'76 Blog

(Denver Post, Oct. 3) The 18th century English lexicographer Samuel Johnson famously discovered virtue in the prospect of being hanged in the morning because said circumstance "concentrated the mind wonderfully." Similarly, public officials all across Colorado will be having their minds concentrated wonderfully as they commence what one described as the "budget year from hell." [Editor's Note: Moloney is heading the School Finance 2.0 study group to provide state legislators with Centennial Institute's recommendations for implementing the concepts in this article when next year's budget is written.  Details here.] In August. Gov. Bill Ritter and state legislators learned that worsening revenue collections had created an additional $60 million hole in the current year's budget. Now that looks like the "good old days" in light of the recent announcement by chief legislative economist Natalie Mullis that the $60 million hole had exploded into a $257 million gap and coming soon was a jaw-dropping $ 1.1 billion shortfall for 2011-12. The gargantuan size of the shortfalls make abundantly clear that future budget making in Colorado will require an entirely different way of thinking to deal with an entirely new financial environment. Equally clear is that the fiscal crisis we face is as much a result of metastasizing entitlements as it is of collapsing revenues. In the August budgetary re-balance, Ritter ruled out any cuts to education, but now in light of the new numbers, his budget director, Todd Saliman, says it would be "difficult to address that $257 million shortfall without impacting K-12." Very true, and it will be even more true when we get to the looming $1.1 billion shortfall for 2011-12. Saliman's remark is a simple reflection of the fact that any serious address to the state's mammoth budget crisis is impossible without a determined effort to constrain the one expenditure area that already consumes half of Colorado's budget, and is the lion's share of all local expenditure as well. Historically, we have not thought of education as an entitlement program, but it assuredly is. Like Social Security, Medicare and Medicaid, it represents a permanent obligation of government monies embedded in both law and public expectation. Also it has, through incremental growth over time, reached a point of absolute unsustainability at anything like the rates of increase it has seen in recent decades. The startling disconnect between education costs and reality was underlined by highly respected economics writer Paul J. Samuelson, who noted that between 1970 and 2008, though national student population increased by only 8 percent, the number of teachers increased by 61 percent. In a similar vein, he reported that between 1955 and 2007, student teacher ratios had fallen from 27-to-1 to 15-to-1. Accordingly, there is little surprise in the U.S. Bureau of Labor Statistics reports that per pupil expenditure in K-12 education increased — adjusted for inflation — 134 percent between 1975 and 2005. A central cause of these exploding costs is the fact that public school educators — the largest single employee classification in the country — have created a structure of job security, compensation, health and pension benefits far surpassing those enjoyed by the average American. As Colorado's PERA woes illustrate, this is unsustainable in its present form. So, what is to be done? Can a different way of thinking identify a model of public education that's effective, cost-effective and sustainable? Assuredly yes. There are useful models near and far. The largest private systems in the country are parochial schools, which deliver a basic and widely admired educational product at 62 percent of public school per pupil cost. Look further afield at other industrial nations that are thrashing us educationally today and will thrash us economically tomorrow. The vibrant democracies of Singapore, Taiwan, South Korea and Japan average 68 percent of U.S. cost. Several European countries come in at 70 to 80 percent. In the past, we never seriously looked at these alternatives because it was politically difficult — and, well, we didn't have to. Now, it will still be politically difficult, but reality is saying we have to. William Moloney, now a Centennial Institute Fellow, was Colorado's education commissioner from 1997 to 2007.  

"Larger shortfall looms in Colorado budget, and schools are likely to feel the pain," shouted the headline on a Denver Post story this week.  The timing could not be more appropriate for School Finance 2.0, a study group on sustainable budgeting for Colorado K-12 education, soon to be convened by the Centennial Institute. William J. Moloney, a Centennial Institute Fellow and former Colorado Education Commissioner, 1997-2007, will chair the project. Analysis and recommendations are to be ready by December, for use by the next session of the Colorado General Assembly when it convenes in January 2011, said John Andrews, director of the Centennial Institute.  Read Moloney's prospectus for School Finance 2.0.  Education Budget Study Sept. 2010.doc (30.50 kb)

('76 Editor) I asked former Treasurer Mark Hillman what sort of genuine PERA stabilization bill he would file if the two of us were still state senators, in light of his concern expressed in the previous post that the current bipartisan Senate Bill 1 doesn't get at the root of the problem.  He recommended the following three steps: * Raise the retirement age to 67 for anyone who hasn't been in a PERA-covered job for more than 5 years.  * Give everyone the option to put their money into a DC plan. * Put into statute that, from this point forward, if PERA's funds fail to meet the 30-year amortization requirement, that constitutes an "actuarial emergency" and it's up to the PERA board to produce permanent benefit reductions that restore the 30-year amortization schedule. By the way, Hillman has just published an excellent overview of how Bill Ritter and Colorado Democrats have shredded both the budget and the constitution since 2006.  The paper is called "A Billion Reasons Why Colorado Taxpayers Need Protection." He wrote it for the Rocky Mountain Foundation, the new group headed by our friend Tom Tancredo.