The Illinois General Fund Budget and the Long Term Causes

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  • 1.“Public Education’s Future”A Story of Fiscal Policy and Politics 70 East Lake StreetSuite 1700 Chicago, IL 60601www.ctbaonline.org July 10, 2017 © 2017, Center for Tax and Budget Accountability Monday, July 10, 2017 AASA Legislative Advocacy Conference Hyatt Regency on Capitol Hill 400 New Jersey Ave NW Washington, DC 20001
  • 2.July 10, 2017 2 © 2017, Center for Tax and Budget Accountability
  • 3.The Fiscal Policy Issue: July 10, 2017 3 ONE AXIOM DEFINES THE CORE PROBLEM © 2017, Center for Tax and Budget Accountability Where needs are greatest Resources are least
  • 4.Which Creates the Political Problem July 10, 2017 4 Responding to core fiscal issues requires tax policy to be redistributive—even under capitalist theory © 2017, Center for Tax and Budget Accountability $ $
  • 5.Adam Smith, the father of modern capitalism, contended that for a tax system to be fair it has to be progressive July 10, 2017 According to Smith: "The subjects of every state ought to contribute toward the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state ….[As Henry Home (Lorde Kames) has written, a goal of taxation should be to] 'remedy inequality of riches as much as possible, by relieving the poor and burdening the rich.'" © 2017, Center for Tax and Budget Accountability 5
  • 6. The long-term trends in income distribution in America demonstrate that his reasoning was solidly on target. Was Adam Smith Right? July 10, 2017 © 2017, Center for Tax and Budget Accountability 6
  • 7.So There Should be Bipartisan Support to Raise Taxes the Capitalist Way and Solve Problems, Right? July 10, 2017 7 © 2017, Center for Tax and Budget Accountability $ $ $ $ UH — NOPE Because this is also Fertile Political Fodder for: Grandstanding and Demagoguery—which are politically preferable to fixing tax policy And hence the second fiscal policy axiom: Inadequate capacity on the front end means inadequate outcomes on the back end.
  • 8.The Political Impact of All This July 10, 2017 8 Incentivizes electeds in both parties to: Hide the real cause of fiscal problems, i.e.“Tax Policy”; and Cover up shortcomings in Tax Policy by pinning the blame for less than desired outcomes on the education system itself—rather than recognize the lack of capacity. © 2017, Center for Tax and Budget Accountability
  • 9.Funding Gaps July 10, 2017 9 © 2017, Center for Tax and Budget Accountability Source: Funding Gaps 2015, The Education Trust “By far the largest gap is in Illinois, where the highest poverty districts receive nearly 20% less state and local funding than the lowest poverty districts.”
  • 10.Into the fray cameThe Equity & Excellence Commission July 10, 2017 10 © 2017, Center for Tax and Budget Accountability Researchers & Academics UC Berkeley, Stanford University, NYU, University of Virginia, Campaign for Educational Equity State & Local Educational Professionals Chicago Public Schools, Illinois SBE, NY State System & School Reform Experts Education Law Center, CAP, Education Resource Strategies, Ed Trust, Council of the Great City Schools Teachers Unions National Education Association, American Federation of Teachers Issue Experts NIEA, Michigan DOE Office of Special Education, Rural School and Community Trust, CTBA, American Cities Foundation Civil Rights Leaders NAACP, MALDEF, NUL
  • 11.The Equity & Excellence Commission’s Charge was to Advise the DOE on: July 10, 2017 11 © 2017, Center for Tax and Budget Accountability “the disparities in meaningful educational opportunities that give rise to the achievement gap, with a focus on systems of finance, and to recommend ways to which federal policies could address such disparities.”
  • 12.Why—Because as it Turned Out…. July 10, 2017 12 Public Education in America is not so much “Broken” as it is under-resourced to educate all children © 2017, Center for Tax and Budget Accountability
  • 13.The International Benchmark July 10, 2017 13 © 2017, Center for Tax and Budget Accountability 2015 Programme for International Student Assessment (PISA): Combined Reading, Math, Science, Critical Thinking In Reading, U.S. schools scored a middling 497 with the OECD average @ 493 (24th overall) But fell to 38th among OECD nations in Math (470)
  • 14.Reality  #1 July 10, 2017 14 © 2017, Center for Tax and Budget Accountability But adjusting for poverty  U.S. schools w/ 0-10% poverty scored a combined 551, best in the world (Finland was 2nd @ 536)  U.S. schools w/ 10-24.9% poverty scored 527, top in the world for similar profiles (Canada was 2nd @ 524 and 4th overall )
  • 15.Poverty July 10, 2017 15 © 2017, Center for Tax and Budget Accountability U.S. scores did not start to drop significantly until poverty got over 25% That’s a concern because…..
  • 16.Poverty July 10, 2017 16 © 2017, Center for Tax and Budget Accountability U.S. Poverty Rate for school age children is more than double the OECD average—and higher than any advanced industrial nation in Europe, North America or Asia A majority of public school children in 21 states were low income in 2013 As a region, southern states have the greatest % of total student population represented by low-income children—57% Mississippi was highest at 71%, but populous states like California, Texas, Illinois, Florida, and Georgia were over 50 In large urban districts, poverty can be very high—Chicago Public Schools—over 85% of the children live in poverty Most districts with significant low income populations spend less than their wealthy peers
  • 17.Percentage of Low Income, Public School Students by U.S. Region July 10, 2017 17 © 2017, Center for Tax and Budget Accountability Source: Southern Education Foundation Calculations of NCES Common Core of Data, 2013
  • 18.Demographic Splits The Poverty — Racial/Ethnic Divide July 10, 2017 18 CHILDREN IN POVERTY (2015) 36% of African American Children 30% of Latino Children 11% of Asian/Pacific Islander Children 12% of White Children Achievement GAP between children from high and low income families is 30%-40% WORSE among children born in 2001 than those born 25 years earlier. © 2017, Center for Tax and Budget Accountability Source: NCES, Common Core of Data
  • 19.Achievement Gaps July 10, 2017 19 © 2017, Center for Tax and Budget Accountability 2015 National Assessment of Educational Progress
  • 20.So the Charge of the Commission was on Point—The Core Issues Remain: July 10, 2017 20 Poverty and Insufficient Resources Inequitably Distributed © 2017, Center for Tax and Budget Accountability
  • 21.Which is Nothing New July 10, 2017 21 Who first noted these as core issues in U.S. Education © 2017, Center for Tax and Budget Accountability “Who”
  • 22.July 10, 2017 22 The NIXON COMMISSION on Education in 1972! © 2017, Center for Tax and Budget Accountability
  • 23.The Nixon Commission Found: July 10, 2017 © 2017, Center for Tax and Budget Accountability Educational funding at the state level is too tied to property taxes—and rarely connected to the educational needs of children. Money can help solve many of the Educational Problems that have surfaced. States have the responsibility to reform school financing to eliminate disparities and ensure adequacy 23
  • 24.So How’s that Working Out? July 10, 2017 24 Overall, states were providing less per pupil funding for K-12 in 2015 than they did before the Great Recession hit in December of 2007 In real terms (adjusted for inflation), at least 25 of 46 individual states provided less $ per student for the 2015-2016 school year than before the Great Recession To pile on, the Feds have cut funding for Title I by 11% in real terms since 2010 (in large part due to “sequestration”) © 2017, Center for Tax and Budget Accountability Source: Center on Budget and Policy Priorities
  • 25.What State’s Actually Do July 10, 2017 25 36 states use a “Foundation” or base level of funding per pupil But rarely tie it to actual cost needed to educate even non-at-risk children This base is usually supplemented in formula: 30 states supplement the base w/ a factor for low-income students 27, have a factor for ELL 25, have a factor for disability 29, have a factor for local property tax effort And supplemented out of formula with categoricals for transportation, special ed, etc. © 2017, Center for Tax and Budget Accountability
  • 26.Fiscal Policy Issues: July 10, 2017 26 The “Base” or “Foundation” level is usually funded by a combination of state-based resources and local resources But getting that mix right is crucial for both equity and adequacy BECAUSE ONE AXIOM COVERS ALL © 2017, Center for Tax and Budget Accountability FISCAL POLICY: Where needs are greatest Resources are least
  • 27.Some Trends that Raise Questions Going Forward July 10, 2017 © 2017, Center for Tax and Budget Accountability 27 Average salaries for public school teachers DECLINED by 1.67% in constant $’s, for the decade ending in the 2014-2015 school year 25 states had a drop in real teacher salary over that decade, led by: Illinois (-13.5%) Indiana (-11%) Mississippi (-10.5%) North Carolina (-10.2%) Idaho (-9.9%) Overall, state tax revenue has recovered to above 2008 levels, however, 17 states still lag 2008. Key among them: Alaska Louisiana Florida By this time after the 2001 Recession, tax receipts had rebounded in all states except one: Michigan Georgia is down -7.1% since the end of 2000 (Pew Charitable Trust)
  • 28.That’s a Problem Because $ Does Appear to MatterIllinois Example, Part 1 July 10, 2017 28 © 2017, Center for Tax and Budget Accountability *Linear regression is a statistical analysis that shows the correlation of two or more variables, in this case, how per-pupil expenditures correspond to ISAT test scores. The regression line (heavy red) represents the predicted test score results a school district should obtain, given a specific level of instructional expenditure. (2006 data)
  • 29. It’s Also GOOFY Short-Sighted Economically Because © 2017, Center for Tax and Budget Accountability 29 The research shows that those states which have made the greatest investment in building the capacity of their public school system to meet the educational needs of all their children, from the poorest on up, have experienced stronger economic growth than states that did not. Source: Noah Berger and Peter Fisher, A Well-Educated Workforce is Key to State Prosperity Indeed, the high-investing states also had larger increases in worker wages over the same time period. Source: Michelle T. Bensi, David C. Black, and Michael R. Dowd. “The Education/Growth Relationship: Evidence from Reach State Panel Data.” Contemporary Economic Policy 22, no. 2 (April 22, 2004): 297. As well as a statistically meaningful advantage in state level GDP growth. (Id) July 10, 2017
  • 30.© 2017, Center for Tax and Budget Accountability 30 And it’s not just Bensi, Black & Dowd whose research found this. As it turns out, investment in K-12, higher ed and infrastructure are the only policy decisions at the state level which have a statistically meaningful correlation to economic outcomes. Source: Center for Tax and Budget Accountability, “Good for Business: How Illinois Can Best Support Small Business.” (April 7, 2014) July 10, 2017
  • 31.© 2017, Center for Tax and Budget Accountability 31 The Federal Reserve of Cleveland found that differences in personal income between states could be explained in large part by differences in educational attainment. Specifically, it found states that had a greater percentage of their population attaining high school degrees than other states, also had a 1.5 percent higher per capita personal income. Overall, the states with the greatest high school and college graduation rates have the highest per capita personal incomes. July 10, 2017
  • 32.Some Data: Median Annual Earnings of U.S. Workers (Age 25+) by Educational Attainment, 2011 © 2017, Center for Tax and Budget Accountability 32 Source: Economic Policy Institute, Berger and Fisher, “A Well-Educated Workforce Is Key to State Prosperity” July 10, 2017
  • 33.Failure Has ConsequencesUnemployment Rates of U.S. Workers, by Education Attainment, 2015 33 Source: Bureau of Labor Statistics, http://www.bls.gov/emp/ep_table_001.htm July 10, 2017 © 2017, Center for Tax and Budget Accountability
  • 34.Education Wage Gaps Over Time © 2017, Center for Tax and Budget Accountability 34 Source: The State of Working in America *NOTE: The gaps doubled over the 1979-2011 sequence! July 10, 2017
  • 35.Investing in Educational Practices © 2017, Center for Tax and Budget Accountability 35 Investing in those educational practices which have statistically meaningful correlations to enhancing student achievement is particularly important from an economic standpoint: From 1970-2010, there was a strong relationship between the academic achievement of a state’s adult workers and economic growth in that state, with states like Massachusetts, Minnesota, Texas, and North Dakota having both significantly greater levels of achievement and rates of economic growth, while state like Alabama, Mississippi, Utah, and Nevada lagged the nation in both achievement and rate of economic expansion. July 10, 2017
  • 36.© 2017, Center for Tax and Budget Accountability 36 If American schools performed comparable to higher-performing nations (e.g. Canada) in math (scoring approximately 40 points higher on the Programme for International Student Assessment), our higher skilled students would produce a faster growing economy, improving GDP over the next 80 years by an amount with a present value of $70 trillion. Source: Hanushek, Ruhose & Woesmana And There Really is A lot to Gain for Everyone July 10, 2017
  • 37.For Each and Every Child © 2017, Center for Tax and Budget Accountability 37 The Equity and Excellence Commission found that eliminating the achievement gap between white students on the one hand and African-American and Hispanic students on the other, would add “some $50 trillion (in present value terms) to our economy” over the next 80 years. Simply achieving a 90 percent graduation rate for students of color would add as much as $6.6 billion in annual earnings to the U.S. economy. Source: U.S. Department of Education, For Each and Every Child—A Strategy for Education Equity and Excellence, (Washington, D.C.: 2013), 13. July 10, 2017
  • 38.© 2017, Center for Tax and Budget Accountability 38 CTBA analysis of Census data on per pupil spending in all 50 states and Washington, D.C., confirms that those states that did the best job investing in K-12 education have higher median and mean wages and income than other states, with per pupil spending being strongly correlated with median income (.668), mean hourly wage (.635), median hourly wage (.668), and annual mean wage (.634). July 10, 2017 Bottom Line:
  • 39.© 2017, Center for Tax and Budget Accountability 39 Research demonstrates that high school graduation reduces criminal activity. Nationally, a 1 percent reduction in the male dropout rate would save as much as $1.4 billion per year in reduced correctional costs, or about $2,100 per additional high school graduate. Across the United States, the smoking rate for individuals with college degrees is one-third of the rate for those who are less educated. Obesity and heavy drinking rates are half as high among the more educated, which helps, in part, explain why college graduates had a life expectancy that was eight years longer than high school dropouts in 1990. Benefits Go Beyond Simple Economics July 10, 2017
  • 40.July 10, 2017 40 AND HIGHER EARNERS PAY MORE IN TAXES © 2017, Center for Tax and Budget Accountability YEAH!
  • 41.The Solutions July 10, 2017 41 © 2017, Center for Tax and Budget Accountability Build the capacity of the public school system to create a meaningful educational opportunity for every child in her or his local public school; Utilize an evidence-based approach to education funding tied to strategies proven to enhance student achievement; Minimize inefficient competition, maximize collaboration; Develop resources to sustain the investments needed for success; and Implement an effective, informative, and corrective accountability system.
  • 42.Each and Every Child July 10, 2017 © 2017, Center for Tax and Budget Accountability What a State Should Do: Identify and publicly report the teaching staff, programs and services needed to provide a “meaningful educational opportunity” to all students of every race and income level BASED ON EVIDENCE OF EFFECTIVE EDUCATION PRACTICES—LIKE THE APTLY NAMED “EVIDENCE-BASED MODEL”; Adopt and implement school finance systems that provide equitable/sufficient funding for all students to achieve content and performance standards; “Equitable” in some case means more than equal investment—as in other advanced nations, it includes providing additional resources for at-risk populations. 42
  • 43.The Evidence-Based Model July 10, 2017 43 Created by Drs. Odden and Picus it: ties funding to those educational practices which the evidence and/or research show have a statistically meaningful correlation to enhancing student achievement. creates an “Adequacy Level” of education funding for each school district that adjusts for demographics. © 2017, Center for Tax and Budget Accountability
  • 44.July 10, 2017 44 © 2017, Center for Tax and Budget Accountability
  • 45.Model Highlights Calculates Core Instructional Cost / Student Ratios for staffing and expenses Additional Ratios for Staffing/Expenses for Low Income students English Learning students Special Education students (mild/moderate) State Average Salaries July 10, 2017 © 2017, Center for Tax and Budget Accountability 45
  • 46.Direct Funding for Evidence Based Practices Tier 2 and 3 Intervention Teachers 1FTE/125 DHS and EL Students (Duplicate Count) Additional Pupil Support Teachers 1FTE/125 DHS and EL Students (Duplicate Count) Extended Day Programs 1FTE/120 DHS and EL Students (Duplicate Count) Academic Summer School 1FTE/120 DHS and EL Students (Duplicate Count) English Learner Teachers 1FTE/120 DHS and EL Students (EL Count Only) July 10, 2017 © 2017, Center for Tax and Budget Accountability 46
  • 47.July 10, 2017 47 ALSO OPENS THE DOOR TO A BETTER ACCOUNTABILITY SYSTEM © 2017, Center for Tax and Budget Accountability
  • 48.BUT WAIT….. July 10, 2017 48 WON’T TAX INCREASES KILL THE ECONOMY? © 2017, Center for Tax and Budget Accountability
  • 49.NOPE: July 10, 2017 49 A rigorous 2012 study commissioned by the U.S. Small Business Administration (SBA) found: “ No evidence of an economically significant effect of state tax portfolios on entrepreneurial activity.” Can State Tax Policy be Used to Promote Entrepreneurial Activity, Small Business Economics, 2012. The Harry S. Truman Institute @ University of Missouri found that when benefit of a tax break is measured against the economic loss generated by spending cutes—there is always a NET ECONOMIC LOSS. The CBO found no correlation between tax policy & job creation. . . . Private sector demand is what counts. © 2017, Center for Tax and Budget Accountability Economic Growth
  • 50.NOPE: Two Approaches to Tax Policy… July 10, 2017 50 Kansas Cut top personal income tax rate from 6% to 4.5% in 2012 Projected to reduce revenue by $920 million in FY2017 Income tax as share of state revenue fell from 50% to 40% Minnesota Raised income taxes in 2013 Third-highest top marginal personal income tax rate (9.85%) Middle rates, covering income from $25,180 to $146,270, are 7.05% and 7.85% $1.4 billion budget surplus for FY2018-19 © 2017, Center for Tax and Budget Accountability
  • 51.…And Their Results July 10, 2017 51 © 2017, Center for Tax and Budget Accountability Source: St. Louis Federal Reserve
  • 52.Increasing Taxes the Right Way Won’t Hurt the Economy © 2017, Center for Tax and Budget Accountability 2002-2011 Comparison: 9 States with Highest Graduated Income Tax Rate vs. 9 States with No Income Tax Source: Institute on Taxation and Economic Policy, States with “High Rate” Taxes are Still Outperforming No-Tax States (Washington, DC: February 2013). Figures 2,3 & 4 52 July 10, 2017
  • 53.Economic Growth Isn’t Stymied by a Well-Designed and Needed Tax Increase July 10, 2017 53 © 2017, Center for Tax and Budget Accountability Henry Blodget, Bombshell: New Study Destroys Theory That Tax Cuts Spur Growth, September 21, 2012 http://www.businessinsider.com/study-tax-cuts-dont-lead-to-growth-2012-9 Economic Growth Rates Following Periods of Tax Increases and Tax Cuts
  • 54.Business Can Handle it OK July 10, 2017 54 © 2017, Center for Tax and Budget Accountability Source: Bureau of Economic Analysis Percent Change Since the Great Recession 2009 (Q3) to 2016 (Q3)
  • 55.The Multiplier Effect July 10, 2017 © 2017, Center for Tax and Budget Accountability Source: Testimony of Mark Zandi before the Joint Economic Committee, "Bolstering the Economy: Helping American Families by Reauthorizing the Payroll Tax Cut and UI Benefits", 2012 55
  • 56.For More Information Ralph M. Martire Executive Director (312) 1049 rmartire@ctbaonline.org © 2017, Center for Tax and Budget Accountability 56 CTBA's principal goal is to ensure major policy systems work to promote social and economic justice. You can help strengthen our efforts by making a tax-deductible donation at www.ctbaonline.org/donate July 10, 2017