by Ron Knecht

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March 21, 2013
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Public education hardly dismantled over past decade

A Nevada legislator says he’s witnessed the “systematic dismantling” of public K-12 education over recent budget cycles, with more than $700-million cut from K-12 during the Great Recession. (Associated Press, March 1, 2013.)

While folks may recognize that “systematic dismantling” is just the next rhetorical step after “draconian cuts” and similar silly buzz phrases from previous years, they typically are less sure whether the numbers claims have any merit, let alone what we should do.

What, then, are the real and central facts of actual state spending in recent years and long-term on K-12 and other general-fund categories, versus the rocky fortunes of the families and businesses that pay taxes to support that public spending, and as compared to Nevada’s economy?

To answer this question, I used all the state’s Comprehensive Annual Financial Reports for 1994-2012 (which are all the years available on line and which use current budget categories), plus Nevada personal income data to measure the state economy and the income ups and downs of our families and businesses. Because all these amounts have increased with inflation and population growth, I used inflation and population data to convert all the aggregate values to real, per-capita 2012 dollars.

Nearby, the aggregate nominal dollar amounts are shown in the table, and the changes in per-capita real spending are displayed in the graph. I highlight K-12 (including the state’s funding of local districts), health and human services (HHS, including Medicaid), and higher education because they comprise 85 percent of total general-fund spending. I compare changes in these three categories and total and other state general-fund outlays to the personal income indicator for Nevada’s economy and its families and businesses (the state’s taxpayers).

The graph shows that in the mid-1990s, higher education (orange line) grew fastest; but, by 2000, gains in personal income (purple), reflecting mainly the private sector, exceeded growth for all major categories of state general fund spending (green). In the 2000s, HHS (red) surged and then K-12 (blue) rose even faster, bringing overall state general fund spending (of which they comprise 75 percent) with them. For the entire period, other state general fund spending (maroon; public safety, infrastructure, commerce and industry, constitutional offices, cultural affairs, but not transfers out of the general fund) lagged behind all other categories almost every year.

By fiscal year 2009 — a time by which the private sector had been hammered by the recession but state spending had not yet felt its full effect — all major state spending categories had grown significantly faster than Nevada’s economy and the incomes of its taxpayers. Because earlier tax increases and the bubble economy fostered very optimistic pre-recession state economic projections, and because the Legislature preferred to spend expected new revenues instead of prudently growing “rainy day” funds, 2009 spending on K-12 grew 20 percent in real, per-student terms over 2008 levels.

After 2009, state real per-student K-12 spending dropped 11.2 percent, thus netting a real per-student gain of 6.6 percent over a two-year period, before holding steady and resuming growth in 2012. Health and human services spending also surged with continuation of the recession, while total state general fund spending eased slightly due to cuts in HE and the smaller budget categories.

With major recent cuts in higher education and other smaller general fund categories, their current per-capita real spending levels have dropped below the line for Nevada’s economy, families and businesses, and they have actually fallen back to or below 1994 levels. However, as the diverging sets of lines in the graph show, K-12 and HHS spending in real per-capita terms in the most recent year were 39.5 percent and 36.3 percent, respectively, above their 1994 levels. Overall real per-person state general fund spending was 28 percent higher, while the state’s economy and incomes of Nevada taxpayers had increased only 6.8 percent.

If one uses the 2001 figures as a starting point, the trends favoring K-12, HHS and total state general fund spending and those showing the declines in higher education, other smaller budget sectors and the state economy and well-being of families and businesses are even more pronounced. The progress of all sectors was similar until the recession began, but K-12, HHS and total state general fund spending have all risen since that time (despite their declines from the imprudent spending blow-out levels of 2009), while everything else has plummeted.

In sum, the central narratives of the teachers and other public-employee unions and the folks seeking to raise taxes and spending are false — almost completely backwards. Nevada state and local government spending, especially for K-12 and HHS, have grown the most, and indeed they rose quite nicely over the last two decades, despite the recent recession, while incomes of families and businesses that must bear the tax burden for that prosperity have barely grown at all. So much for the “systematically dismantling” claim.

Higher education and other smaller parts of state government have borne the real burden of actual cuts in state spending and are now at or below their real per-capita 1994 levels, trailing even the anemic growth of Nevada’s economy and personal incomes. For higher education, the state figures actually understate the net decline in state general fund support, because they include the offsetting effects of significant recent increases in tuition and fees. Higher education has done well, however, on self-help, increasing its yield from grants and contracts and especially from its self-supporting operations (now its largest revenue stream).

Put another important way, from 1994 to 2012, state general fund spending as a fraction of the Nevada economy and relative to the incomes of Nevada families and businesses grew by nearly 20 percent; for K-12 state spending the excess growth was almost 35 percent and for HHS it was 27.5 percent. Thus, Nevada taxpayers – families and businesses – have been required by tax and spending increases in the last decade to increasingly fund K-12 and HHS, even as their own incomes stagnated and then declined. In addition to taxpayer largesse, K-12 and HHS were aided by real cuts to higher education, public safety, infrastructure, etc.

The real burden on Nevada taxpayers has grown even though Nevada is not a low-tax state, as tax-and-spend advocates claim it is. Nevada’s total state and local tax burden falls in the middle range — 24th to 26th — for the 50 states, according to the Federation of Tax Administrators, using federal agencies’ data. Since extensive research shows that the government fractions of our economy are already sub-optimally large (that is, contrary to the broad public interest), no tax increases can be justified. Instead, modest re-allocation of current levels of public spending in favor of higher education, public safety, etc., are in order, if not overall cuts in state spending relative to our economy.

Improving education is very important. However, instead of adopting low- and no-cost changes in policies and practices that are available and have been demonstrated effective in improving it, we have continuously thrown more money at special interests (teachers’ unions) and untested (and unsuccessful) trendy programs advocated by the educrats – mainly with the real goal of increasing teacher-union numbers and power.

What we need now is the adults to step forward, dismiss the demagogic rhetoric and misleading budget-cut claims, embrace the real and central facts (starting with those presented here), and propose sober and constructive solutions. We don’t need yet more tax increases to feed the public-employee unions that will be as selfishly predatory upon the public interest as legislatures, administrations, school districts, etc. allow them to be.

Ron Knecht is an economist and Douglas County’s representative on the Nevada Higher Education Board of Regents.


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The Record Courier Updated Apr 6, 2013 09:51AM Published Apr 17, 2013 03:36PM Copyright 2013 The Record Courier. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.