Pandemic budget losses are painful but offer opportunity

Written by Derek Monson

April 29, 2020

Originally published on UtahPolicy.com.

Utah lawmakers just appropriated $4 billion in federal COVID-19 relief funds, with some strings attached. But they are still likely to have to fill large budget gaps caused by the dramatic economic impact of the novel coronavirus pandemic.

Salt Lake County offers a general glimpse at how big those gaps could be. County revenue is estimated to drop by $60 million due to the pandemic: 3.7% of total county revenues and 13.9% of general fund revenues. Comparable figures at the state level – using revenue from all funds ($20.3 billion) and state funds only ($8.6 billion), respectively – creates a range of $751 million to $1.2 billion.

This back-of-the-envelope calculation simply illustrates that the budget gaps are likely to be significant and painful. But this budget pain could also bring with it a real opportunity for gain. The pandemic is revealing that there may be ways to increase the return on investment of state tax dollars, especially in big-ticket areas like education, transportation and building construction.

Education

K-12 public schools and universities have closed due to the pandemic, placing hundreds of thousands of students in digital learning platforms. This points to a way to potentially avoid hundreds of millions in new building costs while reducing K-12 class sizes and boosting the number of degrees and certificates earned in higher education.

Families’ positive and negative experiences schooling at home suggest that this arrangement can work well for some students but not for others. This reality can help reduce class sizes without building a new school.

For example, students who thrive while schooling at home with the help of a well-suited home environment could enter a special track at school. Half could do digital learning from home part of the week (e.g., Mondays and Tuesdays) with typical school days for the other half. The roles would reverse on other days (e.g., Wednesdays and Thursdays). One day each week could allow for activities requiring all students to be present, such as assemblies, field trips or other schoolwide activities.

Teachers of these students could have more students overall than they do at present, but they would have significantly smaller in-person class sizes due to digital learning at home. If enough students were able to participate in this track in a given school, it could also reduce class sizes for students whose learning styles or home environments require a typical school attendance schedule. If participation were more modest, less expensive class-size reduction policies (e.g., portables or school expansions combined with hiring more teachers) could be used to reduce class sizes without new school construction.

In higher education, the pandemic is revealing that a significant portion of in-class instruction can be moved into a digital learning environment. Certainly not all college classes should be taught digitally, but as digital learning is utilized more widely, less classroom space and new building construction (and ongoing maintenance) is required. This would free up resources to spend on degree and certificate completion strategies. Digital learning could also allow colleges and universities to meet nontraditional students’ needs for flexible school schedules as well, further boosting degrees and certificates awarded.

Transportation and Building Construction

Road or building construction can be more cost-effective during or right after a recession. The construction bidding process in such times is more competitive because demand for construction decreases during economic downturns. As illustrated by the historic drop in oil prices, some construction materials (e.g., oil-based asphalt for roads) can be significantly cheaper during a recession.

A policy that explicitly restrained state spending on road and building construction to the highest-priority projects during economic growth could also make taxpayer dollars go further by increasing spending during downturns. Lawmakers could set aside construction funds in good times for this purpose, or could issue state bonds for construction projects only during a downturn, ensuring more road or building gets built or repaired for each taxpayer dollar spent.

It is likely that there are even more pro-taxpayer policies to be found in areas outside of education, transportation and building construction – such as the highly regulated healthcare sector, for example. Given the bureaucratic organization of government, it is almost always possible to improve efficiency and effectiveness.

It will require political will from lawmakers to spend time and resources thinking outside the box after the pain of the pandemic has subsided. They will have to resist the siren song of lobbyists demanding a return to business as usual. But budget innovation in the wake of the pandemic may lead voters and taxpayers to conclude that the budget pain was worth the gain.

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