Tuesday, August 28, 2007

School spending rate increase unsustainable

The following piece appeared in the Concord Monitor.

Until legislation limits education spending increases to the rate of inflation or the CPI we will continue to see unsustainable spending. Schools have a spending problem and not a funding problem. How can we expect schools to teach our students math when they can not even figure out how to balance a budget. Schools should not be allowed to spend above the rate of inflation or deficit spend. Perhaps so many Americans are in debt because they learned how to spend from the best spenders of all educrats.

School spending rate increase unsustainable

Monitor staff
August 19. 2007

For a half century or so, public school spending in New Hampshire increased at the rate of 9 percent per year. Spending fell to about 4 percent during the recession of the 1990s but quickly resumed its historic growth rate. School spending is now increasing by 7.9 percent annually.
Later this month, the committee charged with determining the cost of an adequate education, as defined by the last session of the Legislature, will begin its work. It's not supposed to consider how the revenue to pay those costs will be raised. That's the Legislature's job. Anyone who does think about how to pay for public schools has to think about that seemingly inexorable 8 or 9 percent annual increase.

No revenue source increases by 9 percent per year on a regular basis, not even an income tax. Nor can growth in the state's economy keep pace. That means old taxes will have to be raised, new ones created or spending reduced.

It's not easy to put your finger on exactly why education spending has climbed so relentlessly. Mostly it's because it's a labor-intensive field, which means providing lots of people with health care and pensions whose costs have been rising rapidly.

The nature of education has also changed. Schools have been asked to meet more and more of children's needs. They now spend more than $50 million per year dealing with children's psychological and mental health problems. That makes them the single biggest provider of behavioral health services for youth. Because society has asked schools to do so much more, it takes more people to run them. A generation ago, an educational aide was a rarity. They are now a big part of the budget.

In coming decades, shrinking school populations could slow the increase in spending. Concord has nearly 5 percent fewer elementary school children than it did a half dozen years ago; Keene about one-fifth fewer. But having fewer students won't, on its own, be enough to make a big dent in that 9 percent annual increase.
Finding a way to run schools with fewer people while still providing a quality education would bring down spending. So would transferring services like behavioral health to another sector of government. But doing either may not be wise or politically achievable.

It's been a decade since the second Claremont school funding decision forced reforms in the way schools are funded, but little has been accomplished. Spending in wealthy towns is actually higher, when compared with the median, than it was in 1998 when the first reforms went into effect. The difference in how much property rich towns and poor towns must tax themselves to pay for schools is once again nearly five-to-one.

Changing that ratio, which was one of the goals of the original lawsuit, will require either a new source of revenue or an increase in the number of donor towns that pay more in statewide property taxes than they get back in education aid.

But bad things could happen if the statewide property tax is raised enough to truly fund education adequately. If property tax bills continue to grow faster than most household incomes, which have been flat for nearly a decade, the young won't be able to afford homes or the old to stay in them. The lack of young workers would threaten the state's economy.

Two things could alter this picture. A higher statewide property tax could come with a circuit breaker of some sort and exempt, for example, the first $100,000 in the value of a primary residence. That would pass the bill on to businesses and second home owners.

An income tax, as we said earlier, won't raise enough to keep pace with school spending without being confiscatory. But it would come closer.

The wages used to pay property taxes only increase by 2 or 3 percent per year. But an income tax, since it would capture wage increases plus revenue from interest and dividends and capital gains would grow a bit faster say 5 percent. The state would still be in a hole and digging, but the dirt wouldn't be flying as fast.

In the end, it all comes down to that 9 percent. If it's a constant, like pi or the speed of light, there may be no way to catch up.

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