Thomas Jefferson Institute for Public Policy

The Thomas Jefferson Institute for Public Policy is a non-partisan research and education organization devoted to improving the lives of the people in Virginia. The Institute was organized in 1996, and was the only state and local government focused public policy foundation in Virginia based on a philosophy of limited government, free enterprise and individual responsibility. It is a “solutions tank” seeking better ways to accomplish the policies and programs currently being undertaken by state and local government – always based on the Institute’s underlying philosophy. The first study was published in February 1997.

The work of the Thomas Jefferson Institute for Public Policy is geared toward educating our political, business and community leadership about the issues facing our society here in Virginia. The Institute offers creative solutions to these problems in a non-partisan manner.

The Thomas Jefferson Institute is a fully approved foundation by the Internal Revenue Service. It is designated a 501 ( c ) 3 organization and contributions are tax-deductible under the law. Individuals, corporations, associations and foundations are invited to contribute to the Thomas Jefferson Institute and participate in our programs.

For more information on the programs and publications of the Thomas Jefferson Institute, please contact:

Thomas Jefferson Institute for Public Policy

9035 Golden Sunset Lane Springfield, Virginia 22153

703/440-9447

email: info@thomasieffersoninst.org website: www.thomasieffersoninst.org

This study, “Seventh Annual Fairfax County Budget Analysis: Spending Slows as Elections Approach, ” is published by the Thomas Jefferson Institute for Public Policy. This paper does not necessarily reflect the views of the Thomas Jefferson Institute or its Board of Directors. Nothing in this study should be construed as an attempt to hinder or aid any legislation.

Seventh Annual

Fairfax County Budget Analysis

Spending Slows as Elections Approach

By: Michael W. Thompson

This is the seventh consecutive year that the Thomas Jefferson Institute for Public Policy has produced an annual analysis of the government’s General Fund Budget and public school’s overall budget in Fairfax County. These numbers do not include those “off budget” government operations of independent agencies such as the Water Authority.

This year’s Fairfax County Budget Analysis cover the full four year term of the current Board of Supervisors and School Board, both of which are up for election this fall.

Fairfax County budget documents are used as the basis for this study and are reproduced in the Appendices.

The purpose of these annual studies is to determine if an outside analysis should be undertaken in order to find whether the taxpayers’ money is being well spent, well-prioritized and if efficiencies can be found. This outside budget review should be undertaken on a regular basis even if spending was not growing as rapidly as this analysis shows. But when spending grows rapidly, the need for an in-depth, outside budget review is even more important. This Thomas Jefferson Institute analysis is only the first step in a better-management process but the results are quite interesting.

This analysis compares actual spending over the past four years with what would have been spent had increases been limited to the growth of the Consumer Price Index (CPI) and population. Calculations also show this comparison for the past three years and the past two years. This CPI-population formula is used since keeping government spending at this level would keep the burden of government the same on the taxpayers in inflation-adjusted dollars. And it would keep the price of providing public education the same on a per student basis in inflation-adjusted dollars as well.

Any significant spending beyond this formula should be a warning sign for our Board of Supervisors, School Board, business leaders, and our civic activists that there needs to be a serious and thorough independent and outside analysis of spending. And such an analysis should become part of the normal course of doing business by our county government and the School Board. This should be a programmatic audit and include a prioritization of spending needs.

Although the property tax rate in Fairfax County has been significantly reduced over the past four years, these total taxes paid by the homeowners and county spending

has risen dramatically. This spending increase was made possible through the dramatic spike in property values over the past several years allowing the Board of Supervisors to reduce the tax rate while still significantly increasing the property taxes.

This year’s Budget Analysis shows these interesting facts:

1)    Over the past four years, the combined “overspending” (beyond the CPI and population formula) of the county and school budgets is $1,082,891,506 – that’s over $1 billion in four years.

2)    Over the past three years, this “overspending” totals $686,449,286.

3)    Over the past two years, this “overspending” is a negative $ 187,791,714. This shows that over the past two years the Board of Supervisors and the School Board have been constrained in spending by the slowing of property values. Indeed, property tax bills in Fairfax County this year were basically unchanged over the entire county, although they have doubled in the past seven years.

And as this study has shown over the past several years, the bulk of “overspending” takes place by the School Board and not by the Board of Supervisors. This continues to be the case in this year’s “Fairfax County Budget Analysis

The county’s budget documents show some interesting facts that have not been highlighted by the Supervisors, the School Board members or the media for that matter.

First, on the School budget: in each of the base years of this study – 2004, 2005 and 2006 – the School Board lists in its Proposed Budget the “estimated” spending for the past year and then the actual spending is shown for two years back. This makes sense since actual spending numbers aren’t going to be available when budgets are drawn up for the next year since spending for the current fiscal year is still occurring. However, what is interesting from a management point of view is that in each of these years, the “estimated” spending shown in the proposed budget documents ends up being substantially more than what is shown the following year under “actual” numbers. In fact these “estimated” spending numbers have averaged $103,597,000 more than the actual spending for that year as reported in the subsequent year budget documents.

Why can’t the school system better proj ect its yearly spending especially when this seems to be an annual over-projection? Is there a reason for this continued inability to project more realistic numbers?

And each of these annual budget documents also show the actual spending by the schools in Fiscal Year 2004, ’05 and ’06 average $32,958,000 less than the approved budgets for that particular year. So the school system doesn’t seem to be spending all that is appropriated by the Board of Supervisors.

If over several years, actual spending by the School Board is less than the approved budget for that year, then the annual “we need more than you are giving us” argument does not seem to stand up to the facts.

Here are the numbers from the school’s budget documents. Each year’s analysis requires numbers from three years of budget documents.

2004:A) Approved budget$ 1,668,306,862B) Estimated spending$ 1,741,810,340C) Actual spending$ 1,630,084,447A-C =$    38,222,415 less than approved budget2005:A) Approved spending$ 1,805,536,495B) Estimated spending$ 1,853,909,667C) Actual spending$ 1,767,440,448A- C =$    38,096,047 less than approved budget2006:A) Approved spending$ 1,931,367,218B) Estimated spending$ 1,992,177,528C) Actual spending$ 1,908,812,456A — C ~$    22,554,762 less than approved budget2007:A) Approved spending$ 2,085,242,967B) Estimated spending$2,114,230,232A – C =$    28,987,265 more than proposed budget;

“actual spending” in next year’s budget.

Three year (FY 04.05, 06) spending below the adopted budget: $ 98,873,224.

So over the most recent three year period with complete numbers available the school system spent $99 million less than the adopted budget. This shows that the School Board is good at staying below the adopted budgets. It also clearly shows that the “estimated budgets” are continually way off the mark. However, the school system is spending a huge amount of money over and beyond the CPI-population formula and that indicates serious review of spending is needed.

This annual study by the Jefferson Institute shows school spending is not only much higher than the inflation-population formula, there seems to be a built-in overestimation of spending that is presented to the Board of Supervisors and to the public each year as the next year’s budget is requested. Then, the next year these numbers reflect actual spending and they are continually much less than estimated one year earlier. The inability to more properly estimate spending each and every year is something that our elected officials need to figure out and remedy. Such miscalculations by the school system only makes the budget decision-making process more difficult.

Second, on the government side of the county budget, the Board of Supervisors over the three years- 2004, 2005 and 2006 – regularly spent much more than the adopted budgets in May allowed. We won’t know the actual numbers for 2007 until next year. However, the “revised” numbers for 2007 show significant overspending once again. Why can’t the county government spend within its budget?

The “revised” number in the county government budget listed below is comparable to the “estimated spending” in the school budget. But unlike school spending, the government side continues spending significantly more than was budgeted.

Here is what the Fairfax County government’s budget documents show:

2004:A) Adopted$2,559,804,213B) Revised$2,617,340,240C) ActualC- A =$2,752,206,132$    192,401,923 more spending thanadopted budget.2005:A) Adopted$ 2,733,221,469B) Revised$2,809,518,182C) ActualC- A =$ 2,809,880,067$    76,658,598 more spending thanadopted budget2006:A) Adopted$ 3,021,130,406B) Revised$ 3,097,542,690C) Actualc- A =$3, 113,897,426$    92,767,202 more spending thanadopted budget2007:A) Adopted$3,213,678,996B) Revised$3,275,156,956C) ActualB-Anot yet reported$    61,477,960 more spending than

adopted budget

Three year spending above adopted budgets: $ 361,827,723

Four year spending above adopted budgets: $ 423,305,683*

* only “revised” and not “actual” spending available for 2007

Clearly, the Board of Supervisors cannot seem to spend within its own approved budgets. Had it done so, then the government side of the spending equation in Fairfax County would have been close to the CPI-population formula. But, the Board spends every “extra” dollar that comes into the county coffers.

It is clear from this analysis the School Board continues to spend well beyond the CPI-student population formula even when spending less than budgeted. In the past four

years, school “overspending” as determined by this study totals $696,831,206. And, with the student population remaining constant at approximately 165,000 (the annual numbers are rounded to the nearest 1,000 while the annual student population varies only by a few hundred) this additional spending – far beyond the rate of CPI and student enrollment growth – should be a significant caution sign for our elected School Board Members.

The projected ‘extra’ costs for the increase in the number of new teachers, Special Education, and ESOL instruction were subtracted out of the school system’s overspending numbers so they would not be included as part of this analysis on spending.

The Fairfax County Board of Supervisors should not feel good over the fact that in the past four years its “overspending” has only totaled $386,060,300. County government could have increased each and every program by the rate of inflation and kept pace with our increasing population while spending $386 million less. This fact points toward the need for a solid and transparent outside management analysis./!/**/ had the Board of Supervisors limited its spending to its adopted budgets, it would have saved the taxpayers $423 million over the past four years. That is a huge amount of spending over-and-beyond the annual adopted budgets.

This is a four year analysis which gives the reader an idea of just how much money our county could have dedicated toward transportation improvements, new and renewed school buildings or even further tax reductions had the growth of government and school programs remained constant to the CPI and population growth. And as these numbers show, the county government could have more than met the inflation-population formula had it merely kept spending in line with its approved budgets.

The “overspending” numbers in this budget analysis do not include debt service for the county or for the school system. These are obligations based on bond issues passed by the voters. What these numbers do reflect is the “working budget” and something that can be changed should our elected officials decide to do so.

This analysis finds these “net overspending” figures (see table below) for the county and school systems. The school system numbers have subtracted from them the costs beyond the CPI-population growth formula for additional teachers, special education and English for Speakers of Other Languages courses. The author did not want to have these important programs used as an excuse for the large “overspending” figures.

Net Overspending in Fairfax County

Base Year County Overspending

School Overspending Total Overspending

$1,082,891,506 $ 686,449,286 ($ 187,791,714)

$696,831,206 $482,286,606 ($ 28,267,266)

2004	$386,060,300
2005	$204,162,680
2006	($159,524,448)

What these numbers show is that in the past two years, the spending in Fairfax County has indeed been below the inflation/CPI-population formula. This is an encouraging sign if this trend continues once this year’s elections are over.

If these “overspending” figures are reduced by 10% to allow for such extraordinary increases as health insurance costs, the remaining numbers are still very high over the past four years. So again, our elected leaders cannot point to the rise in health insurance costs as an excuse for such large “overspending” numbers.

This brief analysis of the Fairfax County budget is not a substitute for a careful management review for each and every program in government and in the school system. This budget analysis is not a detailed critique of the many programs funded by our county or by our schools. But these “overspending” numbers do give the reader an idea of how much more is being spent in Fairfax County than if the general burden of government and the average cost per student in our schools had simply kept pace with Consumer Price Index and population growth.

This analysis shows that serious budget management needs to be instituted in Fairfax County by the government and the school system. Best business practices need to be implemented. Prioritization of spending needs to take place. And contracting out of government services and programs need to be researched and implemented where possible as other governments throughout the country have accomplished.

Here are a few budget management ideas that should be considered by our Board of Supervisors and by the School Board that will be elected this fall:

1)    The School Board should create a serious two-year citizens panel to study the budget without restraints on the panel’s work. When the School Board last had a citizen’s panel look at its budget in 2003, the School Board Chair ordered the panel not to look at the cost of instructional programs. Yet, almost 85% of the school budget is instructional programs. For 85% of the budget to be off-the-table in a budget analysis makes the whole process practically worthless.

2)    The Board of Supervisors should appoint a panel of business leaders and government budget experts to review the budget with an eye on finding waste, prioritizing spending and finding those services to be put out for bid to see if the private sector can provide them at a less expensive price.

3)    Years ago each Supervisor had their own Citizens Budget Oversight Committee that helped them get a better handle on the county budget. Those oversight committees disappeared over ten years ago. They should be re-established.

4)    Study after study has shown that teaching students to read through a phonics-based program is significantly better than other reading programs. And many studies show that a phonics-based reading program can reduce the number of students in special education classes. Indeed, recent studies show that the reading

scores of African American students in Richmond exceed those of African American students in Fairfax County. One difference is that Richmond has a phonics-based reading program. The School Board should make a phonics-based reading program the basic reading program in Fairfax County. This could reduce the cost of Special Education significantly and help students at the same time.

5)    Public private partnerships in building all government construction projects -county projects, new school construction and improvements to current schools -should be the first option in all cases if the price and product are better. Governments and school systems all over the state and throughout the country are finding significant savings using public private partnerships. Indeed, the new South County high school was built at a savings of almost 30% by using this management tool.

6)    The Gibson Consulting Group study of the school system a few years ago needs to be taken off the shelf, dusted off and its recommendations reviewed and publicly determined to be followed or to tell the taxpayers why they are not. This type of programmatic study/review should be completed on a regular basis.

7)    The state of Virginia has recently contracted out its information technology needs to the private sector and expects to save hundreds of millions of dollars over a few years. The county and school system should issue a Request for Proposal for its IT services to be handled by the private sector.

8)    The Board of Supervisors and School Board should eliminate all possible duplication of services between the County and School Board, consolidating those services to the government unit that achieves the best result at the best price for taxpayers. Among the services that might be consolidated are payroll processing, media and audio-visual, maintenance, warehousing, public works design and construction, and non-supervisory Human Services.

9)    And the General Assembly should pass legislation allowing staggered terms for the members of the Board of Supervisors and the School Board so that half of each governing board faces the voters every two years. This simple change would bring a continual review by the public of the county government and school systems and this would create better government overall and more citizen involvement in the process.

In this election year, this budget analysis should be seriously reviewed by those who currently hold office and those who are running for the Board of Supervisors and School Board. These numbers clearly show that a serious outside management audit needs to be a normal part of the budgeting process for both the county government and the School Board.

Overspending Analysis Tables

These analysis tables of the Fairfax County budgets do not include debt service for the school system and the county since these payments are “locked in” through voter approved bond issues.

The tables review the budgets going back four years including the budget that began on July 1, 2007 of this year – the FY 2008 budget cycle. The following are three sets of tables for the county government budgets and three sets for the school systems budgets.

Comparisons are between what was spent and would have been spent had these budgets only increased at the rate of inflation and population growth. This formula was chosen since it would have allowed these government budgets to increase at a rate that would have remained constant with inflation factored in. This also means that had the budgets increase at the formula limits, the burden of government on our taxpayers would have remained constant as well.

This comparison does not get involved in special program analysis but is meant as an initial management tool. That is, if the budgets over a four year period are “way out of line” then that is a signal that further review is needed by the Supervisors and School Board Members to try to find ways to slow the growth of government spending. Of course, good management requires constant review of all programs and policies to make sure that the taxpayers’ dollars are being well spent.

For the county government budget, population is the number of people living in Fairfax County. For the school budget, population is the number of students enrolled in the public school system.