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Position Paper on Education Finance and Reform Submitted by the Utah Taxpayers Association Printable Version | Back to Position Papers The Case for Comprehensive Education Reform Evidence demonstrates that spending even more money on K-12 education is not sufficient to increase education performance. Based on national experience, Utah should pursue a course of implementing meaningful education reform – including more charter schools, vouchers for low income students, merit and differential pay for teachers – instead of focusing only on spending more money per student. Part I: Spending, Performance, and Demographics U.S. spending per student has increased dramatically in nominal terms as well as real terms, due in part to a 17.9% decrease in pupil-teacher ratios:
Source: National Center for Education Statistics, Bureau of Labor Statistics Little Improvement in Performance Despite Significant Spending Increases Despite significant spending increases, performance has not significantly improved as demonstrated by NAEP scores. In Education Myths, Researcher Jay Greene notes on pages 10 to 12 that twelfth grade NAEP scores are basically flat over the past thirty years. Various performance measures can be used, but twelfth grade NAEP scores are the best measure since twelfth graders represent the end product of the education system. Is Spending Growth Attributable to Changes in Student Demographics? Some argue that states are spending more per student in 2005 than in 1980 because student demographics are less favorable now, especially since more children come from single parent families and/or come from homes where English is not spoken. However, most of the real increases in per student spending cannot be attributed to unfavorable changes in demographics. Poverty prevalence is generally considered a good measure of the difficulty of educating students. Poverty rates were generally slightly lower in 2004 than in 1980, which is one indication that students are not necessarily more difficult to educate today than they were in 1980. Severe poverty (those at 50% of the federal poverty level) rose by only one percentage point. Changes in Poverty Rates, 1980 to 2004
Source: Census Bureau Another demographic factor that impacts student performance and cost is teenage birthrate. According to the Alan Guttmacher Institute, teenage birthrates per 1,000 women aged 15 to 19 have dropped dramatically in recent years, from 53.2 in 1980 to 45.3 in 2001, a 15% reduction. The percent of enrollment that is classified as special education has increased, but empirical studies by Stanford University and the Manhattan Institute have found that growth in special education programs is primarily driven by school funding incentives, not increases in the occurrence of disabilities. Only two demographic variables have produced higher costs since 1980. According to the Census Bureau, the percent of children living in single parent homes increased by nine percentage points, from 22.6% in 1979 to 31.6% in 2003 and the number of students who speak a language at home other than English has increased about ten percentage points from 8.5% in 1979 to 18.6% in 2003. A ten-percentage point increase in the number of students living in homes where English is not spoken and nine-percentage point increase in the number of students living in single parent homes account for only a small part of the 64.5% real increase in per student spending since 1980, even if it is assumed that these students are 50% more expensive to educate than other students. Is inflation a good standard for measuring per student spending growth? Proponents of increased education spending argue that inflation is not a good measure for assessing per student spending growth. Proponents argue that health care costs, unfavorable demographic changes, and other causes require education spending to increase faster than inflation. However, except for demographic changes which are responsible for only a minor portion of total real spending increases, the argument is not valid. The consumer price index is a broad economic measure that is driven by hundreds of thousands of domestic and foreign producers that have challenges of their own. General inflation impacts all producers and all producers impact inflation. Opponents of inflation measures in education are basically arguing that the private sector should be expected to be more productive on a cost basis but government in general and education in particular should not be expected to achieve consistent productivity gains. Should Utah increase K-12 funding by raising taxes? Utah’s state/local tax and fee burden is 4th highest in the nation and is 10.8% higher than the national average. A detailed report prepared by the Utah Taxpayers Association, How Utah Compares, is available at www.utahtaxpayers.org. Is Utah K-12 education being harmed because state revenues are growing too slowly? Despite a couple of years of slow growth in the early 2000s, major state government revenues have increased at a rate of 6.2% annually, which exceeds inflation and population growth of 5.2% annually from 1996 to 2006. Details are available at utahtaxpayer.blogspot.com (August 9, 2006 post). What tax increases would be needed to match the national per student spending average? Substantial individual income tax increases would be needed to increase Utah’s per student spending relative to the U.S. average. These tax increases would lead to lower long-term economic growth. Per Student Spending and Tax Increases
Calculations by Utah Taxpayers Association based on FY2005 data from National Center for Education Statistics, Census Bureau, Utah State Office of Education, and Utah State Tax Commission. In addition to these income tax increases, local property taxes would also have to be increased since most of the funding would be used to reduce pupil-teacher ratios which would necessitate the construction of new schools. Utah is last in per student spending for two major reasons. The percent of Utah’s total population that is enrolled in public education is 20%. Nationally, the percentage is 16.4%. The percent of population in public education is higher in Utah than in the rest of the nation because Utah has large families and a small private school population. Second, Utah’s average wage is 18% below the national average which means less tax revenues for education are generated per worker. Part 2: Comprehensive Education Reform Comprehensive education reform consists of the following items which are based on sound economic principles
Will vouchers financially harm public education? What about fixed costs? Vouchers will not financially harm public education, despite concerns about so-called “fixed costs”. First, fixed costs are not an issue in districts with growing enrollment since there are no fixed costs associated with schools that have not yet been built, teachers that have not been hired, and equipment that has not yet been purchased. However, are fixed costs an issue for districts with declining or stable enrollment? In the long run, all costs are variable, even in declining enrollment districts, but what about in the short term? Fortunately, the shift in enrollment and funding from declining enrollment districts to growing districts provides a good indication of how vouchers would impact declining enrollment school districts. Functionally, the shift in enrollment and funding between declining enrollment districts and growing districts parallels the shift that occurs when low income voucher students leave declining enrollment districts for private schools. Recent history demonstrates that changes in instructional costs per student in urban districts do not correlate with changes in enrollment (more details will be released in the Utah Taxpayer Association’s monthly newsletter). Districts cope with declining enrollment by reducing staff and consolidating schools. Moreover, even as enrollment declines, districts continue to keep local property tax revenues which are not dependent on enrollment. The amount of state money per voucher student would be less than the amount of state and local money per student in growing school districts. Therefore, since growing districts are not harming declining districts, voucher students would not harm declining enrollment districts either. Are vouchers a subsidy for private schools? Opponents of vouchers argue that vouchers are a subsidy for private schools, but this assertion is not logically defensible. Vouchers are definitely a subsidy for the low income families that use them, but the current public education system is also a subsidy for these students since low income parents do not earn enough money to pay enough taxes to cover the cost of educating their children. In FY2005, taxpayers spent $6,309 per student, a figure that includes instruction, operations, food service, facility construction, and debt service but excludes non-K-12 programs. Recently proposed voucher programs would have a maximum voucher amount of $3,500 with an average voucher of less than $3,000. Consequently, a voucher for low-income students, the vast majority of whom do not presently attend private schools, would be a smaller subsidy than the current public education subsidy that they receive from taxpayers. However, vouchers are not a subsidy for private schools just as food stamps are not subsidies for grocery stores and Medicaid payments are not subsidies for doctors and hospitals. In these and other examples, the providers of the service are not the recipients of the subsidy. What have been the results of vouchers? Extensive research indicates that:
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