Monday, September 8, 2014

It Depends When You Look: Lehman’s Balance Sheet and Teacher Vacancies

It Depends When You Look: Lehman’s Balance Sheet and Teacher Vacancies

Over the weekend my column in the News & Observer[1] was about North Carolina’s lack of investment in its public school teachers and the resulting turnover.  A reader emailed to complain that my math was all wrong because the current vacancy rate has fallen at schools across most of the state.  It shouldn’t come as any surprise that there is a teacher in front of most students now that we are four weeks into the new school year. 

My reader’s comment reminded me of the false conclusions that were drawn from perusing Lehman Brothers’ balance sheet at the end of any given quarter.  In the period leading up to the financial crisis, Lehman had the habit of temporarily laying off some of the staggering debt on its balance sheet, only to repatriate the debt immediately after reporting to the public.    If you looked at Lehman on December 31st, things didn’t look too bad.  However, the picture was much uglier on January 1st.  When it comes to school districts, teacher vacancies are bound to appear small once school is back in session.  However, the picture was entirely different in July and early August.

My reader also pointed out that in Brunswick County, the turnover rate had fallen slightly between 2011-12, and 2012-13.  His point was that things aren’t getting worse.  There are two problems with this contention.  First, the available data is more than a year old.  The NC Department of Public Instruction has yet to make its report for 2013-14.  By this past summer, teachers had received one 1.2% raise in the past five years and seen tenure and additional compensation for advanced degrees attacked.  I’m fairly certain the 2013-14 report will show an increase in turnover.

Second and more importantly, the average turnover for the past five-years covered in the report is 12%, which means that the county has experienced 60% turnover in its teaching staff.  In a highly skilled profession like teaching, this kind of turnover is a problem.  A money management firm experiencing this kind of turnover among its portfolio managers and analysts would have problems holding on to its clients.

The shift from long-term investment to short-termism isn’t confined to financial markets.  Active money managers focus on today’s trade and this quarter’s results.  As I’ve documented for the past two years, the results aren’t too encouraging.  Politicians concentrate on tonight’s fund-raiser and this fall’s election.  Public education and particularly teachers, a critical component to our economic wellbeing, are getting short-changed.


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