Mike Lang's Funny Math
August 10, 2017Share:
Chris Tackett, a current Granbury Independent School District Board Trustee, posted the following essay to his Facebook page. Because we think that this is relevant to many school districts, we asked his permission to post it to our blog. He graciously agreed, and we have reproduced it in unedited form below.
TL;DR: Recently, Mike Lang released a snapshot of GISD indebtedness with a misleading analysis and interpretation of those numbers. Mr. Tackett methodically retraced those numbers and provided a clear and rational understanding of the actual indebtedness.
Ok Mike Lang. I saw your post about the debt in the various counties you represent (https://www.facebook.com/RepMikeLang/posts/1607476709272260). I saw how you told someone how “simple” it was to pull these numbers together. I looked at the numbers you provided and just couldn’t figure out how they made sense. So I took it upon myself to go to your source (the Texas Bond Review Agency website) to find the numbers and replicate what you’ve done. If anyone else would like to do the same, just go to http://www.brb.texas.gov/local_debt_search.aspx
I’m going to go step by step and put in some examples as we go, because I know numbers and formulas and interest rates, etc can get people’s heads swimming, and it’s easy to just throw out lots of numbers and get people to believe them because they don’t understand the root. I don’t want that happening here.
Quick reminder. On the Hood County sheet, you call out Granbury ISD with the following 4 columns: - $194,594,361 in Outstanding Debt - 189.93% Highest Bond Interest Rate - 6,502 Population / Enrollment - $29,928.39 Amt Debt Per Individual Student Some of those numbers jump out at you on first glance, which I’m sure is what you were shooting for.
When you go to the website above (data is from 08/31/2016 on the site) and put in Granbury ISD, you get a listing of 5 different bonds that are being paid for: 1999 which matures in 2020 2010 which matures in 2029 2013 which matures in 2028 2015 which matures in 2029 2014 which matures in 2039
Each one of these bonds are in very different spots in their life span, with some being new debt that has a high principal and interest still remaining, others are getting close to being paid out, so the principal is low. But, when you add all five of these up, the total Principal + Interest to be paid out over the life of the bond does equal the $194,594,361 you called out on the sheet. So kudos there.
Where do the rest of the numbers on your sheets come from? Well, I clicked on the ISD name (from the listing of the active bonds) and a window popped up that had a field named ISD ADA. For those who don’t know, ADA is Average Daily Attendance. On any given school day, every kid is not there when the teacher does attendance, so over the school year, the average daily attendance is created. When schools report numbers to the state, they report TOTAL Enrollment and the ADA number, which is usually around 95 or 96% of total enrollment. So the Enrollment number on the sheet (6,502) is really the ADA, not Enrollment, but you are only 5% off there, so it’s at least in the ballpark.
Now let’s get to the meat of things. The first field that confused the heck out of me was the Highest Bond Interest Rate. I see 189.93% and I think to myself, THAT’S CRAZY. No one pays 189.93% interest on their house, on their car, on their credit card. Why is my district paying that much to service a bond? What he did with the numbers here is absolutely deceitful and NOT AN INTEREST RATE AT ALL. Mike Lang took the remaining interest on each of the 5 bonds and divided each one by it’s remaining principal and then reported the highest one. If you’ve paid down the principal and still have interest remaining, it creates a high %. Granbury has a bond from 1999 that has $4 million in principal left on it and $8 million in interest (rounding here). So by and Lang’s crazy math, the ISD is paying a 189.93% Bond Interest Rate. That just isn’t true.
An example to explain this. You are buying a new $200,000 home and you are financing it. You are financing for 30 years and you get a 5% interest rate. Your house payment every month is $1,073. If you just do the math, $1,073 times 360 months is $386,280, not the $210,000 I’d expect if I add 5% to 200,000. It’s because its 5% interest PER YEAR, not the interest you are paying over the life of the home loan. In my home example, Mike Lang would say you are paying a 93% interest rate. It’s the same with these bonds. What he’s representing is disingenuous at best.
The Debt Per Student is another field that seemed weird to me. If you want to be “simple”, and present something as apples to apples when it’s really apples to oranges, you just take the $194 million in principal and interest and divide it by the 6,502 ADA, which gives you $29,928.39. But now that I understood there were really 5 bonds for GISD and that they all had varying maturity dates, so “simple” doesn’t really tell the truth to the people of the district.
If I treat the bonds like my house payment (which I know bonds don’t always work that way and may have varying pay dates, but if I’m trying to be simple…), I took the balance for each bond individually and divided it first by the number of years still to go on the bond (to get a “per year” amount) and then divided that by the ADA number (assuming my district doesn’t grow or shrink at all over the life of the bond). Now I get a number that is a per student per year per bond number. NOW I’m finally on an apples to apples type number. Total up all of the bonds and Granbury ISD shows an understandable number of $2,193.56 “Per Student”. And just a reminder to folks that big bonds like the one that redid Granbury High School (and other things) were voted on by the community to move forward on. It’s not like the school districts across the state are just wildly spending money. The community is approving it with their vote.
So what’s happened here? Mike Lang has put out a bunch of numbers that at some level have a basis in reality, but are not well presented, not well explained, and may very well be structured this way to deceive or mislead some in the communities he represents. I’m hoping that what I laid out here makes sense to those non-numbers folks.
It’s the people in the counties, towns and school districts who are called out on these sheets who have to hold our elected officials accountable to provide us with good data, good analysis, and then listen to our voices when they represent us in Austin. I’m not sure this is getting that done.
If anyone would like me to run the numbers I just described for your district based on what I did above, just let me know. I’ve got all the data sets at this point.