Tuition Students

Disclosure: Average Daily Membership (students) and a Town’s State Grant are from the New Hampshire Department of Education. The Property Tax Rates and Town Valuations are from Anura Guruge. All other data is from the Oyster River Cooperative School District Website or from direct correspondence with District Staff.

Superintendent Morse said “Like any great business, breaking into a new market requires a strong brand and a reputation of excellence. Oyster River has both.” Then followed on with “The subject comes often comes up in public meetings as to why we would not charge $16,300 per student (NHDOE 2011-12) the cost of educating ORCSD students. The answer, like business we can only charge what the market is willing to pay. Our private school competitor, Coe-Brown, charges approximately $13,500 per student. If we charge far more than Coe-Brown we will be out of alignment with the market, resulting in too few tuition students . . .”.

First, the Oyster River Cooperative School District is not a for-profit business so I would question the need for a loss leader. My actual business experience was that superior products commanded superior prices and that only inferior or comparative products price at or near the best competitor. If the Oyster River Cooperative School District is willing to market their product (education) for an equivalent price as their competitor that tells me management does not believe their product is superior to the competition.

Second, with Oyster River Cooperative School district costing $16,300 compared to Coe-Brown at $13,500, we are already “. . . out of alignment with the market . . .”. Are we seriously recommending losing money on each Tuition Student but planning on making it up in volume?

Benchmarking is a valuable analytical tool, especially for monopolies like the Oyster River Cooperative School District, it provides a critical eye  into your business operations and management by comparing your metrics to those of your closest competitor. The question really is “Why is Coe-Brown (a private enterprise) able to provide education for $13,500 and Oyster River Cooperative School District isn’t?”. Isn’t that the analysis that we all want to see? It is not comforting comparing a 2015-16 rate to a historical 2011-12 rate. Superintendent Morse closes his presentation with “Whatever the School Board recommends, the final say is with the voters of Durham, Lee and Madbury in March of 2014.” To my knowledge, Coe-Brown isn’t subsidized by a municipality if they under price their services so why place the burden on Durham, Lee and Madbury.

Superintendent Morse claims when taking about the 70 current Barrington tuition students, “ORHS has not added teachers, as students blend seamlessly into the high school atmosphere, helping to sustain high school classes and programs already offered.” One of the challenges with incremental cost analysis is the old adage of the straw that broke the camel’s back. Incrementally speaking, was it the first straw or the last straw that broke the camel’s back?  As I have said before, the devil is in the detail and we are awash in qualitative sales pitches but bereft of quantitative data. The School Board’s concern over declining member community students could be managed by allowing natural terminations (retirement, voluntary relocations, etc.) without replacement and continue providing excellent education without the need for Tuition Students.

Barrington receives a State Grant more than 3 times the amount Durham receives. The following analysis is based on 2013-2014 information:

Status Quo

Scenario 1

Scenario 2

Average Daily Membership

Total School Budget

School Appropriation

BARRINGTON

1,283.76

$14,136

$10,878

$12,679

$13,263

DURHAM

919.71

$20,275

$18,924

$17,525

$15,708

LEE

678.14

$16,278

$12,441

$11,005

$12,352

MADBURY

354.02

$15,607

$12,993

$12,846

$12,867

3,235.63

$13,724

$13,724

Average for ORCSD

$18,039

$15,596

 Scenario 1:                      Barrington joins ORCSD as full member but State Grants not shared.

Scenario 2:                      Barrington joins ORCSD as full member and State Grants are shared.

Note: For the purpose of this analysis the School (State) tax rate has been applied against the Total Taxable Valuation while the actual tax basis is somewhat less. The School Budget & Appropriations, above, are overstated by a little over $250,000 but per ADM amounts are still very valid for comparing the various options and understanding the effect of the Cooperative Agreement. Barrington’s Total School Budget assumes that it was developed consistent with the method used by Oyster River Cooperative School District.

 Dividing the School Appropriation from above by the Town’s School (Local) and School (State) tax rate yields the approximate increase needed in your Town’s Property Tax Valuation to accommodate 2 new students:

Barrington     $   712,828

Durham          $1,048,986

Lee                  $   647,614

Madbury        $   638,457

This may help explain why Durham has aggressively pursued Student (UNH) housing as the tenants will spend money in Town (good for merchants) and rarely have school age children in tow (great for taxpayers) and we get to charge them a hunk of property taxes, the majority of which is most likely funded by non-residents.

I doubt that Scenarios 1 and 2 were offered to Barrington and I fully expect the Barrington School Board would still be laughing if they had. Scenario 1 and 2 respectively would cost Barrington $2,300,000 and $3,000,000 more than their current situation. They are presented here as means to aid further understanding of the impact of our Cooperative Agreement. The 2013-14 average School Cost per student of $18,039 is comparable to the Tuition agreement and to Coe-Brown’s $13,500.

The Oyster River Cooperative School District cost structure is out of line with their own research and bringing in Tuition students below cost will only exacerbate the situation over time. Remember the prior post that details the concerns over unfunded liabilities which are not being recognized in the $18,039 average cost but will need funding at sometime. I am still waiting for information detailing the workout plan, annual fiscal impact and the timing of the implementation.

 

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