Hamilton County Schools Budget

Working Group
Findings & Recommendations

May 2017

1
Executive Summary

2
Executive Summary: Overview
To improve the performance of our public schools, HCDE must
address a series of fundamental challenges:
Ability to recruit and retain the highest quality teachers and principals
Growing number of students living in poverty and growing concentration of
poverty in individual schools nearly 70% of economically disadvantaged
students in schools with 70% or more of students that are economically
disadvantaged
More than $200 million in deferred maintenance
To meet these challenges, HCDE needs to move toward a multi-
year budget plan that closely aligns spending to outcomes
Multi-year planning makes it easier to understand the need for Year 1
investments that produce Year 2 or 3 savings or results
Additional funding alone will not necessarily improve student outcomes
Our analysis suggests that HCDE can take steps to more efficiently
use its current resources, but (a) even after improving efficiency,
more funding is needed to improve student performance and (b)
increasing efficiency will require initial investment

3
Executive Summary: Findings

To increase efficiency and improve outcomes, HCDE needs

to (a) reduce the number of schools, thereby reducing the
number of teachers; (b) increase teacher and principal
salaries; and (c) better align total compensation to quality.
Most HCDE funding goes to teacher compensation
Total spending on compensation = Number of teachers x Total
compensation per teacher (salary + benefits)
There are fewer students per teacher than state or national
benchmarks because of the number of schools and BEP requirements
Teacher and principal salaries lag behind benchmarks, but benefits are
higher than some benchmark jurisdictions
HCDE total compensation is not aligned to incentivize or reward
performance and in some cases makes recruitment and retention of
quality teachers harder

4
Executive Summary: Findings

HCDE can increase efficiency by reorganizing Central Office.

HCDE has fewer administrators per teacher than benchmarks
HCDE lacks capacity to allow it to more effectively plan (e.g. budgeting for
outcomes, multi-year planning) and develop cost-saving procurement and
other enterprise-wide strategies
HCDE lacks adequate capacity to monitor evaluate spending and
performance
HCDE is unable to meet challenges related to infrastructure
Consolidation to increase efficiency would require new, larger buildings.
Increasing the average population per school from 554 to 600 by
consolidation would allow for reduction of six school buildings
More than $200 million in deferred maintenance cost, including 5 schools
with more than $10 million in projected repair cost
Population shifts result in need for new schools. Population shifts also are
part of the reason for high concentrations of poverty in specific schools.

5
Executive Summary: Findings

IT is the fastest growing department within HCDE more than

doubling in the last six years. HCDE goal is one device per student,
but in some schools not even achieving one device for every five
students. New software could also be used to improve operations
or processes (e.g. ongoing professional development or new
teacher recruitment) and student learning.
Compared to other states, state government in Tennessee spends
significantly less per student. The States BEP formula works to
the disadvantage of Hamilton County, which is treated as a
wealthy county. Among the largest Tennessee counties, Hamilton
County has the third highest per pupil spending trailing Davidson
and Shelby. Only Davidson County, however, spends more per
pupil in local funds than Hamilton County

6
Executive Summary: Recommendations

Consolidate for Efficiency: Over the next four years, HCDE and
the County should consolidate and re-zone schools to enable the
system to achieve a system-wide teacher-student ratio of 16:1.
Fewer Teachers + Better Compensation=> Higher Teacher
Quality => Better Results for Kids: Operating savings from
reductions in the number of teachers should be dedicated to
improving teacher salaries and improving teacher quality. Beyond
increasing salaries, HCDE needs a new compensation strategy to
recruit and retain quality teachers and principals.
C Curbs Costs. HCDE needs to create a real C suite that
supports the business operations of the school system including
a CIO (Chief Information Officer), COO (Chief Operating Officer)
and CTO (Chief Talent Officer) to achieve additional efficiencies.

7
Executive Summary: Recommendations

Hold HCDE Accountable: County should use General Fund

resources to support hiring two FT performance auditors to
regularly report on opportunities for savings and on overall
HCDE performance, thereby increasing efficiency and
accountability
Plan Smart for Progress: HCDE needs a multi-year capital
plan that addresses all of these infrastructure and capital
maintenance needs. The capital planning process along
with a review of school zoning can also be an important
mechanism for reducing the concentration of poverty in
schools, thereby improving student performance.

8
Executive Summary: Recommendations

Invest in the Future: County should create a new tax levy

dedicated to Schools Infrastructure, Technology and
Innovation. Funding for the Schools ITI Fund would:
Fund school consolidations, freeing up savings for teacher
quality, reducing concentration of poverty and improving
student performance
Double funding for capital maintenance and building
repair, eliminating deferred maintenance
Absorb the current cost of debt service funded through the
General Fund

9
Background on the Working Group

10
Role of the Working Group
HCDE needs a multi-year plan that aligns funding to meet specific
outcomes in a way that is sustainable and equitable.
The plan would be informed by budget and finance expertise, best
practices and research.
It would include a detailed analysis of current revenue and spending,
identify opportunities for increased efficiencies, specify the gap between
current revenue and expenditures and options for closing the gap.
HCDE needs an outcomes based budget to improve HCDE student
performance and that wins support from parents, teachers, the
business community, the School Board and the Hamilton County
Commission.
An outcomes based budget directly connects level of investment with
performance. Balanced budgets are essential, but the real goal of any
budgeting process is to maximize efficiency and effectiveness.
To achieve an outcomes based budget, HCDE needs to better able
demonstrate the impact of specific investments.

11
Role of the Working Group

The Working Group sought to advance both of these goals.

On a volunteer basis, members of the business community
came together to identify a path toward better, more efficient
operation of HCDE to improve student performance.
While the Working Group has expertise in business, finance
and operations, it does not have and does not profess to
have expertise in curriculum, teaching or school operations.
Our goal was to share our best thinking with leadership of the
County and the school system to inform the FY 2018 HCDE
budget.

12
Members of the Working Group

Valoria Armstrong, President, Tennessee American Water

Dane Boyington, Co-Founder/CTO, Thinking Media
Sheila Boyington, Co-Founder/President, Thinking Media
Larry Buie, General Manager, Chattanooga Gas Co.
Nick Decosimo, Managing Shareholder, Elliott Davis Decosimo
David Eichenthal, Managing Director, The PFM Group
James Haley, Chairman, Miller & Martin
Tim Kelly, Owner, Kelly Auto
Michael Lebovitz, Executive VP, CBL & Associates Properties
Dana Perry, Shareholder, Chambliss
Kim White, President, River City Company
* Titles for identification only

13
What the Working Group Sought to Do

Understand Current Revenue and Expenditures

Determine if there are likely changes in cost or revenue (e.g.
enrollment growth, inflationary growth in fixed costs) over the
next five years without change in policy or program
Identify opportunities for savings in current operations
Determine new needs to achieve improvements in student
performance
Define the gap between current funding and what is needed
over the next five years
Identify means of closing the gap

14
Meeting the Challenge

Hamilton County needs a financial plan

that aligns resources with efforts
necessary to meet the challenges
facing our schools and our students
and improve student performance.

15
Recommendations

16
Increasing Efficiency
There are two significant long term opportunities to increase
efficiency in the school system:
Reducing the number of school buildings in the system, thereby reducing
the number of teachers needed to comply with BEP requirements
Aligning total compensation with school system goals
Compared to other large school systems in Tennessee, HCDE has
fewer students per school building. The number of school buildings
drives non-personnel cost (e.g. utilities and building maintenance)
The number of school buildings combined with BEP class size
requirements -- also results in HCDE having more fewer students
per teacher than benchmark school systems.
School consolidation and rightsizing could reduce maintenance
costs and reduce the number of teachers in the system, producing
annual savings of $15 million to $20 million. Reductions in the
number of teachers could be achieved through attrition.
17
Increasing Efficiency

Absent system-wide enrollment growth, HCDE should freeze

the current number of classroom teachers. HCDEs
strategies for increasing the number of ELL, literacy and other
specialized teachers should be achieved within the current
total FTE count of teachers.
Over the next four years, HCDE and the County should
actively pursue consolidation and rezoning strategies
that allow HCDE to achieve a system-wide teacher-
student ratio of 16:1 comparable to other large school
systems in Tennessee and still lower than in other
comparable school systems nationally
Operating savings from reductions in the number of
teachers should be dedicated to improving teacher
salaries and improving teacher quality.

18
Increasing Efficiency

HCDEs current system of compensation is not aligned

with its stated strategic goal of ensuring a great teacher
in every classroom
Beginning salaries are not competitive when compared to other large
Tennessee school systems
Maximum salaries are not competitive when compared to nearby
school systems in Tennessee and North Georgia
Current employee and retiree health benefits are high cost and not
aligned with recruitment and retention strategies
No differentiated salaries for hard to recruit positions

19
Increasing Efficiency

HCDE needs a new compensation strategy:

A detailed compensation study to fully understand how to
effectively compete with other school systems for the best talent
Increased salaries and bonuses for principals
Increased starting salaries and changes to the step system to
allow for retention of more experienced, high performing
teachers
Signing bonuses for new teachers, retention bonuses for high
performers, incentive bonuses for high performing schools and
high need teachers
Reforming its current health benefit program to provide for high
risk screening (i.e. tobacco) and different rates, more consumer
driven plan models and HSAs
Revising and reducing benefits for retirees prior to Medicare
eligibility

20
Increasing Efficiency

HCDE needs to create a real C suite that supports the

business operations of the school system including a CIO
(Chief Information Officer), COO (Chief Operating Officer) and
CTO (Chief Talent Officer). These individuals should bring
significant experience in these areas, even if they have limited
direct education experience.
Other opportunities to increase efficiency at HCDE will require
greater investment in core capacity. HCDE may sometimes be
inefficient because it has too few staff at Central Office, not too
many:
Limited finance staff reduces ability to effectively plan
Limited procurement staff reduces ability to maximize value
HCDE needs a system-wide efficiency review of practices and
processes to reduce redundancy and create operational efficiency
is necessary.
21
Increasing Efficiency

HCDE Finance lacks capacity to allow it to more effectively plan

(e.g. budgeting for outcomes, multi-year planning) and develop
cost-saving procurement and other enterprise-wide strategies
Multi-year planning will allow HCDE to look at investments and
savings opportunities over the long term, rather than focusing
primarily on year-to-year debates over the budget.
HCDE needs capacity to clearly articulate outcomes based on
investment
County should use General Fund resources (e.g. part of
payment from HCDE for Trustee services) to support hiring
two FT performance auditors to regularly report on
opportunities for savings and on overall HCDE performance,
thereby increasing efficiency and accountability

22
Infrastructure, IT and Innovation
HCDE has three big challenges related to building
infrastructure
Consolidation: To achieve the operational savings related to
consolidation, HCDE will need to build new or add on to existing
school buildings. This would require new capital spending and yield
operating savings that could be reinvested in classroom priorities.
Rezoning alone is unlikely to achieve necessary consolidation
Replacement and Repair: HCDE has more than $200 million in
deferred maintenance cost, including 5 schools with more than $10
million in cost. Replacing these schools without consolidation --
would require new capital spending and yield no savings.
Population Shift: Shifts within the County and within the school
system have increased the need for classrooms in schools in some
parts of the County even as overall enrollment remains the same.
Meeting these demands will lead to new capital and new operating
costs.
23
Infrastructure, IT and Innovation
HCDE needs a multi-year capital plan that addresses all
of these infrastructure and capital maintenance needs.
Projects should be prioritized based on agreed upon
criteria including:
Availability of external funding (e.g. grants)
Avoidance of operational costs
Potential for operational savings
Teacher and student health and safety
Investments in replacement and consolidation should have
priority over investments in new schools. HCDE should
become a part of the planning commission approval process
and developers of new subdivisions that would create a
need for new schools thus increasing operating and capital
costs for County taxpayers --- must be strongly encouraged
to incorporate those costs into development.
24
Infrastructure, IT and Innovation
The capital planning process along with a review of
school zoning can also be an important mechanism for
reducing the concentration of poverty in schools,
thereby improving student performance. Any new
investment in school infrastructure should be assessed
on this basis.
County and School Board should appoint a joint citizens
committee based on federal base closing commission
model that would develop a single, unified plan for
consideration and adoption by the Commission and the
School Board. The plan would recommend priority capital
investments and opportunities for rezoning.

25
Funding
County should create a new tax levy dedicated to
Schools Infrastructure, Technology and Innovation
similar to Nashville Davidson Education Debt Service
Fund
Funding for the Schools ITI Fund would:
Fund school consolidations, freeing up savings for teacher
quality, reducing concentration of poverty and improving
student performance
Double funding for capital maintenance and building
repair, eliminating deferred maintenance
Absorb the current cost of debt service funded through the
General Fund

26
Funding
The new fund would provide budget relief to Hamilton County,
though County should refund Trustee fees to HCDE minus
cost of independent audit of HCDE
General Fund current funding for school related debt service ($24
million) Return of HCDE Trustee fees (offset by cost of auditors) =
$20 million in potential savings
The fund would provide immediate budget relief to HCDE that
could be invested in capacity, innovation and technology
Capital maintenance and building repair budget ($5 million) + Return
of HCDE Trustee Fee ($3.7 million) = $8.7 million in FY 2018 budget
relief

27
Funding
Property Tax rate to support new Fund would depend on:
Projected annual new debt service to support new school
capital plan
Retirement of current debt
Timing of debt issuance, planning, design and construction
Alternatives include:
Combining a smaller property tax increase with an
increase in the sales tax or imposition of a wheel tax
Seeking state legislation for alternative tax options
Voluntary negotiation of PILOTs with major tax exempt
property owners

28
Findings

29
Challenges Facing Hamilton County Schools

HCDE Strategic Plan outlines the following challenges:

Increase in number of children in poverty
Growing ELL population
Teacher recruitment and retention
Pockets of population growth
Uncertainty regarding testing climate and policies
Deferred maintenance

30
The Challenge: Concentration of Poverty

Student performance is closely correlated with student family

income.
Programs e.g. Benwood Initiative have demonstrated how
great principals and great teachers can help overcome the
gap. Past efforts have focused on reconstitution, data for
targeted improvement, embedded professional development
Problem may be less student income and more concentration
of poverty.
EPI 2017: Attending a higher poverty school had a negative influence
on the math and reading achievement of students from all racial/ethnic
groups in both fourth and eighth grades.
Nationally, the percentage of ED (FRPL) students in schools with 75%
or more ED students increased from 45.5% in 1996 to 61.6% in 2013

31
The Challenge: Concentration of Poverty

District % ED % ED % ED
Students Students in students in
80% or more 70% or more
ED Schools ED Schools
Hamilton 64.2% 54.3% 68.5%
Knox 46.4% 5.7% 19.9%
Davidson 76.3% 61.0% 82.3%
Shelby 82.3% 68.5% 82.2%

32
The Challenge: Teacher Quality
HCDE has over 3,000 teachers and hires between 300 and
350 new teachers every year.
Teachers matter more to student achievement than any
other aspect of schooling. Many factors contribute to a
student's academic performance, including individual
characteristics and family and neighborhood experiences.
But research suggests that, among school-related factors,
teachers matter most.
When it comes to student performance on reading and math
tests, a teacher is estimated to have two to three times the
impact of any other school factor, including services,
facilities, and even leadership. RAND Corporation

33
Growing Consensus on School Improvement
HCDE Strategic Plan
Great Teacher, Great Leaders
Engage Every Child. Every Day
Strong Foundations: Literacy and Math
Building Our Values: Culture, Climate and Communication
Prepare All Students for College and Career
Closing the Opportunity Gap
Chattanooga 2.0 Ten Urgent Strategies
Strengthen Supports for Parents & Families
Create an Early Learning Network
Reimagine Learning for the 21st Century
Increase the Focus on Literacy for All Students
Support Great Teachers in Every School and Classroom
Empower School Leaders
Ensure High Expectations and Equity for All Students
Prepare All Students for College and Career
Increase Post-Secondary Completion
Connect More Residents to High Demand Jobs
34
Growing Consensus on School Improvement
UnifiEd Pact for Public Education
Ensuring that there is a Great Teacher in Every Classroom
Achieving Universal Excellence by Guaranteeing Equal Opportunity to all
Students
Building Community Support for Public Schools by Increasing
Transparency and Accountability
Prioritize Funding for Public Schools
Public Education Foundation
All children are curious and eager to learn and will succeed at very high
levels when held to the highest expectations, taught with a rigorous
curriculum, and nurtured in welcoming schools, engaging classrooms, and
supportive communities.
All schools must have visionary leaders and skillful teachers, who, in turn,
must have ongoing training and support.
High performing schools succeed on the assessments required by state
government but they are not focused exclusively on test scores; high
performing schools also provide skills, experiences, and relationships that
help students succeed in their career, their community, and their life.
Creating and sustaining high performing schools demands the support of
an entire community.
35
Current Funding
Compared to other states, state government in Tennessee
spends significantly less per student
The States BEP formula works to the disadvantage of
Hamilton County, which is treated as a wealthy county
Among the largest Tennessee counties, Hamilton County has
the third highest per pupil spending trailing Davidson and
Shelby. Only Davidson County, however, spends more
per pupil in local funds than Hamilton County
Current PPE data does not account for (a) cost of debt
service for capital ($24 million) or (b) transfer from HCDE to
County for Trustee ($3.9 million)
HCDE has not benefited from an increase in property tax rate
in more than ten years.

36
Current Funding: FY 2017 HCDE Budget

Funds
General Purpose School Fund: $363.0 million
Federal Projects (e.g. Title I): $27.4 million
Food Service: $21.4 million
Self Funded Projects: $5.9 million
TOTAL = $417.7 million
NOTE: By comparison, City of Chattanooga FY 2017
General Fund Budget was for $230.3 million and the
Hamilton County FY 2017 General Fund Budget
(excluding HCDE) was $218.8 million

37
General Purpose Fund Expenditures FY 2017

Instruction Administration Charter Schools Technology

Vocational 3% 2% and Other
Education 1%
3%
Transportation
4%
Capital, Plant
Operation and
Maintenance
10%

Instruction Special Regular Education

Education Instruction/Support
11% 66%

38
General Purpose Fund: Source of Revenues

State of Tennessee: $152.4 million

Property Tax: $136.8 million
Sales Tax: $68.0 million
Other: $4.6 million
TOTAL = $361.8 million
NOTE: To balance the FY 2017 General Purpose School
Fund budget, HCDE used $1.2 million in fund balance

39
Funding for K-12 Education in Tennessee 2014

Analysis of Total Spending per Student FY 2014

National: $11,009
High: New York = $20,610
Low: Utah = $6,500
Tennessee is 42nd out of 50 states = $8,630
Analysis of State Spending per Student FY 2014
National: $5,969
High: Vermont = $16,996
Low: South Dakota = $3,165
Tennessee is 46th out of 50 states = $4,144

40
Funding for K-12 Education in Tennessee 2014

Analysis of Local Spending per Student FY 2014

National: $5,712
High: New York = $12,571
Low: Hawaii = $295
Tennessee is 36th out of 50 states = $3,852

41
Projected HCDE Revenue
In his FY 2018 budget, Governor Haslam has proposed full
funding of BEP and an additional $100 million for salary
increases for Tennessee teachers. Overall, BEP funding
would increase from $4.47 billion to $4.69 billion a 4.9%
increase.
HCDE projects modest growth in both property tax and sales
tax revenue locally (without a change in rates).

42
Cost of Compensation

The vast majority of HCDE spending is for compensation for

teachers and other educational personnel.
When adjusted for cost of living, teacher salaries in Hamilton
County lag behind other major Tennessee counties and
statewide teacher salaries lag behind national salaries for
teachers.
Adjusted for cost of living, starting teachers in Hamilton County
earn $3,500 less than starting teachers in Knox County, $4,400
less than in Davidson County and $10,000 less than in Shelby
County.
Salaries for experienced teachers also lag behind those in peer
counties and North Georgia

43
Cost of Compensation

Teacher salary is primarily based on education and years of

service. HCDE provides limited differentiation based on
performance, difficulty of school assignment or limited
number of candidates for certain positions.
Salaries for principals are also lower than in other major
Tennessee school systems.
HCDE medical, dental and life insurance cost totaled $40.5
million. HCDE benefit costs per FTE (not including pensions)
are lower than Davidson but more than double rate in Knox
County.
Unlike Davidson and Knox, HCDE does not have a process
for screening for tobacco use and charging higher health
insurance rates for tobacco users. HCDE does not have a
high deductible plan option including HSAs.

44
Cost of Compensation

HCDE has undertaken a series of recent reforms that

increase the employee contribution for health insurance and
limit the ability of employed spouses to participate in health
benefits.
Georgia teachers are insured through a statewide plan for
teachers and State employees
High cost of benefits in Hamilton County may be in part
attributable to retiree health benefits. Retirees are allowed to
continue on health insurance at no increased cost between
55 and eligibility for Medicare. Retiree health cost = $7.8
million/year. Nationally, just 12% of private sector employers
provide such benefits.

45
Cost of Compensation

HCDE-wide cost of compensation is also driven by the

number of teachers. HCDE teacher-student ratio is lower
than in other benchmark school systems.
The higher number of teachers is the result of having fewer
students per school. The combined effect of having more
schools, fewer students per school and BEP class size
requirements is more teachers than provided for under State
formula.

46
Does teacher pay matter?

[There is] no evidence that teacher incentives increase

student performance, attendance, or graduation, nor do I find
any evidence that the incentives change student or teacher
behavior. If anything, teacher incentives may decrease
student achievement, especially in larger schools. Harvard
University study of teacher incentives in New York, 2011
(http://www.nber.org/papers/w16850.pdf)
[We] found that higher salaries appeared to be associated
with better average student outcomes. This lends some
support to the hypothesis that higher pay attracted more
effective teachers. RAND Corporation analysis of teacher
pay in Illinois, 2006
(https://www.rand.org/content/dam/rand/pubs/working_papers
/2006/RAND_WR378.pdf)

47
Does class size the number of teachers -- matter?
When school finances are limited, the cost-benefit test any
educational policy must pass is not Does this policy have any
positive effect? but rather Is this policy the most productive use of
these educational dollars?
Will a dollar spent on class-size reduction generate as much return
as a dollar spent on: raising teacher salaries, implementing better
curriculum, strengthening early childhood programs, providing more
frequent assessment results to teachers to help guide instruction,
investments in educational technology, etc.?
There is no research from the U.S. that directly compares CSR
(class size reduction) to specific alternative investments. Brookings
Institution, 2011 (www.brookings.edu/research/class-size-what-
research-says-and-what-it-means-for-state-policy/)

48
Facilities
HCDE does not have a prioritized, multi-year capital plan based on
agreed upon criteria. It depends on the County Commission to
approve all capital investment and debt service.
Unlike Davidson County, there is no separate millage for debt
service or capital investment in Hamilton County.
HCDE has three different types of facilities challenges:
New schools or new capacity is needed to allow for school
consolidation that reduces personnel cost. School consolidation
and zoning can also begin to address poverty concentration
New schools or new investment is needed to repair or replace
schools that are in deteriorated condition. HCDE has a backlog
of more than $200 million in deferred maintenance and a budget
of just $5 million/year for capital repair and building
maintenance/
HCDE is not able to keep up with population shifts within the
County due to new development. There is no apparent
coordination or review as part of Planning Commission process.

49
Technology & Innovation
HCDE has a 2016-2019 technology plan.
IT is the fastest growing department within HCDE more
than doubling in the last six years. HCDE has had to take on
telecommunications support formerly provided by Hamilton
County
HCDE goal is one device per student, but in some schools
not even achieving one device for every five students. No
clear evidence of the effect of increased availability of
technology
HCDE would like to achieve a four year replacement
schedule, but not able to fund that currently
New software could also be used to improve operations or
processes (e.g. ongoing professional development or new
teacher recruitment) and student learning.

50
Technology and Innovation
HCDE has identified investment in technology as a critical,
unfunded need. In 2017, more than $6.4 million in unfunded
requests were for technology investments
HCDE Technology Investment Plan calls for:
Technology Access for All Students
Professional Development
Infrastructure and Technology Support
TNReady Preparation
Communication and Collaboration

51
Support

Comparative data and our interviews suggest that HCDE lacks

adequate capacity in overall administration and operations, with a
low number of administrators per teacher
Opportunities exist for some savings through improvements in
procurement, but they are hard to achieve given current staffing
levels (e.g. Procurement Card, contracting out for certain services).
There is also potential for shared services with County government
HCDE cut supplies allotment for teachers from $500 to $100 per
year
HCDE needs additional support for planning (e.g. capital plan,
multi-year financial plan, budgeting for outcomes) and audit and
oversight (e.g. no performance audit capacity)
HCDE needs additional support to evaluate additional opportunities
for efficiency and evaluation of return on investment

52
Funding Options

Property Tax
Most large counties rely primarily on property tax revenue
for local funding of education.
Among large counties, Hamilton County property tax rate
dedicated to education (1.3726) lags behind Davidson,
Shelby, Sumner and Williamson
In Knox County, the majority of local revenue for schools
comes from sales tax.
Separate dedicated levy for debt service (Davidson) and/or
transportation costs (Montgomery County)
Additional funding from property tax could be possible
through economic growth, but property tax revenue growth
is greatly limited by equalization

53
Funding Options
Local Option Sales Tax is capped at 2.75 on the first $1,600
of a purchase, with at least half of all revenue going toward
education. Only one large county (Montgomery) has a rate
higher than the 2.25 rate in Hamilton County.
HCDE currently receives half of the LOST in Hamilton
County. An increase in the sales tax to 2.75, with all of the
increase going to education, would yield an additional $28.7
million for education
Not all of the new revenue would come from Hamilton County
businesses or residents between 25% and 45% would likely
come from commuters and tourists
Sales tax is inherently regressive based on IRS data,
approximately 2.84% on residents earning $20,000 or less vs.
1.35% on residents earning $200,000 or more

54
Funding Options

Hamilton County is the only large Tennessee county without a

wheel tax
Unlike other major Tennessee counties, where there is
approximately one vehicle registration per capita, there are
1.8 registrations per capita in Hamilton County
Assuming that registrations declined to one per capita, there
would be 354,000 registrations in Hamilton County. In large
counties, the wheel tax ranges from $25.75 in Williamson
County to $55 in Davidson County.
Based on this range of rates and 354,000 registrations
annually, a wheel tax could generate between $9.1 million
and $19.5 million annually.

55
Funding Options

Additional new sources of revenue would require changes in

state law.
Example: Local cigarette or tobacco taxes are relatively common in
Alabama, Alaska and Virginia. There is 60 year old special state law
allowing for a local cigarette tax in Memphis
Local parking tax
Tax on new housing starts or property transfer
Other local governments are increasingly turning to large tax
exempt property owners (e.g. private education and medical
centers) to provide funding or services in lieu of taxes
Example: In FY2015, more than 35 of Bostons hospitals, higher
education institutions, and cultural institutions combined to provided
community benefits and cash PILOT payments totaling nearly 20% of
their taxable value

56
Appendix

Benchmarking Local Per Pupil Spending 2015

Per Pupil Spending Change
Benchmarking Cost of Education
National Teacher Median Wage Data
Average Teacher and Principal Salaries
Teacher Salary Adjusted for CPI
Benchmarking the Cost of Benefits
Benchmarking Local Revenue: Tax Rates
Benchmarking Local Revenue: Wheel Tax

57
Benchmarking Local Per Pupil Spending 2015

ADM 2014- Per Pupil

2015 Expenditure Local ED%

Davidson 80731 $ 11,496.30 $ 6,786.27 75.3

Hamilton 42669 $ 9,728.80 $ 5,146.54 60.5

Williamson 34991 $ 8,739.70 $ 4,850.53 9.6

Knox 57582 $ 9,043.00 $ 4,836.20 40.0

Shelby 110807 $ 11,221.60 $ 4,498.74 79.8

Sumner 28346 $ 8,402.00 $ 3,834.67 36.7

Montgomery 31384 $ 8,675.50 $ 2,906.29 49.4

58
Per Pupil Spending Change FY 2011 to FY 2015

Total
Spending Per Pupil Expenditure
State 5.0% 3.2%
Davidson 12.3% 3.8%
Hamilton 6.6% 3.5%
Knox 12.1% 6.3%
NOTE: Year to year comparative data for Shelby
County during this period is skewed by its merger
with Memphis Public Schools

59
Benchmarking Cost of Education, National
Riverside
Sacramento
Hamilton Davidson Knox Shelby Unified
2014-2015 City Unified
County County County County School
(CA)
District (CA)
Total Student
43,797 84,070 59,750 116,059 42,587 47,031
Enrollment
Total Teachers 3,058 5,314 3,670 7,214 1,621 1,870
Total
184 601 385 507 119 128
Administrators
Total Schools 79 154 90 221 50 87

Total Per Pupil

$9,728.80 $11,496.30 $9,043.00 $11,211.60 $9,200.00 $11,035.00
Expenditures

60
Benchmarking Cost of Education, National

Riverside Unified
Hamilton Davidson Sacramento City
2014-2015 Knox County Shelby County School District
County County Unified (CA)
(CA)

Student/
14.3 15.8 16.3 16.1 26.3 25.2
Teacher
Teacher/
16.6 8.8 9.5 14.2 13.6 14.6
Administrator
Students/
554.4 545.9 663.9 525.2 851.7 540.6
School
NOTE: Riverside and Sacramento were selected because they are
similar in enrollment and ED% and have achieved better student
outcomes

61
Identifying National Benchmarks

Are other school districts of similar size and economic make-up performing
better than Hamilton County?
We conducted a national search for the 2014-2015 school year. Riverside Unified
School District and Sacramento City Unified were chosen for comparison because
they had higher levels of ED students and similar student body size yet had similar
(or better) graduation rates and performed better on the ACT.

2014-2015 Hamilton County Riverside Unified School Sacramento City Unified

District (CA) (CA)

Total Student Enrollment 43,797 42,587 47,031

Total Per Pupil

$9,728.80 $9,200.00 $11,035.00
Expenditures
Average ACT/SAT Score ACT: 18.9 ACT: 21 ACT: 19.8
High School Graduation
85.4% 89.4% 80.3%
Rate
% Economically
60.5% 63.6% 64.2%
Disadvantaged Students

62
National Teacher Median Wage Data: May 2015

Kindergarten Elementary Middle High School

United States $54,510.00 $57,730.00 $58,760.00 $57,200.00

Tennessee $49,800.00 $49,470.00 $49,250.00 $50,570.00

High $71,510.00 $75,700.00 $79,760.00 $80,550.00

Low $40,560.00 $41,760.00 $41,270.00 $42,960.00

63
Average Teacher and Principal Salaries : FY 2015

Hamilton Davidson Knox Shelby State

instructional
Personnel $ 50,484 $ 52,958 $ 49,204 $ 59,805 $ 50,175
Classroom
Teacher $ 48,298 $ 50,133 $ 46,410 $ 57,355 $ 47,979
Principal $ 89,083 $ 101,208 $ 86,438 $ 101,201 $ 82,445

64
Teacher Salary Range (adjusted for CPI)

Starting High CPI Starting CPI High

Hamilton $ 37,501.00 $ 65,802.00 $ 37,501.00 $ 65,802.00
Knox $ 37,180.00 $ 64,360.00 $ 41,070.93 $ 71,095.35
Davidson $ 42,100.00 $ 73,850.00 $ 41,923.48 $ 73,540.36
Shelby $ 42,343.00 $ 72,870.00 $ 47,774.17 $ 82,216.75
Sacramento $ 44,565.00 $ 81,017.00 $ 36,814.57 $ 66,927.09
Riverside County $ 56,035.00 $ 100,547.00 $ 44,509.41 $ 79,865.93

65
Benchmarking the Cost of Benefits

School districts pay Medicare/Social Security at the federal

rate and contribute to the state pension system for teachers
Majority of remaining benefits subject to local discretion
medical insurance, dental insurance, life insurance
Benefit data is based FY 2017 budget for Hamilton and Knox
and FY 2016 budget for Davidson

Hamilton Knox Davidson

Total Benefits $40,459,671 $27,228,803 $ 96,650,000

FTEs 4249.2 6245.05 9182.8

Benefits/FTE $ 9,521.71 $ 4,360.06 $10,525.11

66
Benchmarking the Cost of Benefits
Employee contributions for health insurance
Davidson reduces cost based on assessment for tobacco
Knox has a Consumer Driven Health Plan that also includes
an Health Savings Account
Employee Annual Family Annual
Davidson - Health Assessment $ 2,089.00 $ 5,049.40
Davidson $ 2,889.00 $ 5,849.40
Knox Partnership $ 1,855.68 $ 6,495.00
Knox Standard $ 3,285.60 $ 8,525.40
Knox Limited $ 830.52 $ 3,239.16
Knox CDHP $ 831.72 $ 3,239.16
HCDE HMO or PPO $ 1,200.00 $ 6,403.20
HCDE High Deductible $ 600.00 $ 4,680.00
67
Benchmarking Local Revenue: Tax Rates

Property Tax
Property Tax - Education - Debt Property Tax -
Education Education Total Local Sales Tax

Davidson 1.4200 0.18 4.5160 2.25

Hamilton 1.3726 0 2.7652 2.25

Williamson 2.2675 0 3.0875 2.25

Knox 0.8800 0 2.3200 2.25

Shelby 2.1400 0 4.3700 2.25

Sumner 1.4539 0 2.5000 2.25

Montgomery 0.9729 0 2.9747 2.50

68
Local Revenue: Wheel Tax

Rate
Davidson $ 55.00
Hamilton N/A
Knox $ 36.00
Montgomery $ 30.50
Shelby $ 50.00
Sumner $ 51.00
Williamson $ 25.75

69