later, generally speaking, and end up medicated for ADHD when they aren’t ready for this.  Heck, many of the school systems that are touted as “top in the world” make a clear distinction and hold off on anything academic until first grade.  I am not an expert on what the district is doing, and perhaps these parents have indeed gotten this all wrong but if there’s any risk that all-day kindergarten becomes the new first grade, that’s a problem.

school bus
school bus, public domain, https://www.maxpixel.net/Bus-Vehicle-Education-Transport-School-Bus-School-4406479

The “Dutch Model” Hybrid Retirement System Reform (updated version)

Periodically I pitch my preferred version of Social Security/retirement system reform, as a “thinking big” means of remedying problems with the system in a way that the usual proposals don’t address.  Here’s a write-up in fact-sheet fashion.

The United States faces three challenges as Americans age and the pension system has been transformed:

  • First, the Social Security Trust Fund is facing insolvency;
  • Second, the move from traditional Defined Benefit pensions to Defined Contribution retirement accounts will result in far fewer Americans with lifetime income protection as new generations move into retirement; and
  • Third, the Multiemployer Pension Plan bailout provided in the American Rescue Plan, by the very way the legislation was written, will result in rescued plans becoming insolvent 30 years after its implementation, or even sooner.

Elements of the retirement system in the Netherlands offer features which can resolve these issues.

First, the basic Social Security benefit is a flat monthly sum, prorated only for those who have lived in the country for less than 50 years.  This form of benefit also exists in Denmark, Ireland (prorated by work history) and Australia (means-tested).  And the United Kingdom, in 2016, transitioned from a system very similar to America’s Social Security benefit, to a flat benefit, with a gradual transition period.

Second, Dutch employers provide pensions in a hybrid format combining features of defined benefit and defined contribution plans.  (Note that the Dutch system is in the middle of a substantial transformation and the following sentences are heavily simplified and idealized.)

Near-universality is achieved through a combination of legislation, collective agreements, and labor-market norms.  However, because of the flat benefit guaranteeing income replacement on a first tranche of income, benefits have an initial threshold – that is, for the first level of income, which will be replaced by Social Security, neither workers or employers make contributions (benefit accruals), mitigating the burden on both, with respect to low-skill workers.

In some cases (but much less often now), lifetime income guarantees are made by employers.  However, a form of benefit which is increasingly popular is the “Collective Defined Contribution” or “Defined Ambition” plan, in which the plan provides lifetime income protection by pooling assets, holding additional reserves as needed with a conservative funding policy, and cutting benefits if needed to preserve funding levels.  Because benefits have a built-in cost-of-living adjustment, the benefit “cut” may take the form of a benefit freeze (no COLA for a year or longer) rather than an actual cut, but the objective is in any case to provide workers with benefit protection to the greatest extent feasible by sharing/pooling risk, even without a guarantee by the employer.  Similar plans are being developed in the United Kingdom.  Here in the U.S., the risk-sharing Wisconsin public pension plan offers some potential features, as does the VAPP (variable-annuity pension plan) as adopted by the UFCW and Kroger, Albertsons, and Stop & Shop in 2020.

Moving from this general principle to a legal structure that works for the pension environment of the United States is not a simple task.  When should cuts be required? What investments should be permitted? How conservative should the funding policy/contribution level be? What sort of entities should be permitted to offer this type of plan?  Should there be a government backstop in case of a crash that would require cuts that are too harsh?

However, if paired with a flat-benefit reform of the “regular” Social Security system, I believe that a mandatory second-tier hybrid system could become acceptable to many who would otherwise reject a mandate to contribute to retirement savings accounts and offer a way out of the current “third rail” reform stalemate.  And as a bonus, because this sort of plan is essentially a multiemployer plan, once a design has been worked out which all parties agree provides the best feasible level of benefit and protection relative to contributions, this model can become the basis for transforming existing multiemployer pension plans and providing for long-term solvency in those plans as well.

It should also be noted that it is far more common in the Netherlands than in the United States to invest using insurance/annuities, held by employers or pension funds, regardless of the type of retirement benefit, which results in particularly costly benefits.  To be clear, this proposal does not envision annuities but rather would adapt the overall Dutch concept to American investment norms.

Finally, this is not the proposal of any think tank, advocacy group, or other partisan or nonpartisan group.  I have no institutional affiliation, have worked with organizations on both sides of the political spectrum (the National Academy of Social Insurance and the Illinois Policy Institute, respectively), and truly hope that by adopting a wholly new system, with careful transition planning, support can be found on both sides of the aisle.

Further reading:

“Collective Defined Contribution Plans,” by J. Mark Iwry, David C. John, Christopher Pulliam, and William G. Gale, Brookings, December 2021.  https://www.brookings.edu/wp-content/uploads/2021/09/20211203_RSP_CDC-final-paper-layout.pdf

Mercer Global Pension Index 2021.  After a long stretch at #1, the Netherlands was knocked down to second place by newly-added Iceland.  https://www.mercer.com/our-thinking/global-pension-index-2021.html.  Also see “What Does It Take To Build The World’s Best Pension Systems? Ask The Netherlands And Denmark” for a description of the Index.  https://www.forbes.com/sites/ebauer/2019/10/22/what-does-it-take-to-build-the-worlds-best-pension-systems-ask-the-netherlands-and-denmark/?sh=5b08258449b6

On the multi-employer VAPP:

News reporting:  “Kroger, Albertsons, Stop & Shop to withdraw from UFCW national pension fund,” Supermarket News, July 21, 2020, https://www.supermarketnews.com/retail-financial/kroger-albertsons-stop-shop-withdraw-ufcw-national-pension-fund

Local 663 information for members:  MRMC Benefit Plans (663benefits.com)

Podcast: “UFCW Local 21 and the Saga of the Variable Annuity Plan,” https://multiemployerfunds.com/episode/ufcw-local-21-and-the-saga-of-the-variable-annuity-plan/

 

Contact information:  janetheactuary@gmail.com

 

https://commons.wikimedia.org/wiki/File:Social_Security_Card.svg; j4p4n, CC0, via Wikimedia Commons