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February 16, 2006 Focus on Budget: FTE and The Danger of Using Averages This article is the fifth in our series on <<Full Time Equivalency (FTE)>> and how your administration uses it to build your school district’s budget. I’ll explain what averages are, why administrators sometimes use them, and, most importantly, how misleading – and even fiscally dangerous - it can be to rely on them. I have come to believe the concept of “average” places a school district in greater financial jeopardy than any other. The reason? Averages, as an economist friend of mine likes to say, “are theoretical numbers that don’t exist in reality. Statisticians use them to reduce a large amount of information to a single number, one that means much less than they presume.” Or, to put it another way - the average daily high temperature in Minneapolis is 45 degrees. As any Minnesotan will tell you, this “average” temperature means very little in the month of January (when it’s often much colder), or in July (when, thankfully, it’s much warmer than that). Then, Why Do School Administrators Use Averages? It’s difficult to fault a local school administration or board for using averages during the standard budgetary process. Your district establishes several “average” figures to help calculate their annual costs. Administrators often, in fact, use several averages, applied to various line items or broad budgetary categories, because averages can be a useful estimating tool help calculate costs. The danger lies in using them without crunching them up against actual hard numbers. School districts tend to over-rely on averages for a couple of reasons, even though using averages goes against many basic principles of accounting or good business management. First of all, the typical district is far understaffed. This means it’s difficult, if not nearly impossible, to allocate precious staff time to calculate such detailed information as the FTE value of each program or teacher. As you know, calculations of FTE value are based on research and careful data collection and then, that raw information must be analyzed to create a realistic picture of your district’s budgetary needs and assets. This takes a fair amount of staff (or board finance committee) time and a commitment to accuracy. Many districts are not able – or willing – to allocate their resources to this task. The second – and far more damaging - reason why school districts rely on averages is that educational systems tend to be driven by the philosophies and opinions of the decision makers. Using this approach is the opposite of making sound decisions by examining and evaluating the financial/accounting realities. Averages Don’t Make Good Business – or Educational - Sense Can you imagine any business assuming that all its salespeople earn the same average salary and produce the same average amount of sales? Or can you imagine any business cutting the lowest seniority sales staff - regardless of the productivity level or financial value of that individual? If the average business used such a process, it would soon be bankrupt. When a school district is in financial crisis, its educational philosophy is often very clearly exposed. For example, if administrators assume all teachers have the same “average” cost (or salary), they may propose cuts in curricular areas they see as educationally least important. Using a system based on average financial calculations ignores the cost benefit of specific programs. When cuts are based on educational philosophy or opinions (or even just simply “gut feelings”) about which curricular areas are most or least important – or when the elimination of teachers is based on seniority (usually required by contract or law) – this type of decision making ignores the value of maintaining those programs. Averages Don’t Solve Problems – They Create Them! Using averages ignores the fact that the teachers with the highest FTE value are often those with the lowest salaries and/or the highest students loads. Music Performance teachers fall into this category. When administrators or school board members rely on “averages” to structure their budget process, they often create financially problematic scenarios such as these:
Districts innately understand this, of course. But, in the presence of a financial crisis, decision makers may be swayed by proposals to cut programs and staff because they appear to make sense or be easier - on the surface. That is, they may decide to go with their “gut feelings” about which programs have a higher value as a curricular entity instead of taking the time to analyze carefully the financial impact of their proposed cuts. What Can You Do to Counteract the Use of Averages? The use of averages points out yet another reason why music advocates need to be involved in the budgetary process. As well-informed advocates – advocates who understand how to calculate FTE values and also know how to develop and present Impact Statements detailing the damaging effects of proposed cuts – we have the opportunity (and the responsibility) to insist that decisions are NOT based on “averages.” And, we need the hard, concrete data to support our proposals – and to show decision makers why it’s not a good idea to rely on averages. As you present your reasons why averages are damaging to the music program, you must clearly demonstrate the fiscal viability of the music program – using Impact Statements based on accurate research and calculations that include a clear analysis of the FTE value of teachers and programs. You must show there’s absolutely nothing “average” about your music program – using dollars, cents AND business sense! Until Next Time, John L. Benham |
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Scott Brady |
