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CMS Financial Foolishness

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The more things change, the more things stay the same. Charlotte Mecklenburg Schools, having yet to finish spending a $516,000,000 bond package voted on in 2007, which won’t be entirely spent until 2016, wants more money, $400,000,000 more, in the pipeline now. A short history of CMS, school bonds, and their spending practices seem timely.

About 25 or 30 years ago CMS, with the support of the Mecklenburg Board of County Commissioners (BOCC) went on a long-term spending spree. Every two or three years a bond issue for anywhere between $125 million and $400 million was placed on the ballot. The Charlotte Chamber of Commerce, ever a cheerleader of excessive spending of taxpayer money to the benefit of their members, always supported the bond issues, often spending $250,000 in advertising to encourage the voters to pass the bonds. The BOCC was usually compliant, making minor changes, but generally going along with what was requested. Then there were those who opposed the bonds, representatives such as George Higgins, Joel Carter, Jim Puckett, Larry Gauvreau and Don Reid, along with the now defunct Citizens For Effective Government (CFEG). During part of that time period I was a member of the Citizen’s Capital Budget Advisory Committee, a committee appointed by the BOCC to give citizen’s input into capital expenditure requests, and also a member of CFEG. I received an instructive education. From what I can tell, what I learned then about how CMS works to waste taxpayer money still applies.

First, the previously listed elected officials worked diligently to make the county and CMS responsible to the taxpayers for the money they spent. They were almost always in a voting minority, so no real changes occurred. But what they attempted was to change the way money was spent, the way maintenance was performed, the way buildings were designed and locations chosen. For instance, Jim Puckett and Joel Carter both worked to reduce costs of maintenance and construction. They did not succeed. One of the costs they identified was the lack of a comprehensive maintenance program.

CMS has over 500 buildings. A good maintenance program would have certain things done every year, or every 5 years or 20 years. Roofs are a primary example. Any roof has a specific life expectancy, at which time it will need to be replaced. For our purposes, let us say 20 years. Since the school system has 500 roofs, 25 roofs should be replaced every year. This work should not be financed by bonds, but by yearly operational funding. The same is true of parking lot maintenance, HVAC, plumbing, and other maintenance needs. They are not. The argument CMS makes is that these items are capital expenditures. While technically true, the sheer number of them CMS has to maintain makes an annual expenditure for their upkeep a necessity. If money is going to have to be spent on these items every year, the money should not be borrowed, but put into the operational budget as an ongoing expense. By borrowing the money, the expense is spread over 20 years, along with the interest which must be paid on the bonds. But next year, the money has to be borrowed again, and that annual expense spread over 20 years. And so the story goes. If this is a legitimate way to operate, they would borrow the money to cut the grass and pay the electric bill. It is not. The reason for it has to do with avoiding annual expenditures so the money which should go to maintenance goes to some other place in the budget. It is a way to mislead the taxpayers. This year the request is for almost $40,000,000 for HVAC, plumbing, roofs, paving and electrical work.

Second is the process of rebuilding the school system. Because of the amount of money CMS spends on renovations, over a very few years they spend enough money to completely rebuild the school system. Why? One of the reasons has to do with pretending new, improved buildings make a difference in educational results. More technically, they say, certain schools were built to standards which no longer apply, which are out of vogue. So, since it is not their money, they just rebuild. If one reads the list, more than half the $400 million request is for renovations.

Third are the people who benefit directly from school bonds. These include the construction industry, the lending institutions, real estate agents, and bond lawyers. You will find almost all of these businesses are members of the Charlotte Chamber and give money to the campaigns to support the bond issues. Not a bad deal: invest a few thousand and in return see $400,000,000 spent over a few years. For those who oppose the bond issues, there is no return on the money they invest to fight. If someone gives $100 and the bond doesn’t pass, they gain little; perhaps their tax bill doesn’t go up $10 or $15 per year. This is not to be compared to the $100,000 or $20,000,000 those who directly benefit gain. Theirs is the perfect example of corporatism. But their political argument is that, “It’s for the children.” As a regular opponent of bonds, I had occasion to visit with too many of the supporters and will never forget John Tate of the NC State Board of Education, previously a member of the CMS Board of Education, telling me I hated children, simply because I didn’t support a school bond.

Fourth are the students and their parents. By teaching students that buildings are more important than what goes on in the classroom, we teach them how we don’t value education but the appearance of education. We teach them that spending on things people see is more important than an ability to do or learn or work with others to accomplish your goals. Let us be clear: if the Charlotte Chamber valued an education for the children of Mecklenburg County, our focus would be on the classroom instead of all around the classroom. It is not. Their focus is on appearances.

We see this in our political representatives all too often. What they are doing is catering to the needs of the Charlotte Chamber of Commerce members. Our elected officials of the city, county and CMS are constantly spending on projects which benefit the members of the Chamber, but not the taxpayers. If they benefitted the taxpayers, our tax bills would be getting smaller as government became more efficient. The reverse is true. This bond request is solely about crony capitalism, and Board of Education Vice Chairman Tim Morgan, brother of the president of the Charlotte Chamber says it best: “You guys have hit a home run on this, an absolute home run.”

Well, maybe for some people, but not the students in the public school system.

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