Monday, December 5, 2016

Privatize Our School Buildings

Governor Mead is getting some well-deserved attention for taking the state's fiscal crisis seriously. KCWY13 in Casper reports:

A new supplemental budget report released by Governor Mead for the 2017- 2018 biennium will tighten budgets and reduce revenues more than originally thought. This is because of falling oil and gas prices and coal continuing to struggle. Governor Mead said he trusts our legislators will provide the best possible budget for Wyoming, however the biggest challenge moving forward will be funding education. … He continued to report revenue forecasts and estimates on spending has only gotten worse. He said education funding will be a challenge. There is a 600-700 million-dollar shortfall on education funding for the next biennium and some even estimating a one and a half billion-dollar shortfall over the next six years. Governor Mead also said the legislature cannot continue to support education funding at the current level.
In fact, as Casper Star Tribune explains, the situation is even worse:
Mead’s press conference came two weeks after a report by the Joint Education Interim Committee showed the state’s education system is projected to be in a $1.8 billion hole by the 2022 fiscal year. In his budget recommendations to the Wyoming Legislature, Mead acknowledged the shortfall in the school foundation program account.
So what solutions does the governor have in mind? Casper Star Tribune again:
To fill some of that gap, he said, $567.9 million has been taken from the Permanent Land Fund Holding Account. Given the shortfall, Mead said lawmakers have suggested examining several options to address the budget crunch, including larger class sizes, consolidating school districts, looking at special education and transportation.
These are defensive solutions. We as a state need to go on the offense to deal with this problem. Before I suggest how to do that, though, let me emphasize that this budget crisis is not an education-funding crisis. It is a general budget crisis that has been turned into an education crisis by the legislative leadership - and, unfortunately, Governor Mead - for one simple reason: it is easier to rally people behind tax increases if they believe that their children's education is at risk. 

This is a good old scare tactic that has been used by politicians to defend big government spending since the dawn of big government. The goal, of course, is to paint the crisis in such bad colors that parents practically beg for higher taxes.

The problem is that they can raise taxes all they want - very few people are going to be able to afford those taxes anyway. According to the Bureau of Economic Analysis, in 2015 there were 316,600 non-farm private-sector jobs in Wyoming. Of those, 285,300 were outside of the minerals industry. On average, those jobs paid $36,000 per year. 

Many people work more than one job, so even if their main job pays $36,000 per year they can still have a better total income. Furthermore, a married couple where both work for that average non-minerals pay can still enjoy a good standard of living at $72,000.

At the same time, Census Bureau data indicates that about half of all Wyoming households earn less than $60,000 per year, with two out of three of those households, in turn, making less than $35,000 per year. 

Where are those families going to get the money to pay for higher taxes? What should the 67,000 households earning less than three grand per month, give up so that they can afford higher taxes?

Instead of raising taxes, our elected officials should consider other, fiscally better and morally more acceptable options. Here is one idea for how to permanently solve the school construction-fund problem: privatize the school buildings

Our school districts should sell their school buildings to private investors, then lease them back on reasonable terms that both lower the cost to taxpayers and make owning a school building a safe and attractive investment opportunity for all the people in Wyoming who are now investing their wealth out of state. It should not be difficult to attract Wyoming money for such a project: in studies by the IRS of wealth by state, Wyoming ranks 14th. This means that Cowboy State residents with at least $2 million in net worth on average own $7.5 million. And that was in 2007. 

A sale-lease back of school facilities is a constructive alternative to higher taxes. It gives our school districts an infusion of cash, it keeps wealth in the state and it avoids the destructive macroeconomic consequences of higher taxes.

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