Despite asking for $10 million more than state-mandated minimums, Montgomery County Public Schools looks to get no more than the county is required to give.
Montgomery County Executive Isiah Leggett (D) recommended in his fiscal year 2014 budget providing a county contribution to the school system at maintenance of effort, but his proposal also says it funds 100 percent of the school system’s $2.2 billion request.
Leggett’s budget includes a county contribution of $1.4 billion plus $27 million in carry-over funds among other sources including $605.4 million in state aid, $34.5 million for teacher pensions.
Superintendent Joshua P. Starr’s budget asked for $10 million more from the county and used only $17 million from the school system fund balance.
“We are saying, use your reserves,” county spokesman Patrick Lacefield said of the subtle difference.
http://www.gazette.net/article/20130315/NEWS/130319358/1022/leggett-x2019-s-budget-falls-short-of-schools-x2019-request&template=gazette
Friday, March 15, 2013
County to MCPS: Use Your Reserves
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My understanding of the MOE law is the county can never get that $10M back once they add it to the school budget baseline. This means that going $10M over budget is the equivalent of a $10M annuity that lasts forever (assuming the law never changes). This is also known as a perpetuity. The present value of a perpetuity is just the annual amount divided by the discount rate. In our case, that means that if we assume a 4% discount rate, then the real cost of this $10M budget is $10M / .04 = $250M.
ReplyDeleteAnother way to think about it is this. Let's assume there is no discount rate, so $10M means the same thing every year. Now add up $10M every year for 30 years. That amounts to $300M. With a 4% discount rate over 30 years, the present value works out to about $173M
So that $10M request is not as small as Starr makes it out to be.