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Minnesota 2020 Journal: Starving the Beast Starves Schools

July 08, 2011 By John R. Van Hecke, Executive Director & Fellow

Minnesota will never move forward if we continue gutting state funding for schools. Yet, this is exactly what conservative state legislative policymakers propose. Their idea of new revenue, balancing Minnesota’s $5.2 billion budget deficit, shifts forty percent of the proposed K-12 allocation into a future fiscal period. It’s borrowing dressed as revenue.

Minnesota legislators have repeatedly implemented the piggy bank raid budget balancing strategy. It’s easy, it’s tempting, it yields a neat, quick budget fix followed by a solemnly pious promise to promptly repay the delayed funds. And, it’s profoundly wrong.

Normally, state K-12 education legislation follows the standard how-a-bill-becomes-law model. A budget bill is introduced, proposing funding for Minnesota’s public schools. Policymakers debate and negotiate the final sum. Assuming that the bill passes both legislative chambers and has the governor’s support, the governor signs the bill and it becomes law. Part of that law includes a funds disbursement schedule.

At the appointed moment, the state transfers money to schools. Schools, in turn, combine state funds with local property tax-levied money to buy books, chalk, erasers, school buses, teachers, computers, desks, globes and whatever items that the district decides is necessary to educate its kids from the money it has available.

Like most households and businesses, schools work diligently to smooth out costs so that they can pay them with available monies. Schools, like most households and businesses, have a monthly cost nut, the base amount of costs necessary to deliver the district’s kids’ education. School budgets anticipate both expenditures and income. Shortfalls, the gap between money coming in and money going out, necessitate borrowing against future income.

Schools build their budgets anticipating both state and local revenue. It used to be that state funding was a rock-solid revenue promise. Alas, no longer.

To make Minnesota’s financial books look good, Minnesota policymakers, over about the past decade, have gotten into the habit of employing the payment shift. Since Minnesota may not run a state deficit—only nations can do that—it balances accounts by delaying promised payments until the next fiscal period. Suddenly, a looming deficit is eliminated!

Except, of course, the debt remains. Barring any unexpected increase in economic activity-driven revenue increases, today’s deficit is added to next year’s likely deficit, creating an even larger deficit. Today’s crisis is pushed off for a little while.

Schools, however, don’t have that luxury. When the Minnesota legislature delays school transfer payments, schools incur additional costs to make up that difference whether it’s a little or a lot. In the financial world, this practice is sometimes referred to as a haircut, the difference between the promised payment and the actual amount received, settling the obligation.

Minnesota’s conservative state policymaking leaders, represented by Speaker of the Minnesota State House of Representatives Kurt Zellers and Minnesota State Senate Majority Leader Amy Koch, propose a 60-40 educational payment shift. Forty percent of the first transfer payment would be delayed until at least January 1, 2012, leaving schools with just 60 percent of the expected check.

That’s quite a haircut.

Most importantly, it tells us what we’ve come to learn the hard way: Minnesota’s conservative policymakers don’t have Minnesota’s interests at heart. Rather than raise income taxes on the richest two percent of Minnesota income earners, conservative policymakers would rather stick it to Minnesota’s school kids.

Let’s get this straight. Starving the beast—conservative rhetoric for defunding any government function at any level under any circumstance—means starving Minnesota’s school children of a good education. Conservative policymakers are loathe to come right out and say it, so I will: Minnesota school children are less important than Minnesota’s wealthiest 7700 people.

It’s past time to move beyond this absurd conservative “no new taxes” orthodoxy. Minnesotans are quite willing to accept substantial service cuts. They’re equally supportive of modest tax increases. Yet, conservative legislative caucuses are so tightly wound that rhetoric trumps reasonable compromise. This conservative policy path only leads to folly and failure.

Minnesota needs a balanced approach, pairing program cuts with responsible revenue increases, including an income tax increase on the very wealthiest Minnesotans. A balanced approach further means no more school transfer payment cost shifting. We can be honest about the resources we have, the outcome we expect, and the means to achieve them but we first must be honest with ourselves. Minnesota’s conservative policymakers are not being honest with Minnesota. School kids must never be pawns in some great political game yet that’s exactly what they’ve become.

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