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John Hill - Editorial Writer
Will a shaky financial history doom the Hillsborough school’s tax? | Column
Voters have to decide in coming weeks whether to raise their property taxes to help pay for costs of running local schools.
Addison Davis makes his pitch to become Hillsborough County Schools Superintendent in January 2020.
Addison Davis makes his pitch to become Hillsborough County Schools Superintendent in January 2020. [ OCTAVIO JONES | Times ]
Published Jul. 14|Updated Jul. 14

Addison Davis took a seat across from the dais, settling in for his first public interview with the local school board. The superintendent from Clay County in northeast Florida had emerged as a semifinalist for Hillsborough’s top job.

In a blue suit and pink-maroon tie, Davis outlined how he’d guide the nation’s seventh-largest school system, promising to work tirelessly to turn around failing schools, to promote equity and to be open and accessible to staff and parents. It was a gripping performance.

But Davis’ pitch in January 2020 was also something else — a tall order for a district in such financial peril that it’s now asking voters to approve an additional tax. For the previous decade, Hills­borough indulged in runaway spending, blowing a half-billion-dollar hole in the budget. Davis’ vision was exciting. But where was the money to pull it off?

During the interview, the seven elected board members pressed Davis on how he would keep them in the loop, handle unpopular decisions, delegate authority, interact with staff. They questioned him about charter schools and student discipline.

The budget? Nobody asked.

That Davis’ soon-to-be bosses chose not to raise the most serious threat facing the district epitomized how the school system ended up in financial disarray.

Year after year for nearly a decade, school officials ladled into cash reserves and shifted tens of millions of dollars from capital accounts to cover payroll and other routine expenses. It was like raiding your savings to pay your monthly light bill — a recipe for a downward financial spiral.

Board members and top administrators bemoaned the practice for years but did little to stop it. The spending was unsustainable, bad practice, politically risky and potentially ruinous to the district’s future. A crisis a decade in the making suddenly blew up overnight last year, forcing the district to take drastic steps to avoid state intervention because of its dwindling reserves.

The district’s cost cutting, combined with tens of millions of dollars in federal COVID-19 relief, stabilized the short-term budget. The pent-up shortfalls finally forced some accountability. The district is shedding jobs and expenses — cuts that many complain will undermine the district’s effort to boost its academic appeal and push more families to move their children (and the educational tax dollars that follow them) to privately operated charter schools. Board members are facing a number of politically contentious decisions, from vastly redrawing school boundaries to consolidating or closing campuses.

Davis’ scramble to balance the budget bought him time and room to maneuver. But two years into the job, his honeymoon is long over. Three members of the seven-member board that hired him are gone; two lost reelection in 2020 and a third moved to a higher office. And while the spending crisis has abated, thanks in part to buckets of onetime federal money, the financial headwinds remain.

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The board voted 4-3 in April to seek the additional property tax. Hillsborough voters will decide in the Aug. 23 primary election whether to raise their property taxes by levying an additional $1 for every $1,000 in assessed property value. If passed, the new tax would raise about $146 million annually and be spent on operations, including salaries for teachers and support staff. Combined with ongoing cost savings, the additional revenue, officials said, would help the district make key investments in the coming years, enabling the public school system to better compete and thus retain those precious enrollment dollars being lost to charters and private schools.

But the board’s split decision on the tax reflects the uncertainty with the recovery plan and the unease with going back to the taxpayers to ask for more money. With inflation at a 40-year high, and schools the new battleground in the state’s culture wars, the referendum comes at a difficult time. Why, voters may ask, should they tax themselves more for a school district that spent itself into trouble? Why is the district crying poor when dozens of its schools are only half or two-thirds full? What has really changed with the spendthrift culture, and who says another financial crisis isn’t around the corner?

In short, the August referendum boils down to a simple decision: Would a yes vote transform the district or merely amount to throwing good money after bad? That is why understanding how Hillsborough got into this mess is essential. Even now, some supporters of the school system complain the district has been overly optimistic or premature in predicting a durable financial turnaround. And with only days before mail ballots go out, supporters wonder whether the tax is on the public’s radar.

Although Davis inherited this crisis, the August referendum will define his tenure. COVID-19 forced him to lead from “behind a screen” for his first year, as he described it. But the question now is whether the superintendent has cultivated the relationships and public trust necessary to push the referendum over the line. Groundwork is key to massing political support for major civic initiatives like ballot measures, something the pandemic made much more difficult. As the referendum looms, Davis also confronts a messaging problem. He must stress the district’s acute needs while persuading voters that the district’s financial flubs are in the past. But that past is hard to shake.

‘Only person breaking pencils’

For nearly a decade, the numbers weren’t pretty. Annual deficits from 2012 to 2020 were never smaller than $25 million. After years of draining its reserves to dangerously low levels, the district started to tap its capital fund to shore up operations. This flushing of money between accounts obscured the true picture of the district’s finances and virtually guaranteed the trouble would mushroom into a full-blown emergency.

Many blamed the district’s money woes on its relationship with the Bill & Melinda Gates Foundation, which in 2009 awarded Hillsborough a seven-year, $100 million grant to phase-in a new mentoring and evaluation program for teachers. The goal was to make classroom instructors more effective, thereby boosting academic achievement, especially in struggling schools. But teachers chafed under a peer-mentoring program and a consultant later derided

Hillsborough’s professional development efforts as “fragmented, unfocused and workshop-based.” The district’s share of the cost ballooned to at least $124 million, as thousands of employees took outsized raises and tens of millions of dollars flowed to consultants.

The Gates experience was expensive, but it aped a larger problem that went well beyond the partnership with Microsoft’s co-founder. For years, inflated staffing levels, massive overhead, lucrative outsourcing and inattention and outright indifference to spending all compounded to upend the budget.

The spending decisions were big and small, and the dollars added up. When the Great Recession swept the country in 2008, Hillsborough officials boasted how the school district made the deliberate decision to avoid layoffs and cutting programs, even as other local governments across Tampa Bay shed thousands of jobs and millions in expenses to offset declining revenue.

From 2011 to 2015, Hillsborough had fewer students per teacher than the Pinellas, Palm Beach, Duval and Orange County school systems, an outside consultant found. It also had too many clerical workers, in part because mid-level managers relied on secretaries — not voicemail — to take their messages. Even Hillsborough’s janitorial staff was bloated. Records for the 2014 school year showed that custodians cleaned about one-third less than the industry standard for a workforce of its size, at a cost of about $12 million a year.

Consultants hired to find waste found it around every corner. Hillsborough used grants to hire employees, then kept the employees on the payroll long after grant money was gone. Administrators filled positions without knowing whether the district could afford them. Charter schools increasingly siphoned away students, and the tax dollars that travel with them, yet Hillsborough did not adjust staffing levels to reflect for lost enrollment. Buildings wasted electricity. Duplication abounded; at one point, Hillsborough had 126 different anti-bullying programs.

As expenses mounted, a catchphrase emerged at the downtown headquarters: “Make it work.” While Hillsborough adopted some consultants’ cost-saving recommendations in 2016 and 2017, the district did not bring spending in line with income. Few senior staff were sounding the alarm; fewer still were acting on it. Many treated the deficit as a cash-flow problem, not a structural binge toward insolvency. Administrators kept kicking the can down the road — and school district employees loved it. “Gretchen was the only person in the room breaking pencils,” recalled one former administrator, referring to Gretchen Saunders, the district’s former chief financial officer. Her colleagues grew so tired of the warnings that they quit inviting her to meetings.

The district covered these losses two ways. First, it transferred tens of millions of dollars annually from capital accounts to the general fund, taking money from major projects to pay for routine expenses. Those transfers grew from $7 million in 2015 to $41 million the following year. During the six-year period ending in 2020, capital transfers totaled $197 million.

The district also drained its cash reserves. Its balance dropped from $361 million in 2010 to $146 million by 2014. The reserves remained steady for several years, even increasingly a little, by 2018. Officials framed the healthier balance as a signal of fiscal restraint, which they used as a selling point to help convince Hillsborough voters that November to approve a local sales tax for school repairs, including fixing many broken air conditioners. But the bad habits returned the following year, as reserves dropped again, to $118 million.

In all, the deficit spending over 10 years totaled more than $550 million. The district was on course to be tens of millions of dollars in the hole in 2021 before spending cuts and the influx of federal pandemic assistance. The district is working to rebuild its balance sheet, but with the tax vote looming, even longtime school advocates are weighing their support for public education against the district’s shaky financial history.

Higher taxes the solution?

The district’s rush to stem the bleeding last year held off state intervention and what could have been an embarrassing period of austerity and outside control. It’s given Davis time to institute his self-described “soft landing” strategy, which calls for eliminating jobs in stages through the end of this year, mostly by attrition. Davis has said that right-sizing the bureaucracy is key to convincing voters that the district is more fiscally responsible.

A 2020 study by the Council of Great City Schools, a collaborative involving the nation’s largest urban school systems, found that Hillsborough’s 25,000-member workforce had 3,000 excess positions. Davis announced in April that he had eliminated about 1,000 of those jobs. He also imposed new spending controls, from squeezing travel and overtime pay to requiring that senior staff sign off on any new hires.

Can Davis overhaul the district’s finances? Three credit rating agencies have doubts. In reports issued last year, Moody’s, Fitch and S&P Global downgraded their ratings on some of the district’s debt. While acknowledging the new administration had instituted a recovery plan, analysts expressed concern about Hillsborough’s ability to curb spending long-term, which Moody’s anticipated would be “difficult to implement” given that past attempts had “limited success.”

The rating agencies’ outlook underscores a central point: Changing Hillsborough’s financial picture involves changing its bureaucratic culture as much as its revenue base. Yet as the fiscal crisis mushroomed, district officials and apologists looked outward for blame. Board members, for example, pointed to miserly state funding, competition from charter schools and a dearth of construction dollars for large, growing districts — without acknowledging that other similar-sized school systems across the state face the same financial pressures.

Take charter schools. Board members routinely grouse that Hillsborough loses $250 million a year in funding that follows nearly 35,000 students who attend charters. But the threat from charters is hardly unique to Hillsborough. The nearly 16% of students attending charters in Hillsborough is only slightly above the 13% state average. And 10 counties have larger shares of children attending charters than Hillsborough, including the state’s largest school districts, Miami-Dade (24%) and Broward (19%).

Hillsborough also has a lot of under-used schools, a distinctly local drain on spending that Hillsborough has yet to adequately address. Seventy-seven of the district’s 217 schools operate at or below 70% student capacity. Nine schools are at half capacity or less, three more than last year. Of these chronically vacant schools, only 19 are expected to see any meaningful enrollment growth in the coming years. Most of the under-capacity schools are in older, minority neighborhoods and urban areas with higher numbers of Black students. Proposing to close them is an invitation to battle. Local elected officials, neighborhood activists, alumni, civil rights groups, unions, contractors and others have a vested interest in keeping these schools (and their large, aging facilities) right where they are.

The school board hasn’t seriously considered closing schools for decades, despite the huge costs of maintaining underused campuses. Indeed, a school system that dates to the 1880s has never closed a school because of low enrollment. The head of the NAACP branch in Hillsborough, Yvette Lewis, pressed the point with Davis after hearing rumors of proposed closures last year. “I said, ‘You need to get ahead of this,’” Lewis recalled telling him, insisting flatly that Black students not be used as “sacrificial lambs” to balance the budget. The district agreed in March to hire a consultant to identify underused schools that might be “repurposed.” But the board did not discuss the contract before approving it and the report is not expected until 2023 — after this year’s school tax vote and school board elections. The timidity and timing say a lot.

Even if voters reject the additional property tax, Davis insists his recovery plan would keep the district’s cash reserves above the 3% state-mandated minimum. The district plans to use an estimated $640 million from federal COVID relief to cover salaries, benefits and other expenses through 2024. It is exploring whether to privatize some services, such as busing, and is looking to renegotiate contracts with vendors. It hopes to generate new income by renting school facilities and wringing advertising dollars from school sports and stadiums. And officials think they can adopt solar to shave double-digits off the district’s $32 million annual electric bill.

While Davis says the district can survive without the tax, he also maintains that Hillsborough needs the money to compete with other counties for quality teachers. Improving the talent pool could help boost academic achievement and make district schools more attractive than private options. Davis also promised early on to fix the 35 campuses on the state’s list of persistently low-performing schools, by far the most in Florida. Hillsborough has made headway, but Davis said the district needs more time and money.

With ballots going out next week, Davis and his supporters have only days to sharpen the messaging. A few weeks before the 2018 sales tax referendum, public support seemed deeper and more organized than it is this summer. The focus was simpler — broken air conditioners in hot, humid Florida. The economy felt more stable. Gas prices were half what they are today. And now trust is much more of a factor.

Davis acknowledged during a meeting Tuesday with the Tampa Bay Times Editorial Board that the timing of the current referendum was a challenge. “There may be some heartache historically to what’s happened,” he added, before swiftly pivoting to the ways the tax would benefit the district. Will Hillsborough voters pivot so quickly to the upside? We’ll know in a few weeks.

John Hill is an editorial writer on the Tampa Bay Times Editorial Board. Contact him at jhill@tampabay.com.

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