Feature                                                   Pages 26-29


Stating Our Fiscal Impact

How the superintendent in Flagstaff, Ariz., used an independent study to document the value of school district operations on the local economy


Superintendent Barbara Hickman launched a fiscal impact study of the Flagstaff, Ariz., Unified Schools on the surrounding community.
When I came across James G. Merrill’s article “Making Our Case: Schools as Economic Development Engines” (School Administrator, June 2012), I smiled in recognition and picked up the phone. In his article, Merrill, then superintendent of the Virginia Beach, Va., School District, described his district’s efforts to show, in a quantitative manner, the importance of the school system as a critical component of the city’s economic vitality.

Merrill’s account delivered the push I needed to follow up on something I’d started a couple of weeks before — to find a way to not only quantify the positive financial impact of high school graduates on my district’s community but also to illustrate clearly that we, as a public school system, are a driving force behind secure employment, that we have a large and positive impact on the purchase of local goods and services, and that having our school district be a healthy fiscal entity is nearly as important as the education we provide.

Tax Facts

The 9,900-student Flagstaff, Ariz., Unified School District, where I serve as superintendent, is located in the northern part of Arizona with Grand Canyon National Park and the red rocks of Sedona two of our closest neighbors. Major employers include Northern Arizona University, W.L. Gore (of Gore-Tex fame), Flagstaff Medical Center, Nestlé-Purina, and both the National Park Service and the U.S. Forest Service.

There’s nothing about Flagstaff, at 7,000 feet above sea level, that looks like the cactus and tumbleweeds that are Arizona clichés. Our town is anchored by the San Francisco Peaks that top out at an often snow-covered 12,637 feet. We’re also in the middle of the Coconino National Forest and bordered on three sides by additional federal land and the Navajo Nation.

The surrounding geography dramatically affects the scarcity of private land for development and housing in Flagstaff. As a result, housing prices are higher in our community compared to the major metropolitan areas in Arizona. Correspondingly, our homeowners and business owners pay higher property tax levies, accentuating resistance to higher taxes even in this very supportive community.

The school district, which has been in business since 1883, has weathered the ups and downs of operating in a state that perennially vies for the bottom rung among states in terms of funding public education. Arizona also champions itself as a leader in school choice, in its support of charter schools and in expanding ways to use public funds to support private school entities. Over the past seven years, the level of state-funded equalization aid to our district has decreased from 48 percent to less than 15 percent of the operating budget.

During the recession years of 2009-14, the state had to increase the equalization property tax rate, resulting in our homeowners experiencing sizable property tax increases. In addition, in both program and capital performance, the Flagstaff community has demanded an educational system of quality beyond the basic support level established and funded by the state. As such, the school district has asked voters for additional funds from overrides and bonds, which come in the form of secondary property tax levies. Since 2006, our citizens have passed two bonds in the amounts of $52.6 million and $21.9 million and two override elections that have provided $9.5 million annually in operating funds. Our next override renewal challenge occurs this November.

Study Findings

The looming election coupled with an increasing anti-tax and anti-government sentiment, both locally and nationally, convinced me we needed to show that in addition to providing a quality education, the school district plays a positive and necessary role as a major contributor to our community’s prosperity. I wanted to prove that instead of being what some considered a tax burden to our local constituents, we actually give back more than we take in to support the local economy. The district generates jobs and an increased need for local goods and services.

To find my proof, I turned to the Arizona Rural Policy Institute, part of the W.A. Franke College of Business at Northern Arizona University. Wayne Fox, director of the institute, and Jeff Peterson, the chief research associate on our project, had completed similar reports for various departments on the university’s campus and were interested in working with us on a K-12 study.

My intent was to show that the Flagstaff Unified School District is critical to the economic vitality of Flagstaff as a major player in employment and as a consumer, thereby contributing to the fiscal health of our community. I also wanted to show the more typically measured positive effects of high school graduates on the overall financial picture of state economics.

Among the study’s findings:

  • The money spent locally by the school district stimulates spending and hiring at a local level that is well beyond the district’s direct expenditures and payroll;
  • The operations budget in 2011 spent around $79 million locally, hiring more than 1,300 workers and paying almost $70 million in salary and wages;
  • When the ripple effects (direct and induced effects, commonly referred to as the multiplier) are considered, the district and our employees spent $117 million within the city of Flagstaff;
  • The ripple effect created an additional 1,651 jobs and $82 million in community earnings that can be traced back to district operations;
  • The total economic impact of Flagstaff Unified on Flagstaff was $132.3 million, based on a school district operating budget (FY ’11) of approximately $89 million.
  • The impact study also highlighted some of the more traditional financial benefits of K-12 education, including these points:
  • If the entire graduating class of the two comprehensive and one alternative high school in Flagstaff Unified stayed in Arizona until age 65, the state would collect $13.6 million more in income tax based on the incremental earning power of a diploma;
  • Members of the high school graduating class will earn an additional $321 million between the ages of 18 and 65 due to their diplomas; and
  • The value of a high school diploma in the labor market is approximately $10,000 in annual income, or $490,000 over a normal working life.


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Measuring Methods

These economic impacts consider both the school district’s operating expenditures and a three-year average capital budget. They were developed using IMPLAN — an industry standard input-output model that quantifies financial and employment effects of certain expenditures. The multiplier impact estimates are built on both local business spending patterns — how local needs are met by buying goods and services and considering when these needs are satisfied locally — and the spending patterns of residents whose incomes rise due to the spending.

The tax impact estimates use a state income tax rate of 4.24 percent applied to the incremental lifetime earnings attributable to a diploma.

This was the Arizona Rural Policy Institute’s first study for a school district. The institute previously quantified the regional economic effects of the Arizona Cardinals’ Flagstaff training camp, the Lowell Observatory’s Discovery Channel Telescope, and various government, university and nonprofit groups.

After completing Flagstaff’s study in August 2012, Fox, assistant dean at the W.A. Franke College of Business as well as the institute’s director, began offering similar studies to other school districts in Arizona that believe they could benefit from this type of analysis. “Many individuals seem to have the impression that their tax dollars in support of education somehow evaporate, when the reality is those expenditures have material economic consequences,” he says.

Community Reassurance

The use of standardized methodologies to complete this study assured our community about the financial needs of the district. Formally known as “The Economic Impact of Flagstaff Unified School District 1 on the Flagstaff Area Economy,” the report has important value for a quality school district that has enjoyed a high level of support.

Regularly asking voters to provide approximately 25 to 30 percent more resources than what is allocated through the state’s school funding formula challenges us in school leadership because many families are struggling with lower household incomes. We must raise the community’s recognition that adequately supporting and stabilizing the school district’s funding is important for restoring a solid economy. The school district’s graduates, employees and operations contribute significantly to the community’s fiscal state.

I have shared the impact report with various community groups and presented the findings to a joint meeting of the Flagstaff City Council and the Coconino County Board of Supervisors. The report is accessible on our website (http://bit.ly/FUSD_Economic_Impact), and we’ve discussed it during school board meetings and at other district events. In addition, I shared the experience in the newsletter of our statewide administrator association.

Have we made our case? November 2014 will certainly provide one answer and insight into how our message has been received.

Barbara Hickman is superintendent of the Flagstaff Unified School District in Flagstaff, Ariz. E-mail: bhickman@fusd1.org



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