Saturday, December 31, 2016

Protecting Big Government At All Cost

The legislature is slowly letting us know more about what it wants to do about our state's fiscal crisis. On the upside, we now have more details about what to expect - are you surprised to hear that those details include higher taxes? On the downside, though, we also have a clearer idea of the overall legislative strategy, and sad to say, it is entirely concentrated on preserving status quo, i.e., saving big government at all cost.

The document giving away this strategy is from a subcommittee under the Joint Education Committee. Called the Subcommittee on Education Deficit Reduction Options, it released a White Paper on December 29 detailing its thoughts on education funding in response to the state's fiscal crisis. 

Before they detail their policy prescriptions, they explain the fiscal crisis as they see it:
Wyoming faces an estimated $360 and $400 million annual shortfall in the 2019-2020 and 2021-2022 biennia, respectively for funding the daily operations of Wyoming schools. In fact, the current biennial budget has a shortfall of approximately $644 million, but as of the 2016 Budget Session, the Legislature is using savings from prior years to bridge the gap. … In total, mineral production and the taxes paid by energy producers, fund approximately 65% of the K-12 education operations for Wyoming’s schools. Once again, this anticipated deficit and the 43 mills that are assessed are only for the day-to-day operations of schools across Wyoming.
Already here, though, the subcommittee gives away its strategy. On the one hand they mention a total biennial budget deficit of $644 million; on the other hand they discuss the fiscal crisis as if it was only an education-funding crisis. Yes, an education subcommittee is expected to deal only with education issues, but by putting their assignment in reference to the state budget as a whole they reinforce the strategy I have pointed to  for a while now: the legislature wants to turn this into an education issue. 

Put bluntly: since there is not $644 million missing in school funding. 

By turning this into an education-funding issue, the subcommittee gives the legislature green light to shield all other government programs from any discussion. In other words, preserve big-government status quo as far as possible, even if this means fragmenting the discussion up to a point where the "big fiscal picture" is lost. Or, as the subcommittee white paper puts it:
Due to the overwhelming dependence on the mineral industry to fund education in Wyoming, we now find ourselves in a budget phenomenon known as the “double-whammy.” In short, the decline in mineral prices and production decreases property valuations, which in turn reduces the revenue collected on the 31 mills assessed by local school districts and the statewide 12 mill levy. 
A fiscal crisis that is really about a state government that has bloated itself out in all directions has now been reduced to a discussion about the property tax (and, in a moment, the sales tax). By fragmenting the perspective, attention is diverted from the structural issue - more government than taxpayers can afford - into an effort at maintaining as much of an over-sized government as possible. 

Again, the subcommittee has just done the job it was tasked to do. But in doing so, it has not only confirmed the strategy to turn the fiscal crisis into an education issue; but they also help the legislature decide what the fiscal crisis is not about: a bureaucratic and over-regulated health care system; welfare in need of modernization; and an excessively costly correctional system. All these programs, and the bureaucracies that go with them, are now protected from any challenge to their appropriations. 

However, this is not all that the subcommittee has accomplished. They have also narrowed down the discussion about our state's K-12 education system to a technical, budgetary issue (emphasis added):  
However, the State is still required to provide the same level of educational goods and services previously supported by a larger proportion of local tax revenues. The “double-whammy” effect is now upon us as it shifts the amount of funding previously raised by local taxes to the State at a time when the State’s revenues from federal mineral royalties and the statewide 12 mill levy are also declining.
In passing, the white paper establishes, as a matter of fact, that the state is "required to provide the same level" of education as before. 

That's it. No discussion about other options for delivering K-12 education than the institutional status quo we have to day. In other words: by declaring what the state is "required" to do, the subcommittee has now ruled out school choice reform

Whatever changes the legislature will decide on, will be designed to maintain the current school system, firmly run by government; the only modification will be to make it more affordable to a drastically reduced tax base.

That includes higher taxes. Or, as the subcommittee puts it, the legislature should identify...
  • Reductions or modifications to the current funding formula for Wyoming school districts and reductions to appropriations to state agencies from the School Foundation Program Account.
  • Current savings that could be used to offset revenue shortfalls.
  • Existing funding streams that could help offset revenue shortfalls.
  • Spending policies that could help offset revenue shortfalls.
  • Revenue enhancements that could offset revenue shortfalls.

Points one, two and four refer to spending reductions. The subcommittee deserves recognition for its candid talk about cuts in education expenditures; counted per student, our K-12 education system is among the costliest in the country, even when we adjust for the rural character of our state. There is no doubt that we can deliver education at notably lower costs without sacrificing quality (and if anyone disagrees, I ask them to present evidence that Wyoming students lead the nation in academic excellence). 

However, by ruling out school choice, the subcommittee forces itself to propose spending cuts that maintain institutional status quo, not academic status quo. The cuts they discuss under the headline Reductions or Formula Modifications (page 2 of the white paper) have no overarching strategy to them - other than to make sure as much of the current K-12 system remains in place as it is today. This is yet another expression of a desire to avoid structural reforms and to shy away from the kind of creative thinking that is needed in response to a transformative fiscal crisis. 

This preference for status quo is also visible in items three and five above. They are nicely re-written recommendations of tax increases: "existing" funding refers to the property tax; "revenue enhancements" is legislative speak for "whatever tax hikes we can get away with". 

By combining recommendations of modest, status-quo preserving spending reductions with recommendations of spending reductions, the subcommittee gives the appearance of a "balanced" strategy. However, once again we have an example of how tactical concerns overshadow reality. Their balanced approach relies in good part on Wyoming taxpayers being able to afford higher taxes. 

That is, plainly, simply and undeniably, wrong. 

Here is what the subcommittee has in mind when it comes to raising taxes:
  • Increase the number of mill levies assessed for education, which would yield approximately $20 million per mill annually.
  • Require the taxation of health and professional services at the current 4% statewide sales tax rate, which would yield approximately $64 million annually.
  • Increase the statewide sales tax, which would yield approximately $150 million per cent increase annually.

The subcommittee is asking for comments from the public. Before you share your thoughts, please consider whether or not you and your family can afford the higher taxes the subcommittee has in mind. You can submit your comments by following this link; it is always a good idea to let your elected officials know whether or not your family's budget has room for higher taxes.  

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