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
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© 2017, Center for Tax and Budget Accountability
- 3.The Fiscal Policy Issue:
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ONE AXIOM DEFINES THE CORE PROBLEM
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Where needs are greatest
Resources are least
- 4.Which Creates the Political Problem
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Responding to core fiscal issues requires tax policy to be redistributive—even under capitalist theory
© 2017, Center for Tax and Budget Accountability
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- 5.Adam Smith, the father of modern capitalism, contended that for a tax system to be fair it has to be progressive
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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.'"
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- 6. The long-term trends in income distribution in America demonstrate that his reasoning was solidly on target.
Was Adam Smith Right?
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- 7.So There Should be Bipartisan Support to Raise Taxes the Capitalist Way and Solve Problems, Right?
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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
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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
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© 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
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© 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:
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“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….
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Public Education in America is not so much “Broken” as it is under-resourced to educate all children
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- 13.The International Benchmark
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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
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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
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U.S. scores did not start to drop significantly until poverty got over 25%
That’s a concern because…..
- 16.Poverty
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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
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Source: Southern Education Foundation Calculations of NCES Common Core of Data, 2013
- 18.Demographic Splits The Poverty — Racial/Ethnic Divide
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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
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2015 National Assessment of Educational Progress
- 20.So the Charge of the Commission was on Point—The Core Issues Remain:
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Poverty
and
Insufficient Resources
Inequitably Distributed
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- 21.Which is Nothing New
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Who first noted these as
core issues in U.S. Education
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“Who”
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The NIXON COMMISSION
on Education in 1972!
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- 23.The Nixon Commission Found:
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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
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- 24.So How’s that Working Out?
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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
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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.
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- 26.Fiscal Policy Issues:
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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
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FISCAL POLICY:
Where needs are greatest
Resources are least
- 27.Some Trends that Raise Questions Going Forward
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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
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© 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
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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)
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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)
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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.
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- 32.Some Data: Median Annual Earnings of U.S. Workers (Age 25+) by Educational Attainment, 2011
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Source: Economic Policy Institute, Berger and Fisher, “A Well-Educated Workforce Is Key to State Prosperity”
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- 33.Failure Has ConsequencesUnemployment Rates of U.S. Workers, by Education Attainment, 2015
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Source: Bureau of Labor Statistics, http://www.bls.gov/emp/ep_table_001.htm
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- 34.Education Wage Gaps Over Time
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Source: The State of Working in America
*NOTE: The gaps doubled over the 1979-2011 sequence!
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- 35.Investing in Educational Practices
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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.
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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
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- 37.For Each and Every Child
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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.
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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).
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Bottom Line:
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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
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AND HIGHER EARNERS PAY MORE IN TAXES
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YEAH!
- 41.The Solutions
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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
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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.
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- 43.The Evidence-Based Model
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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.
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© 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
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© 2017, Center for Tax and Budget Accountability
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- 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)
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© 2017, Center for Tax and Budget Accountability
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ALSO OPENS THE DOOR TO A BETTER ACCOUNTABILITY SYSTEM
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- 48.BUT WAIT…..
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WON’T TAX INCREASES KILL THE ECONOMY?
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- 49.NOPE:
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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…
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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
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Source: St. Louis Federal Reserve
- 52.Increasing Taxes the Right Way Won’t Hurt the Economy
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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
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- 53.Economic Growth Isn’t Stymied by a Well-Designed and Needed Tax Increase
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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
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Source: Bureau of Economic Analysis
Percent Change Since the Great Recession 2009 (Q3) to 2016 (Q3)
- 55.The Multiplier Effect
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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
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- 56.For More Information
Ralph M. Martire
Executive Director
(312) 1049
rmartire@ctbaonline.org
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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