During his presentation at the 2009 AEP Summit, Dr. Richard Sims, Chief Economist for the National Education Association, discussed the relationship between the economy and education, why education is being affected so drastically during this crisis, and what actions publishers should take. Here are highlights from his session.
First, we are not used to thinking of education as a marketplace–it is an ethereal, higher calling. This is especially true because during past economic downturns, education funding was not typically cut. However, as states encounter large shortfalls (California is looking at one of possibly 33.5%), education is competing for the remaining dollars with health care and corrections. Instructional materials are a small part of the education budget–one that politicians think they can cut.
Second, states tend to lag out of recessions, which means that since the majority of education funding comes from the states, it could take longer for education to recover. Compounding that is the fact that one-third of state education funding comes from property taxes. Tax assessments are not done every year. So, even if the real estate market rebounded this year, it could take a year or two for money from property tax increases to reach education.
Another large source for education is sales and use taxes, but we are now going back to a world where saving is a virtue. That is good for the economy, but bad for sales tax collection.
Similarly, individual income tax revenues, as well as corporate and business, are declining as workers are laid off and businesses shut down. Moreover, in order to attract large corporations, many states and localities offer tax breaks, further decreasing potential tax income. [Ironically, Sims cited an article from the New England Economic Review, Federal Reserve Bank of Boston ("Robert M. Ady, "The Effects of State and Local Public Services on Economic Development," March/April 1997) that said that the quality of the workforce is more important to a corporation when selecting a site than the taxes.] Finally, some states are increasing the “sin taxes,” e.g., alcohol, tobacco, but these typically provide only temporary relief, especially in a culture valuing savings.
Because of these conditions as well as current and potential future education budget cuts, there is a concern that the education gap will widen and that we are producing the first generation of Americans that will have less education than their parents. What can we do? We need to be in the room with state legislators when they discuss education, taxes, and appropriation. Remind them that education has the highest multiplier effect of any budget item, and it produces more local jobs than any other industry. Tell them we need to invest in our human capital as if we want to be the best in the world.
View Dr. Sim’s presentation.
More blog posts from the AEP Summit.
This was an incredibly informative talk which was basically, very bad news. It’s been confirmed by the recent National Governor Association announcements that state budgets need to be reduced by significant percentages across the board.
He gave some very interesting average expenditures by states in which he illustrated that K12 education is the single largest line item in state budgets, followed by higher ed, corrections, and medical. Corrections keeps going up with the prisoner growth, higher ed has been slashed dramatically already and will probably continue to endure cuts, medical is out of control, and that leaves K12 education to look at. Historically, K12 education, protected by politicians understanding of the importance of K12 education underscored by the fact that 1 out of 4 voters has a student in the public school system, has been somewhat protected recently by cuts. But, given the pressure, they can no longer be protected.
It looks bad, he said. And explained why. Great talk.
john http://www.vocabulary.co.il