Education spending and the danger of narrow policy thinking

 

On Friday we wrote about not trying to “keep up with the Joneses” in regard to public education spending. Today I’ll make a few more observations about recently released spending data.

A story from the Salt Lake Tribune recently highlighted a research report from the Utah Foundation showing howUtah’s K-12 public education funding effort has declined since the 1990s.

In the report, “education funding effort” is defined by one piece of data: public education revenues per $1,000 of personal income. In other words, “education funding effort” is based on how much government takes from Utahns’ income via taxes in order to give money to public schools – and the more “education funding effort” the better.

The Utah Foundation report made some pretty sweeping conclusions, including that Utah’s decline in funding effort was “unprecedented” and that “Utah is not exerting a heavy effort [to fund public education] and has not since the 1990s.”

If you limit how you think about public education funding effort to a single piece of information, then these conclusions are arguably true. But is that an accurate depiction of reality? More importantly, is such a narrow thought process likely to produce good public policy?

To the first question, the answer is a resounding “no.” For example, a relevant piece of information aboutUtah’s education funding efforts, and not included in the Utah Foundation report, is the proportion of a government’s revenues going to public education.

Last year, the Census Bureau reported that Utah was 10th for the proportion of combined state and local government spending going to education. Strictly at the state level, as shown by the chart below, the proportion of state funds going to public education has held fairly steady since the 1990s. And as Utah Senate staff recently highlighted, this figure has increased in recent years to more than 50 percent of state funds because the Legislature has tried to protect public education from budget cuts.

Additionally, the vast majority of personal income in Utah does not belong or go to the government. This makes the proportion of personal income going to public education an incomplete measure of public education funding effort.

An analogy should illustrate this point. What is a better measure of a health care business’s willingness to support its employees: the amount the business spends on its employees as a proportion of its revenues, or the amount the business spends on its employees as a proportion of total spending in the health care industry? Of course, the former is a better measure of “employee funding effort” because that represents the money that the business actually controls.

If the health care business had the power to arbitrarily increase its revenue as a share of total health care spending (like government can do when it raises taxes), then perhaps the latter proportion might also be informative. But it would still be incomplete because that health care business is only one of millions of players in the health care industry, and so it controls only a fraction of health care industry spending.

Government is similar: It is a significant actor in the economy, as measured by personal income, but is still just one of millions and controls only a fraction of all personal income inUtah. As such, comparing public education revenues to all personal income in the state is an incomplete, though useful, gauge of education funding effort. Narrowing how we think about public education funding efforts to this single, limited measure of public education funding creates a distorted and misleading view of what is happening in the real world.

Based on these realities, the answer to the second question (“is such a narrow thought process likely to produce good public policy?”) is also “no.” After all, how can we make good public policy from a misinformed view of reality, except by sheer dumb luck? As the saying goes, “garbage in, garbage out.”

Interestingly, the Utah Foundation report illustrates how this might happen. Based on an incomplete definition of “education funding effort,” the report makes sweeping conclusions aboutUtah’s efforts to fund public schools. Transplanted into public policy debates, such broad judgments encourage wholesale rejection of current policies in favor of broad tax increases to “make up” for past failures to “adequately” support public schools.

Assuming political barriers to raising taxes could be overcome, the implications for the state are both significant and ominous. As the Utah Foundation report implies, and as I noted previously, boostingUtah’s per-pupil spending ranking would require double-digit tax increases. The economic and social impacts of such tax hikes would be devastating, and yet that is where the logic of a narrow definition of “education funding effort” points.

Fortunately, that is why we have debate and dialogue about important issues like this one.

This entry was posted in Budget, Education, Taxes and tagged , , , . Bookmark the permalink.
  • Cameron

    What is included in the “State Funds” amount used in the graph? 

    • Derek H Monson

      It’s basically state sales and income taxes.  It also includes some other minor sources of state revenues, like “sin” taxes (beer, cigarette, and tobacco taxes) and severance taxes, etc.

      • Cameron

        I’m looking at page 15 of the Governor’s Budget Summary report and I can’t duplicate your numbers.  For 2011 I see an Operations budget of $10,476,304 with total education spending $4,590,913,000, which gives a percentage of 43.8%, as opposed to the 50% that the graph shows.  If I use “Total Appropriations” numbers the gap is even wider.  Where am I going wrong?

        • Derek H Monson

          Go to Table 6 (page 12) in the FY 2012 Governor’s Budget Summary.  Add the “Current Authorized FY 2011″ public education operations budget ($2,322,061,000) to the “Current Authorized FY 2011″ public education capital budget ($14,500,000). Then divide that sum by the “Total Appropriations” figure for “Current Authorized FY 2011″ at the bottom of Table 6 ($4,710,359,000). You should get $2,336,561,000/$4,710,359,000=49.6% (I rounded to the nearest percent).

          You can follow that process to duplicate the rest of the numbers. Though, just to warn you, in some of the older Budget Summaries all of the numbers aren’t in one nice table like they are in the newer Budget Summaries.