Thursday, February 3, 2011

If something cannot continue forever, it must stop.

On Thursday, Ben Bernanke quoted the famous quotation of Economist Herbert Stein:
"Whenever something cannot go on forever, it will stop."
While Stein was referring to the deficit, his words apply equally to the structural deficit problems in Minnesota's public education system. Our public education finance system is structurally broken and the structural deficits are rising. The structural deficits must stop, but it is going to take courage to stop them in a way that does not harm the next generation.

I've been writing about cost-drivers in education for the last couple of weeks, and I've been writing about the arithmetic of education finance. By arithmetic of education finance, I mean to say that we need to look at the the relationship of what we receive and what we spend. By discussing the arithmetic of education finance, I want to make the point that whether you think educators are underpaid, or overpaid, or paid just right, and whether you think that education is underfunded, or overfunded, or funded just about right, there is no escaping the fact that we need to bring our costs and revenues into balance and as we do, we cannot sacrifice the education of our youngest generation.

Right now, the arithmetic of education finance is overwhelming us, because the State has created a permanent structural deficit in public education. The structural deficit involves growing state spending mandates, intentional revenue shortfalls, and structural problems in the funding and control of compensation. Our leadership in St. Paul, democrats and republicans alike, refuse to come together and restructure our education finance system so that costs and revenues are brought into balance. Educator compensation is built on a step, lane, and health benefit system that drives up costs faster than the legislature is willing to fund. State mandated special education spending is rising vastly faster than the legislature is willing to fund. State mandated educational standards are rising far faster than the legislature is willing to fund. You can argue that this is a funding and taxation problem, or that it is a spending problem, or both, but you cannot argue that we can continue down the current course forever.
"Whenever something cannot go on forever, it will stop"

We are running an educational finance system based on financial principles that cannot go on forever. If this were in a sector of our economy that wasn't all that important to our future, it would be excusable. But the education of our young is critical to the future of our nation and our state. It is inexcusable to continue the current system, which drives up costs and freezes revenues at one and the same time. The chart below, prepared by the Minnesota Department of Education, is an example of a purposeful policy implemented jointly by the Republicans and the Democrats. It shows that over the last decade, the Republicans and Democrats, governor and legislature, have jointly presided over an intentional system which has grown the state mandated special education spending from $937 million per year in 1999 to a planned $2001 million per year, (that is two billion dollars per year) in 2013. At the same time, the total funding provided to pay for this special education spending mandate has grown from $584 million to a projected $1,278 million in 2013. That's a purposeful increase in the special education deficit imposed on local districts of about a half billion dollars per year.

(click on chart for better view)

Now if there was ever a case of "something that cannot continue forever must stop", this is it. But there is not a single legislator in the Democratic dominated House and Senate who was willing in the last legislative session to fix this problem. Not on the cost side; not on the revenue side. Nor did Governor Pawlenty, for all his talk about courage lately lift a finger to address this problem. Every budget year, the Governor's administration pushed local districts to spend more on special education, and every budget year, he submitted a budget that proposed to grow the difference between spending and revenues higher. Last year, I urged local DFL legislators to support a measure that would reduce the spending mandate for special education so that it was matched to the national mandate only, and I was told that they could not do that, because "we would get too many phone calls."

So far this year, the Republican leadership has been introducing cost control measures -- which I support -- designed to freeze the pay of school employees for the biennium. That's an easy vote for Republicans, because Education Minnesota floods democrats with campaign money. But on the special education deficit problem, which is far more significant, so far nothing. So far, Governor Dayton has been silent on this issue. We've heard a lot of loose talk about unfunded mandates. But so far, from St. Paul, nickel and dime stuff from the Governor, and nickel and dime stuff from the legislature. So far, the same idea. Take some easy votes, and blow up the special education deficit. Unless we find a permanent lasting solution to the structural deficit creating problems in education finance -- including the growing special education deficit--we cannot solve the public education financial mess.

As we do this, we need to remember Stein's law: Something that cannot continue forever will stop. And the longer we wait to stop it, the harder the problem is going to be to fix. You can't fix intractable problems by attacking your political enemies only. If you want to lead and govern, if you want to fix what must be fixed, before it is too late. you have to do some things that bother your friends as well. If somebody doesn't find a bit more courage, Stein's law, and arithmetic is going to defeat us.

Arithmetic of Education Finance Series
Excess Cost-Aid proration
Lane Improvement Costs
Increased TRA Costs Imposed on Districts
Health insurance, Part I
Health insurance, Part II
Health Insurance, Part III
Unfunded Step Pay System will Destroy Education

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