Education spending grows faster for taxpayers

A Nevada legislator bewails the “systematic dismantling” of our state’s public K-12 education system, saying it has been cut more than $700-million in the Great Recession. (AP, March 1.)

Silly rhetoric aside, what are the facts of actual state spending on K-12 and other general-fund (GF) categories, as compared to Nevada’s economy and the incomes of the families and businesses that pay taxes to support public spending?

A graph compares the changes in per-capita real personal income (measuring the Nevada economy and the incomes of taxpayers) to changes in per-capita real state spending since fiscal year 1994.

State spending is also broken out for K-12 (including state funding of local districts); health and human services (HHS, including Medicaid); higher education (HE); and other GF categories (public safety, infrastructure, commerce and industry, constitutional offices and cultural affairs). Real dollars means that amounts were adjusted for inflation.

Per-capita figures means that each year education spending is per student and other figures are per person in Nevada’s population.

The graph shows that all sectors grew over time at varying rates, but by 2008, all had experienced comparable total growth, with K-12 funding having grown most and the other GF categories least. During the Great Recession, however, there has been a huge divergence.

All state GF spending areas shot up in 2009 because the 2007 Legislature set the 2009 budget by relying on very optimistic bubble-economy growth projections and spent very liberally, instead of raising the state’s “rainy day” savings funds to prudent levels. K-12 spending for 2009 grew 20% in real, per-student terms over 2008 levels!

By contrast, the fortunes of Nevada families and businesses and our economy were hammered in 2009 and 2010 by the downturn and non-recovery that resulted from the excesses and mistakes of the government sector.

After 2009, K-12 dropped 11.2% in 2010, thus netting a real per-student gain of 6.6 percent over a two-year period, before holding steady in 2011 and then resuming growth in 2012. HHS spending also surged with the recession, while total state GF spending (three-quarters of which goes to K-12 and HHS) eased slightly due to severe cuts in HE and the smaller GF budget categories.

With major recent cuts in HE and the other GF category, their current real per-capita spending levels have dropped below the line for Nevada’s economy, families and businesses, and they have actually fallen back to or below 1994 levels.

However, as the diverging sets of lines in the graph show, K-12 and HHS spending in real per-capita terms in the most recent year were 39.5 and 36.3 percent, respectively, above their 1994 levels. Overall real per-person state GF spending was 28.0% higher, while the real per-person incomes of Nevada taxpayers increased only 6.8 percent.

In sum, the central narratives of the public-employees’ unions and other people seeking to raise taxes and spending are false – almost completely backwards. Nevada state GF spending levels for K-12 and HHS have grown the most.

Indeed, they rose quite nicely over the last two decades, despite the recent recession. So much for “systematically dismantling” K-12. HE and other state sectors have borne real cuts in state spending, while incomes of families and businesses that must bear the tax burden for that prosperity have barely grown at all.

From 1994 to 2012, total state GF spending as a fraction of the Nevada economy and relative to the incomes of Nevada families and businesses grew by nearly 20 percent.

For K-12 state spending the excess growth was almost 35 percent, and for HHS it was 27.5 percent. Thus, Nevada taxpayers — families and businesses — have been required by tax and spending increases in the last decade to increasingly fund K-12 and HHS, even as their own incomes stagnated and then declined.

The real burden on Nevada taxpayers has grown even though Nevada is not a low-tax state, as tax-and-spenders claim it is. Nevada’s total state and local tax burden falls squarely in the middle — 24th to 26th — for the 50 states, according to the Federation of Tax Administrators, using federal agencies’ data.

Since extensive research shows that the government fractions of our economy are already sub-optimally large (that is, contrary to the broad public interest), no tax increases can be justified.

Improving education is very important. However, instead of adopting low- and no-cost changes in policies and practices that are available and have been demonstrated effective in improving it (more parental choice; performance pay), we have continuously thrown more money at special interests (teachers’ unions) and untested and often unsuccessful trendy programs advocated by the educrats (class-size reduction, all-day-K and pre-school) to increase teacher-union numbers and power.

What we need now is to have the adults step up, dismiss the rhetoric and misleading budget-cut claims, and propose sober and constructive solutions. Not more tax increases to feed the public-employee unions that will be as selfishly predatory upon the public interest as legislatures, governors, regents, school districts, etc. allow them to be.

Ron Knecht is on the Board of Regents.


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