The Fallacy in Government Budgeting

For many years, advocates of streamlining government have suggested that government should operate like a business, using phrases like “government should not spend money that it does not have.”  While such phrases may sound appealing, these same business oriented advocates tend to pick and choose which parts of government they think should operate like a business to suit their policy goals, instead of actually applying sound business principles to all aspects of government.

At the state level, the most obvious example of the diametrically opposed methods of budgeting is how most states budget for roads versus how they budget for schools. Not only do most states budget as much road money as road builders request for both new projects and repairs, but specific projects are then put out to bid and states award the contracts based on the amount the road builders claim it will cost to perform the work requested.  This is how business typically works.  A business wants to buy a product or service.  It examines the cost, determines if it has the money, and pays the required cost if it has the money.  Some are so concerned about keeping road money sacrosanct that in Wisconsin, they are moving closer to a Constitutional Amendment to preserve the Transportation Fund from being used for anything other than transportation projects.

When budgeting for education, on the other hand, absolutely no serious consideration is given to how much it costs to educate children properly.  Rather, a pure political decision is made about how much money government is willing to spend on educating children, and then school districts are told to produce high achieving students without any consideration about whether the funding is sufficient to accomplish the desired goal.

Tonight, Governor Walker will announce a biennial budget proposal that calls for vastly increased per pupil funding for children in voucher schools vs. public schools.

The governor’s proposed budget would increase state aid to kindergarten-through-eighth-grade voucher schools in the 2014-’15 school year to $7,050 per pupil from $6,442, an increase of $608 per pupil, or 9.4%…Walker is also rejecting an increase in the state-imposed cap in revenues that public schools are allowed to raise from both the state and local property-tax payers. Before Walker’s tenure, the cap had gone up around $200-plus most years. Two years ago, Walker cut the cap by 5.5%, or about $550 per student.

Leaving aside the issue of the lack of any documented improved educational performance in voucher schools, the budgeting question is this: why is there a complete lack of budgeting analysis about how much it costs to achieve the clearly identified state and federal education standards that are written into law?

There is a method for doing this kind of education budgeting.  It is called, “Adequacy.”  The Wisconsin Alliance for Excellent Schools (WAES) started promoting adequacy funding as far back as 2003.  However, even WAES stopped promoting it as it has failed to gain political traction.  In many states, the failure to adequately budget for successful educational outcomes has resulted in litigation, which has had mixed results.

An additional disparity between business based budgeting and both school and human services budgeting is that business would never appropriately refuse to raise revenue.  No business can survive without bringing in revenue.  Yet, ever since the Reagan taxpayer revolution, those who want to reduce spending on education and human services believe it appropriate to take the government revenue side of the equation off the table.  They should be challenged on business grounds, i.e., if they were running a business would they take revenue off the table?

Ultimately, whether in business or in government, if you want a good product that produces a good result, you have to pay an appropriate price for it.  If that means raising revenue, then raise it in a responsible manner as I described in my prior tax reform blog posts:

It is time to have honest business like budgeting when educating our children instead of using them as political pawns.


For more information on how I can help you accomplish effective, progressive systems change e-mail Jeff Spitzer-Resnick or visit Systems Change Consulting.

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3 thoughts on “The Fallacy in Government Budgeting

  1. Among the sources of revenue businesses need to survive are loans or “money they do not have”.

    Opponents of public education have opposed borrowing by school districts, again demanding “government should not spend money it does not have”.

    Borrowing is the only way for private businesses to finance major construction and maintenance projects. Loans from the private and public sectors are a major part of the financing for road work.

    Access to this revenue source should not be denied to school districts because of ideologically based budgeting fallacies.

  2. Hey Jeff

    Another excellent blog, as usual.

    We run across this same issue in affordable housing. The City of Madison has resisted for many years the idea of analyzing the “affordability gap” — which is the different between the median price of market rate housing and the price that would be affordable to people at 80% of median income. If they did the analysis — they would then be held accountable for providing sufficient subsidy to bridge that gap. Instead, they just provide a fixed amount per unit — and leave it to the nonprofits to make up the unknown difference.

    Same as Gretchen Patey resisting a racial map of Section 8 vouchers and certificates — didn’t want to know — easier not to.

    With all the focus on data collection these days — it is interesting to see what we don’t want to measure.

    Greg

    Greg Rosenberg

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