Friday, March 19, 2010

Ruth Beier's Testimony on HB 5963

Ruth Beier, the MEA’s Economist, testified March 18 on House Bill 5963 (HB 5963). The full transcript is here: (Testimony on HB 5963). She states that Michigan is in financial crisis. She notes there will not be sufficient funds to cover the basic foundation allowance this and next year. Then she states that taxpayer money is used to provide education, not build up a bank account -- and this is where she goes off the rails. She states that, “20% of [taxpayer] education tax dollars get put in a bank,” this is a complete fabrication. Ms. Beier did not highlight a single school district to support her claim because no district in last 15 years has diverted anything close 20% (or 10%, or 5%...) of their foundation allowance to a bank account!

Districts with fund equity balances have them because of pre Proposition A funding which relied on local taxes for operations and capital requirements. Ms. Beier ignores that the operating balances at school districts across the state have been dramatically diminished to the point where state wide fund equity represents less than 30 days of operating cash. Worse yet, the number of districts operating in deficit (i.e., with zero fund balance) is at historic levels.

Ms. Beier says school aid does not cover funding for technology requirements, lap tops in classrooms, building repairs, or health and safety maintenance issues. Her solution is to call for sinking funds to pay for these items. Many districts have tried, and failed, to pass sinking funds. In these districts fund equity is the only source of capital for these critical items. Michigan’s citizens continue to say that they are taxed enough, especially at a time when they struggle with 20% salary cuts, benefit reductions, and economic uncertainty.

Ms. Beire further asserts it’s acceptable to allow districts to borrow cash to pay for operations. In fact, she thinks it’s fine for districts to “borrow as much as they need” while paying only 1.24% interest. In what world is it OK to throw away 1.24% of your foundation allowance on top of current and future funding cuts? Her assertion is appallingly short sighted.

Ms. Beier ignores how districts struggle to pay for accelerating employee insurance and pension costs. Perhaps she is unaware that the state mandated contribution to MPSERS (the pension fund) consumes over $1,015 per student annually, and that the unfunded liability of the pension fund is approaching $30,000 per student. Perhaps she fails to understand that employee costs are accelerating at over double the rate of inflation. Then again I’m sure she does, given she earns over $160,000 a year and got nearly an 8% raise last year. I wonder how MEA membership feels about that?

Districts are spending fund equity. Districts with vision are using fund equity with the strategic objective of eliminating structural deficits caused by labor contracts and tax codes crafted in a bygone era. Adopting Ms. Beier’s deficit spending binge will lead schools down a death spiral of teacher job cuts, program eliminations, and crumbling facilities. Schools will prosper again by making structural cost and revenue changes. Focusing only on revenues, while ignoring costs, is unproductive and will fail our children.


佩怡 said...
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奕LonniePettus0908希 said...
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su said...
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