December 29, 2006

help desk

Have not as yet created KTM the sequel - too busy bombing my practice SAT-math test.

sigh

So, sailing far, far off-topic for D'Ed Reckoning, I'm posting a Help Desk query here.

Does anyone have - or can anyone quickly produce - a sound, illustrative definition of the expressions "money is fungible" and/or "opportunity costs"?

I think some of you have been following the Fields drama here in Irvington: the $4.8 million dollar bond being floated to improve the fields, install artificial turf, build 4 tennis courts, put up stadium lights, etc. This on top of $55 million indebtedness assumed over the past 7 or 8 years.

The bond failed.

The pro-bond forces included the school board, the administration, the high school principal, and the teacher's union.

The high school principal was so pro-bond that he gave the name of the parent who was "heading the committee to defeat the bond" to the union.

The union head called the parent at home to tell her the teachers had voted and they supported the bond.

That parent wasn't heading the committee to defeat the bond, though it was certainly no business of the union's one way or the other if she was.

But she wasn't. No one was heading the committee to defeat the bond because there was no committee. There was no organized opposition at all.

In town the pro-bond forces seemed to include everyone who was anyone, all the machers, big and small.

A group calling itself "Team Irvington" (I'm Chevy Chase and you're not!) put up 800 "Support Our Students Vote Yes" signs all over town one day and paid for zillions of ads featuring large photos of field-less teens staring glumly into the camera. The high school principal signed on with Team Irvington and put his name on all the Team ads along with 20 or 30 or 40 other Prominent Citizens. He wrote his own letter to the editor supporting the bond, and included a pro-bond statement in his MESSAGE FROM THE PRINCIPAL, which arrived in the mail bundled with students' interim grade reports.

Meanwhile the anti-bond people were walking around with bags over their heads.

In a tiny little town like this, the sheer size and force of the pro-bond contingent was unnerving. After Team Irvington's "Support Our Students" signs went up Ed said we had to put up signs, too. I was by then so intimidated I felt too scared to put up signs even after dark, or maybe especially after dark. Even taking Surfer with me I was still scared. I ended up punting.

The next day Ed made even more signs and spent two hours late that night posting them.

Suddenly everyone else started putting up "No" signs under cover of dark, each with a different message. You'd wake up in the morning and: new signs! This went on for days; the townspeople of Irvington had created a Sign Lollapalooza.

My favorite sign was Education not remediation.

I'd love to know who put that one up.

Ed and I counted at least 6 different "No" signs altogether. We don't know who put them up, though we did discover the identity of the mom who wasn't heading the committee to defeat the bond. She put signs up in broad daylight and was followed by two teens in a car. ("Team Irvington" had a huge crew of teenagers working with them.)

After Ed put up signs, I put signs up, too. Naturally I decided to post mine at 10 in the morning just to show I wasn't scared to put up signs.

In retrospect, that was probably dumb.

On election day, the District Clerk laid out all of the Board's many "FAQ"s and "information sheets" on tables in front of the voting booths, next to which stood an easel displaying an architect's drawing of the beautiful plans for our beautiful new fields.

A parent who is an attorney came in to vote around 1 pm, spotted the pro-Bond material, and pointed out to the District Clerk that this was a violation of election law. The Clerk said voters had been coming in asking for information, so she'd put out information.

Word of the Clerk's intervention made the rounds sometime after dark, and at that point Ed and I both figured: debacle.

At 9:30, when the email from the Board saying the bond had been defeated arrived, I couldn't process the numbers. I kept staring at them thinking, "Those numbers look like the bond lost, but that can't be." I had to read the words below the numbers ("The referendum does not pass") to get it. A friend told me she couldn't even process the text, and had to re-read several times before it sank in.

The turn-out was huge, possibly the largest turn-out in recent history.

Final vote:

No: 845
Yes: 798

++++++++

The immediate concern, post-vote, is that we still need fields. (One of the oddities of the vote was that no one publicly or even privately disputed the core issue, which is the need for capital improvements to athletic facilities which haven't been maintained in years and are suffering from over-use to boot.)

The good thing is that a lot of people will be talking back and forth, figuring out what needs to happen to swing 25 no votes to yes.

Whether the fairly large contingent of parents who were posting signs like Education not remediation can begin to make their message heard is another question.

Which brings me to the help desk.

Tonight's Rivertowns Enterprise quotes both the superintendent and the high school principal saying that voters "didn't understand" the bond.

What we didn't understand was that the bond would have no impact on academics. The bond was separate. It was a bond. You can only use a bond for capitol improvements, not for academics, so, ergo, another $4.8 million in debt will have no effect, none, on academics.

This is quite disheartening.

Parents and residents - lots of parents and residents, not just the usual suspects - spent weeks in the run-up to the election asking the board to address the question of opportunity costs & trade-offs. This question was asked repeatedly, and was not-answered repeatedly. The Board put out FAQ after FAQ after FAQ, not one of which addressed opportunity costs and trade-offs.

Apparently the District plans to carry on not addressing the question. It worked so well in the election, after all.

So I'm disheartened.

I was allowing myself to believe that the District would be humbled by this defeat, which was a bad one any way you slice it. They had everything going for them. They dominated all communication; they sent home one pro-bond communication after another while refusing to give equal time to anti-bond arguments (I asked); they sicced the union on parents; they violated election law.

And they still lost.

Ed says that, historically speaking, it is extremely rare for a disorganized, spontaneous, grass-roots movement to prevail against an organized opponent. The vote may have been close, but the loss is large.

So I was thinking that the first words out of the District's mouth would not be "Parents are dumb."

Wrong again.

Ed is writing yet another letter to the editor attempting to explain trade-offs and the fungibility of money.

It's not easy.

I tried to find a simple account in my economics books, but so far no luck.

[update: Ed's letter is pretty good]

If you know a good account, or can write one yourself - or if you have "teaching examples" of money being fungible - I'd love to read.

Thanks!

13 comments:

Anonymous said...

"Money being fungible" means that you can't tell one dollar from another. As an example: you pay some taxes. On *which* items were your specific tax dollars spent (as opposed to everyone elses)? You can't tell, and the question is basically meaningless.

In *practical* terms, it often means that bond measures for item "X" don't wind up finding item "X".

As an example, consider a town currently spending $100M per year on its libraries out of the town's general funds. Townsfolk like libraries and will vote for bonds to pay for more books for the library. Townsfolk hate paying for parks (remember, this is just an example). The politicians running the town want to spend more money on parks. How can they do it?

One way to do it is to ask the townsfolk to vote a bond to improve the parks, but this is a bad idea because the bond measure will fail.

A better (sneakier) way to do this is to ask the townsfolk to vote a bond for the libraries. After it passes, they can then *reduce* the amount of money being spent on libraries from the general fund (say, down to $75M per year) and spend this money on parks. The money spent on libraries could still go up (say, because the library bond was for $50M/year), just not by as much as the bond measure would have caused on to expect (unless one is cynical, like me).

-Mark Roulo

Anonymous said...

"Opportunity cost" is even easier. The basic idea behind opportunity cost is that you can't spend the same dollars twice.

In this case, the idea would be that if the town is/was willing to spend $X on the schools, money spent on one thing for the schools (say, the band) is unavailable for other things (say, new constructivist math books).

Opportunity costs sneak in when you aren't looking for them (unless you have learned to think like an economist). For example, spending time watching TV has an opportunity cost in that the time spent watching TV isn't spent doing something else. Even though it doesn't cost you any *money*, you are still spending *time*.

-Mark Roulo

Anonymous said...

Re “money is fungible” I thought this was a good illustration. It comes from the WSJ and it is critical of court rulings on donating to terrorist organizations that sometimes engage in humanitarian activities.

“The notion of distinguishing between funding a terror group's terrorist and nonterrorist activities is a fatuous one. Money is fungible; every dollar you give to the Osama bin Laden Day Care Center frees up a buck for al Qaeda to spend on its next massacre. The Ninth Circuit's ruling, if it stands, could make a mockery of efforts to stop the flow of money to terrorist groups.”

http://www.opinionjournal.com/best/?id=110004382

Oops, on second thought this might not be such a good example considering the volatile situation In your town. (Yikes! The school is terrorizing our kids!) But I still think it’s a good example.

Sorry!

Tex

Michael said...

"Money is fungible" means that if I put extra money in the grocery fund to buy steak, it frees up money that was already in that fund to buy cookies. "Opportunity cost" means that if I choose to eat the steak for dinner tonight, I am not able to eat chicken tonight, nor am I able to eat the steak tomorrow. These illustrations are off the top of my head with little coffee.

It would be easier to have a telling example if I knew exactly what point you were trying to communicate (you talk around it, but never quite say it).

ShortWoman said...

Opportunity costs can run deeper than "if I spend all my time playing soccer then I can't do my homework" or "if I spend all my money on food than I have no money left for the rent." Sometimes opportunity costs represent missed opportunity.

For example, if I close the office today because I have no appointments on the books, I might miss a new walk-in client who will instead see someone else. Or, a true example from my college days: a professor needed a student assistant for an overseas research trip (the previous assistant having fallen suddenly ill days before they were to leave); but my friend couldn't go because he had no passport and couldn't get one in time. And last, perhaps relevant to your situation: if you don't have playing fields, then you can't have a top notch team as they will have noplace to practice, and you won't be able to host tournaments that will theoretically bring competitors and their families to spend money in your community. I realize this last one borders perilously on "if you build it they will come," a premise I do not beleive.

Catherine Johnson said...

wow!

Thanks so much - all of these are so useful.

Mark - fantastic

btw, the examples Mark gives are completely legal (this came as a surprise to me)

Last year Ed talked to the head of the main urban reform group in NYC; this is a group attempting to reform the public works system, which is based in "Authorities" (such as the Port Authority, which controls the World Trade Center buildings & grounds)

The president told Ed that the book to read on local politics & the way things work is Robert Caro's autobiography of Robert Moses. Ed has now plowed through the entire thing, and I may give it a go.

I'd say it's changed Ed's life. That may not be much of an exaggeration. He's always been intensely "pro-government"; now he's morphing into a small-l libertarian before my eyes.

The Caro book explains the bond situation exactly as Mark explains it, though Caro added some other details, such as eternally "rolling over" bonds into new bonds so that nothing was ever paid off.

It's legal to borrow money for a particular project and then spend that money on other things. In essence, bonds function as legal slush funds.

That has happened here.

We're now $55,000,000 in debt, this in a town of 6500 (school district maybe 13,000?) All of this debt has been racked up in the past few years.

I believe it was the last bond issue that included a plan to build tennis courts.

The courts were never built and now we have a million-dollar item in the new "Fields" bond that is to be spent on tennis courts.

Text - Actually, I'm glad to have the terrorist example; I thought I had that article (or one like it) on my hard drive, but then didn't find it.

Michael - sheesh - I wrote an over-long post & still didn't include the back story

(I'll put it in a separate comment)

Catherine Johnson said...

Michael

The administration asked the community to vote on a new $4.8 million dollar 15-year bond proposal to fund improvements to the two athletic fields at the high school.

Improvements were to include artificial turf for the football field, stadium lights, new track, 4 tennis courts, and the reconfiguration of the football field to bring it closer in size to a regulation soccer field.

The most vocal element of the 'no' vote was the "books or bats" contingent. ("Books or bats" was an anti-Bond slogan some parents came up with two years ago when the proposal had a price tag of $9 million.)

The pro-academics voters wanted to know how an increase in spending on athletics would affect spending on academics.

What would the trade-offs be?

The administration's answer was that there were no trade-offs.

It's against the law to spend bond money on teacher salaries or books; one can spend bond money only on capital improvements.

Therefore spending on the fields would not affect spending on academics.

The "Team Irvington" people also pushed this line, expressing irritation and even a touch of moral indignation that anyone would speak of "books or bats."

"We can have both," these people said.

Ironically, at the same moment the bond proposal was being put forward the PTSA launched a campaign to raise money to buy books for the school libraries.

We don't have books in our libraries!

(Apparently this year the administration actually removed several shelves from the high school library to make the missing books less obvious.)

I had assumed that the administration knew there are always trade-offs in any spending, and was simply spinning the voters.

However, the fact that the administration is still pushing this line in the wake of the bond's defeat makes me think they may not understand core principles of economics.

Catherine Johnson said...

There are many aggravating aspects of the situation, not the least of which is the principal taking a strong public stance in favor of one set of parents and against another.

Now he and the superintendent have told a reporter that one set of parents understood the proposal while another set of parents did not.

The whole situation is untenable.

In so many ways.

The one ray of light is that the Board did not elected to tell reporters that people who voted 'no' are uninformed.

The Board president told the Enterprise reporter simply that "the voters have spoken."

Perfect.

Catherine Johnson said...

Here is a portion of a letter explaining trade-offs that appeared in the Enterprise:

....However, I cannot support the proposal. Too many questions remain unanswered and I am less than satisfied with some of the answers that have been provided.

First and foremost is the question of budget trade-offs. The Board has persistently denied that passing the fields initiative would affect academic budgets. They state that funds for the Bond are entirely separate from annual budgets. Money for the fields would be in a separate “pot.” From that perspective, the academic budget, which comes from the annual budget, would be unaffected.

This explanation is problematic because it addresses the budget question from the perspective of the School Board, not from the perspective of the taxpayer. Funds for the school, whether in the designated “pot” for the fields or in the annual budget “pot” come from the taxpayers. Most of us have finite incomes. If we spend more money for fields, we will have less money for the next tax increase that will undoubtedly be needed to cover academics: rising teacher salaries, health insurance, pensions and curricular improvements.

Catherine Johnson said...

just found what may be a useful Glossary of Political Economy Terms

rightwingprof said...

Here's our central PA school board controversy:

http://www.statehighvision.org/

Catherine Johnson said...

rightwingprof

wow

rings a bell

Catherine Johnson said...

I should add that I don't blame parents for not knowing the definition of "cost" according to economists. I didn't know it myself until yesterday. (If this website is wrong I don't know it today, either.)

However, I do blame our superintendent. If she does not herself understand that all spending involves trade-offs, she needs to recruit people who do and take their advice.

Cost
In the widest sense, the measure of the value of what has to be given up in order to achieve a particular objective.