Remember when Indiana was on an economic hot streak, an “island of prosperity,” if you will? Well, those days are gone with election season, apparently. Now we are getting wave after wave of revenue shortfalls for state government.
Gov. Daniels has called for a plan to reduce K-12 education funding by $300 million without laying off teachers or increasing class sizes.
The governor said the decision was forced by continued shortfalls in state tax collections and a new revenue forecast, delivered just before his announcement Tuesday, that projects Indiana will take in $1.8 billion less in revenue during the next year than expected only six months ago.
Without spending cuts to match it, that lost revenue will eliminate the state’s surplus, projected to be $1 billion at the end of the two-year $27.6 billion budget passed in June.
Obviously, I like to pick on Gov. Daniels’ campaign rhetoric, but Indiana is hardly the only state struggling. And, for those of you who are equally happy to pick on President Obama, the economic collapse started rolling on President Bush’s watch and, I think, in response to his policies. One thing you can be sure of, though, the Club for Growth and Heritage Foundation will use these hard times to call for gut financial regulations, repeal the minimum wage, and cut taxes, especially estate taxes — but that’s because these folks are as constant as the north star *any* financial situation is an excuse to call for these things. Remember how Bush’s tax cuts were the cure for our budget surplus *and* our budget deficit? Remember how “Shimmer” was both a floor wax and a dessert topping? But I digress.
Daniels suggested that schools had gotten a free ride for too long. Other state agencies had been cutting and cutting, and now it’s the schools’ turn since they make up such a large part of the budget.
He suggested schools consider joining the state’s health insurance program, procurement contracts for buying supplies — and foregoing teacher pay increases.
“I’d like the (state) Board of Ed to talk about that,” Daniels said. “The data I’ve seen says that in a year in which the average Hoosier income went down 2.5 percent, the average teacher salary will go up more than 4 percent.”
The Indiana State Teachers Association disputed those numbers, saying that in 2010, pay for most teachers goes up an average of 1.65 percent.
Democrats are skeptical of Daniels’ motives in preserving the rainy day fund in the face of the monsoons that have been here for quite some time. They think he just wants to keep some money in the bank to have a big number to tout when he runs for President. They suggest that it’s raining and perhaps we should go to the rainy day fund before cutting education; then, if education needs to be cut, we cut.
I don’t think Abdul is wrong when he suggests that this is a good time to look for waste and creative solutions in school budgets, but I think we ought to be skeptical if/when the proposed cuts are inevitably damaging to the teachers’ unions. Breaking the teachers’ unions seems to be the dessert topping/floor wax in any proposals concerning education.
The Indy Star article continues:
For 14 straight months, Indiana’s collection of sales, income, corporate and other taxes has fallen short of expectations. In this fiscal year alone, the state has collected $475 million less than it expected.
This highlights the danger in shifting from property taxes to other kinds of taxes. Property taxes are predictable which is important for government planning, given that the controls on government spending and budgeting lead necessarily to a loss of flexibility. As we’re seeing, these other kinds of taxes are much more volatile. Indiana lawmakers need to articulate their plan for dealing with this volatility as they rush to enshrine that mess of a property tax cap amendment in the Indiana Constitution out of political expediency.
Remember when the Democrats wanted to pass a one year budget? Seems like it would have made a lot of sense ……..
Good point!
If every teacher’s union went away tomorrow, I would dance a jig!
With PL217 and the general acceptance, years ago, of pay based on years of experience for teachers, it only stands to reason that teacher pay is going up. Every teacher contract in the state is based upon automatic incremental raises every year.
Kinda goofy when you really think about it…
Just wanted to clarify that the governor is no longer holding onto the reserves. The $300 million in cuts presumes every penny of the reserves gets spent. The governor said the debate on using the surplus is over. He is using them. Though I think he will try to leave a few hundred million for cash flow purposes.
Are you inferring that Shimmer isn’t a floor wax, then?
No, no. Shimmer outlasts every other leading floor wax, 2 to 1. It’s durable, and it’s scuff-resistant. But, it also perks up anything from an ice cream sundae to a pumpkin pie.
It’s also good straight out of the bottle.
There is a Bush-Obama continuum of course. Thinking here of stimulus as a solution, in particular. Shouldn’t we all be wealthy now?
Bottom line: our governments do too much, spend too much, and are generally unsustainably large. If all states are struggling, isn’t that the proof?
Teacher pay does not automatically go up, see IPS for example. Putting teachers on the state health plan would lead to mitch making the teachers state employees, and then he would do away with union negotiations and protections and get rid of teachers. And what does the state board of ed have to do with teacher contracts, health plans or purchasing–nothing, all of these decisions are made at the local level by law. He is just trying to gut public education, as usual.
Your last paragraph raises an interesting point…
There is much rhetoric out their from the education reformers (i.e., anti-union folks, Indiana Chamber of Commerce) that we need an educated populace to be competitive in the future, thus, making our economy strong.
Yet, those same folks are the largest proponents of funding our schools based on today’s economy (i.e., sales tax receipts).
So…the worse our economy gets today (i.e., less sales tax revenue) the less we care to properly fund education.
Doesn’t seem to me that their publicly stated goals are in alignment with their actions. Hmmmmmm…
That’s the theory. But, if it were true, I would expect to see the states with the lowest state tax burden and the lowest federal tax loss to be the most prosperous states with the highest standard of living. But I’m pretty sure the data don’t support that proposition.
I love that you have resurected the old SNL Shimmer spot. And used it appropriately I might add. I like the cut of your gib.
http://aloyalopposition..in/2009/12/11/sign-up-to-receive-our-free-e-newsletter/
I heard that Shimmer was 80 proof.
Several points: It must be that state government is the most efficient governmental unit around since it is open season on blasting every other level of government. Yes, it is likely that schools have “wasted resource useage” but then again local boards, parents, and citizens have made the decisions that have built buildings, put in place various curriculum plans, developed variety of “extra” curricular activities, decided on out of class room experiences being of value, etc. etc. etc. And in defense of the unions they were often a leading advocate of making changes in local systems and not just in seeking to receive higher wages and benefits (yes, I am a retired teacher and was involved in one of the first 10 school systems in Indiana to have a master contract with the local school board, and yes, I received “automatic” raises based on years of experience AND many years got no other raise that kept up with inflation AND had to subsidize my students activities with several hundred dollars of money from my own pocket each year in addition to donating my time either to benefit students or because it was required. And yes I enjoyed teaching and stayed even when better financial offers came from other areas.) The state mandates many parts of local school activities and do not believe they are going to allow a school to reduce services to handicapped (mentally or physically) where in many situations it requires one teacher per 1-5 students, where these students are to be “main streamed” into regular classes of even 30 or more students without any additional help to the regular classroom teacher, etc…. If you taught under the old non union system where the township trustee was lord and master then you might understand why unions came into being (where if wrong political party you were fired, where it was dictated what you could or could not cover in various educational units, where many were fired as they approached “tenure status” according to state law, etc…) Union busting is an intent and not too well kept secret. Also, Mr. Bennet has about gutted the Department of Education of any experienced persons who might have differed with his and Mitch’s plans for education. Just try to get informational assistance from the department now and there are very few who have any clue what you are talking about.
On the subject of movement away from property taxes (and I know there are many who do not believe there is any right to property taxation, of course, some of them also would advocate against virtually ever tax) this has created exactly the concerns that were forcast. Like it or not property taxes are fairly consistent while other taxation is so highly variable as to not be dependable.
Some are predicting that within a couple of years the reduction in services will be extreme enough that such services as police, fire, other emergency units, road maintenance, and many other services (including education for the masses) will be so curtailed that many will not like the world they live in.
Whose fault is it—too many people who have tried to please a very loud minority and too many lobby dollars. Thus it also comes back to each of us as to how much did we do to avoid the present situation whether by being too silent or not using the ballot box well enough.
Keep in mind, Gov. Daniels doesn’t believe in local government. He believes in central control from his “genius” friends and buddies in Indianapolis. He doesn’t believe in public anything, especially public schools.
Doug, I think people in many of the wealthier states- CA, NY, CT, etc, put up with an awful lot in the way of bigger govts and higher taxes as a tradeoff for natural beauty, great climate, or high culture. Sure, some embrace it, but try to have proportionally bigger governments in Idaho, North Dakota, hell- Indiana, and you’ll see population loss. At the same time, Florida has no income tax. Marry that to warm weather, and you get retirees. Plus, CA & NY are losing population. The weather and culture is no worse, so it would be worth examining why.
And how many people are clamoring to move to Idaho, North Dakota, Indiana, Michigan, Ohio, etc., etc. ?
I posted over on Indiana Barrister in response to Abdul’s reference to Dr. White asking for exemption from tax caps for K-12.
The idea of exempting schools from the cap makes sense especially since K-12 has no other way to raise revenue. School districts can’t pass COIT or raise tuition, and since the State took over 100% of the K-12 General Fund, districts can’t go through the referendum process to raise addtional revenue for operations.
The governor is cutting $300 million from education over the next two years. Schools are also projected to lose $288 million in property tax revenue to the tax caps over the next two years (and these losses are in no way tied to current spending or actual need).
The legislature could enact a two-year delay on the application of the caps to school property tax funds, and then allow districts to transfer some of those funds to the General Fund. Exempting school property taxes from the circuit breaker would also free up $60 million in relief grants for 2010. That’s about $348 million in funding, which would be more than enough to cover the cuts.
And taxpayers would still benefit from property tax relief. The portion of the projected credits attributable to schools is less than 1/3 of the nearly $1 billion in relief that Hoosiers are projected to receive through the credits over the next two years.
Before people scream about the need for school districts to reduce spending, especially central office spending–I don’t disagree! Central offices are way too big and full of way too many highly paid people, but districts aren’t going to find $588 million by cutting central office expenditures.
I’m also a huge fan of consolidation of services (as well as funding individual schools rather than school districts). The problem is there are too many school districts in Indiana that will not be impacted by tax caps. They can continue spending at high levels regardless of actual need, so I doubt there would be much interest in consolidation.
Pila, I think it just shows that people will put up with a lot of govt BS in trade for better climate, scenery, and culture. People used to rush to Michigan, Ohio, and Indiana- when it had manufacturing jobs aplenty.
To Kelly Bentley,
Schools most definitely have the option of an operating referendum which would be held outside the cap. And several districts have taken advantage of it already. In fact, the passage rate on those referendums is higher than on capital projects.
Referendums for the remaining property tax funds–yes. That would be the Capital Projects Fund, Debt Service, and Transportation.
But the largest education fund–the General Fund–is NOT property tax supported any longer. The state funds it 100% so there is no way for a district to increase revenue through a referendum for general operating expenses.
You are absolutely wrong.
I know the GF is not supported by property tax anymore. But the legisalture allows districts to seek extra operating money via referendum. It is often used to add teachers, reduce class size and improve programming or simply to preserve existing levels. And it is not counted against the caps.
Districts who have done this in recent months are Southwest Allen County Schools; Southern Wells Community Schools; Hamilton Southeastern and Beech Grove.
Some links:
http://www.wthr.com/Global/story.asp?S=11471784
http://www.journalgazette.net/article/20091104/LOCAL04/311049962/1002/LOCAL
@ Mike Kole
The rest of my comment: You may have a point, but the rushing to the northern midwest was decades ago when the states were prosperous and communities provided amenities. I don’t think that there is anything particularly wonderful about having bare bones government, poor services, a decimated tax base, and a never-ending brain drain.
Well, people choose where to live for a variety of reasons. As for me, I’ve never moved to any community for its’ services, but I have moved away from two cities and one state due to the taxes. That tax burden drained Ohio of my brain. I would think myself an exception, but of my friends and cousins, I was the last to leave Ohio. The others went to NYC, Vegas, LA, SF, London, Silicon Valley, DC. The tax burden in Ohio? It keeps growing. They really don’t get it there. They’re so concerned with funding their precious services in the face of those same services not being so valued by the population, that they run people out. Brain drain, indeed, but also wealth drain. Public policy too often has the effect of turning cities into poverty magnets.
None of my immigrant grandparents came to the US because they heard the social services were really fantastic. They didn’t come because we had a large and involved government. Hell, they usually did have that, and were fairly glad to leave it behind. But really, they moved for one thing and one thing only- jobs. They left their countries because there was better opportunity here. They sent money home, and initially thought they would go home. They never did. They thought it was better here.
When we really figure this out, we’ll reverse brain drains, and draw people back.