Tuesday, April 22, 2008

Perata and Teachers Unions, Have You No Shame?

Don Perata took the microphone at a rally Monday, declaring that we should "raise taxes before cutting education."

This comes on the heels of the news last month that Alameda teachers decided to put kids in trash cans to protest budget cuts. The hyperbole never seems to end.I'd like to spend some time in a later posting on California's ridiculous taxation system, but suffice it to say that we already have the highest state income tax in the nation, including the absolutely preposterous 1% surtax imposed a couple years back for "mental health." Talk about Balkanizing your tax system: what's next, a special income tax bracket for the governor's Hummer?

But I digress. The state's teachers unions have spent years making sure they spend every dime they can possibly find in the budget. This is in an environment where tax receipts have risen dramatically from every source.

Any reasonable business enterprise would budget spending increases based on a logical economic footing -- raising spending annually at the rate of inflation plus population growth, for example.

Not so for the state. At the behest of the unions, the government budgets spending increases with one eye looking at how much money it will take in during the subsequent year. The entire goal of the budgeting process is to find ways to spend every dime. Literally no thought is ever given to the question of whether the government needs to be spending such vast sums.

Enter a modest decline in state revenues, and the unions are completely unwilling to even entertain the notion that the same process they used in good times should also work in the bad times. No, apparently the government's coffers are a one-way door. Any whiff of a problem with that, and teachers start running around putting kids in trash cans in protest.

The reality? The 1999-2000 California state budget authorized $79.8B in spending. The 2007-2008 plan authorized $131.5B. That's an increase of 65% during a period of very low inflation and moderate population growth.

Around 40% of the budget goes to K-12 education. So, it's little surprise that when tax revenues decline the education budget has to take some of the hit.

To me, the more relevant question is where that 65% increase in education funding went during the past 8 years. Did it just vanish into a black hole?

To hear Perata and the unions tell it, that must have been the case. But we know that's not true. As usual, the money was consumed in some combination of wasteful excess and ridiculous, unfounded educational experiments.

The bottom line is that the state government receives plenty of money to provide quality K-12 education. We must stand firm against any tax increases and require the government to live within its means.

Incidentally, I am quite certain that what Perata has in mind is an increase in California's already-highest-in-the-nation 10.3% top marginal tax rate. This is fodder for a separate blog post, but in my opinion it is an open question as to whether this would even help solve the problem. For every new dollar of tax revenue, California will push some number of high earners out of the state. This trend is already well established, and with the growth of information technology, it makes sense to me that many more people may follow suit. After all, Florida, Washington and Nevada aren't all that bad.

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