Monday, February 28, 2011


Minnesota’s newest revenue forecast came out today showing that the state will collect about a billion dollars more than previously expected. Democrats immediately went into spin mode about how, now that we “only have a $5 billion deficit”, it might be easier to convince us to raise taxes to close the gap – after all, raising taxes is the only sane thing to do to solve a state government budget crisis in the middle of a recession.

The problem is that the current budget assumptions increase spending nearly 30%, at a time when the rate of inflation is closer to 2%. We will take in almost 9% more revenue than we did the previous budget and yet the Democrats are still whining that we have to raise taxes. The problem is not that we don’t have enough money. The problem is that the Democrats want to spend still more money than we have. This is what we call a false crisis.

Imagine, if you will, that you are doing your own budget projections for your home or business. Over the next two years, you expect that you will bring in 9% more money than you did the last two years. First of all, most of us would be grateful that we’re seeing any increase at all considering the state of the economy. Secondly, we would go about planning our expenses to fit that revenue. That does involve having to prioritize our budgets and then sticking to our plan. If healthcare or energy costs go up more than planned in our own budgets, we cut back on other things. The same is true for governement spending.

Democrats are trying to create a false crisis to generate sympathy for their projects and bully us into extracting more money out of the private economy for their wish lists. Voters told us in no uncertain terms in November they aren’t interested in that agenda. By voting overwhelmingly for fiscally conservative candidates (remember that 56% of Minnesota voters voted AGAINST Mark Dayton), voters told us they want government to spend less money. They told us to focus on the few things that government is actually supposed to do, and cut the rest.

Lawmakers and the governor would do well to heed this advice. Voters want government to spend less money, but they also want to change the budgeting process on a fundamental level. Most of us are not strangers to this prioritization process, but it seems there are some folks who don't seem to understand how it works. For review: First, fund mandated/essential functions. Second, fund, as best as possible, the things that have a serious impact on the quality of performance and service. Lastly, look at funding the things that are nice to have but not really necessary. This process removes a lot of the personal biases and ties that inevitably grow up around any budget line item. It also prevents politicians from using certain hot button expenses like police and fire as political footballs to generate sympathy for spending. Essential services like law enforcement funding comes first. Effective initiatives to improve economic development are not mandated, but they can make a big difference to the health and productivity of the state, so they might fall into the second category. Items like park improvements and arts grants, while nice to have, would most likely fall into the third priority category in the middle of a recession. Within those categories, how do we most wisely spend the money we have?

By prioritizing categories and remaining committed to our promise to the voters that state government will live within its means, we can achieve a balanced budget without raising any taxes. #falsecrisis solved.

Tuesday, February 22, 2011

Trickle Down Economics Goes Negative

It is amazing how short-sighted some people can be. In all the talk about Governor Dayton's tax plan (let's face it, it wasn't a serious "budget proposal"), folks seem to have gotten caught up in the idea that it's ok to raise taxes on the richest Minnesotans because they should pay their "fair share". We need a little clarity on what this plan really does before we get too comfortable with the concept of soaking the rich because they won't really miss it anyway.
This plan is not about whether a few dozen ultra rich people will leave Minnesota altogether to avoid taxation or will stay to ante up their "fair share". This plan isn't about whether those ultra rich people will take their income and spend it elsewhere, or even whether business owners in S corporations or LLCs will move their headquarters elsewhere to avoid the tax increase. That's not the real problem with Mark Dayton's tax plan.
Here is the sneaky truth of how Dayton's tax plan will kill jobs:
Dayton's tax plan affects any single filer with a taxable income of $85,000 and joint filers with a taxable income of $150,000 or more. The biggest group of people who will be affected by this tax increase will be people with jobs that pay between $90,000 and $130,000 per year. What kinds of jobs are those? They're upper middle management jobs - the department heads, the project leaders, the division managers. Those are the jobs that will start to dry up first. They are positions that can go unfilled in a recession if necessary.  If you do have them, they can be relatively portable (depending on industry) - even outsourced on a contract basis to consultants and free lancers using modern technology like that newfangled internet the kids keep talking about. Let's say I am a job seeker looking at two jobs in that pay range. One is in Minnesota, where the tax rate just shot up to the highest in the country, and one is just over the border in Wisconsin, Iowa or the Dakotas where the income taxes and the cost of government are much lower.  Which job do you think I'll take? If I have any flexibility at all, I’ll take the job in the lower-tax state.
Project leaders, division managers and department heads lead other employees. If you don’t have those positions, or if those positions move to another state, you don’t have the same division, department or project member positions either – the $50,000 to $80,000 a year jobs shrink even more. Without those division, department and project teams on site, their support employees aren’t needed in the same number either so those jobs shrink as well – those are the $35,000 to $50,000 a year jobs.
The loss or transfer of those jobs costs outside businesses as well: the dry cleaners, the lunch spots, the suppliers who base much of their revenue from the business of daytime workers also see their revenue drop in the absence of these positions. When revenue drops for these small business owners, they cut their own employees’ hours.  The slowdown continues to every aspect of life for any population center: without your leading community base (several studies show correlations between those who make $50,000 a year or more and those who contribute most to their local community activities), communities lose their vitality and their tax base.

Then the reality of tax increases on the “wealthy” shows its negative trickle-down effect on the rest of the economy. To put it simply, the loss or transfer of one $100,000 Minnesota job can easily lead to the loss or transfer of dozens of other jobs and their related economic activity, resulting in higher unemployment and lower tax revenues and, ultimately, the decline of entire communities. It doesn't happen overnight, but it happens as surely as the sun rises in the east.  This is the wrong direction for Minnesota. Governor Dayton’s proposal to raise taxes on $85,000 a year jobs will result in job loss for Minnesota. Republicans should relegate it to the trash heap and find ways to encourage employers to expand in Minnesota rather than take their jobs - and their prosperity - elsewhere.

Wednesday, February 16, 2011

21st Century Public Education: Remodel the Framework

There is no doubt that the 1950s factory model of education no longer works.  The needs and expectations of our students is vastly different now than it was 60 years ago (subject for an upcoming post).  Just like teaching our students out of 1950s textbooks would be useless, trying to force-fit the needs and expectations of today's students into 60 year old operational framework will only stifle innovation and impede our students' future success.  We routinely update and remodel outmoded HVAC systems, electrical wiring and other physical plant features to keep up with today's needs.  We need to remodel the framework of our public education system so school board, administrators, teachers and parents have flexibility to design modern operational systems that work for today's students.

Did you know:

1. Local school boards are not allowed to determine their school calendar - the school calendar is dictated by a "meet and confer" committee of classified employees.

2. There is no formal, standardized performance evaluation measurement system that school districts can use to evaluate teacher performance.  Some districts have developed their own; most have not.

3.  Education Minnesota, the statewide union that all public school teachers must currently belong to, consistently ranks in the Top Five of expenditures on lobbying the legislature, which does not include the union dues that are contributed to candidates for office.

We need to shift this balance if we are going to succeed in remodeling our public education framework to meet the needs and expectations of 21st century students.  Here is what school districts need:

1. Decide whether teachers fall into the "essential employee" category that already covers firefighters, police and school principals.  If they don't, we need to give school board the latitude to make significant changes to teachers' Master Agreements.  If they do, the legislature needs to classify them as such, eliminating their ability to strike over contract disputes.

2. Upgrade teacher and administrator training programs to require mastery of data use to improve student instruction and outcomes.

3. Modify PELRA (state laws governing contract negotiations) to ensure that school districts can retain the most effective teachers, not just the teachers with the most seniority, and give teachers and other staff assignments that best fit their skill sets and the district's needs rather than simply by who has "bumping rights".  Allow districts to modify or eliminate the "steps and lanes" automatic increases that classified employees now enjoy as needed to fit budgetary requirements without having to renegotiate the master agreement.

4. Create an independent arbitrator corps that can only consider "last, best total offer" proposals on contract negotiations rather than acting as a negotiator in their own right, or allow districts the ability to implement a contract without the labor unions' agreement.  This modification would go a long way toward balancing the needs of individual school districts that must, by law, negotiate individually against the power of the statewide union organization.

5. Allow school boards to determine school calendars, including staff development days and other non-student contact work days.  Set a minimum school year length (there is currently no standard; each district's number of student contact days is set by the teacher committee).

By remodeling the framework by which we operate our schools, we will go a long way toward modernizing our publica school system and meeting the Minnesota constitutional requirement of "thorough and efficient schools".

Tuesday, February 15, 2011

21st Century Public Education: Enact Funding Flexibility

Most people have no idea how complicated and painful education funding is. Virtually every dollar that comes into a district has strings attached in the form of mandates, restrictions and requirements. Some administrators have estimated that the staff time needed to keep up with all the mandated reporting and submission requirements amounts to nearly half of every full time employee in a school district. If you wonder why the ratio of administrators to teachers is so high, this is one big reason.
For instance, did you know:
1. School districts are required by law to keep separate accounts for capital, food service, debt service, future retirement benefit exposure, and operating funds, and those funds may not be transferred from one fund to another, even if they are not needed in their area;

2. Two percent of the budget every year is mandated to be set aside for staff development (continuing education, etc.), AND the locally elected school board has no control over how those funds are spent – those decisions are made by teachers and school building administrators according to state law;

3. If school boards don’t reach a contract settlement with their teachers’ bargaining unit (Education Minnesota) by January 15th of the contract year, the district is assessed a $25 per pupil penalty;

4. There are myriad “special pots” of money from state and federal sources that can only be used for specific things. Eligibility, submission and compliance requirements are often conflicting and negatively impact other sources of funding;

5. Various districts around the state have special local levying authority that other districts don’t have, and these authorities arise purely out of the clout their local representatives wield in the legislature (it's another form of earmarking). This creates a confusing and unequal playing field.

An economic downturn is the worst possible time for any government entity to ask for more funds. Minnesota’s school districts need funding flexibility. Here is what Minnesota’s public schools need right now:
1. Allow districts to transfer operating money from one fund to another. Locally elected school board members, accountable to the taxpayers, ought to be able to use capital, food service and staff development funds elsewhere depending on the needs of the individual district;

2. Minnesota’s state government should eliminate the 2% set aside for staff development, or at the very least, waive it for the next biennium so school boards can use that money where it is needed most in their districts. Additionally, the law should be amended to give school boards the final authority in how the money is spent to ensure that staff development programs are in alignment with the district’s goals for performance and student achievement;

3. The deadline for settling contracts, and the penalty for not meeting that deadline, needs to be eliminated, pure and simple. This requirement and penalty threat is one of many things that makes it very difficult for school boards to effectively negotiate labor contracts that are in the best interest of the school district;

4. Every “special pot” of money that is currently in existence, whether it’s a grant program, a local levy authority, or something else, needs to be carefully examined for relevance, effectiveness and ease of use, with most of them sunsetted. If the state of Minnesota adopted the same mantra that most moms use during spring cleaning, “for every one thing kept, two things must be tossed”, we would have a cleaner, easier to navigate, more transparent and equitable system of education funding in this state. Reserve special pots for top priority policy items: innovation, outstanding performance, substantial cost savings. Get rid of all the dust bunny programs hiding under the file cabinets because people never bothered to sweep them out.

5. The notion of creating "special" levy authorities for specific budget items like technology, health and safety equipment, etc. is silly.  Local school boards should be able to assess their budgetary needs in total and assess property taxes with the approval of the taxpayers with one number.  Trying to get around that accountability by creating all these special little categories is intellectually dishonest, takes too much staff time, and forces districts to make budget choices that may not best fit their needs.  This line of thinking falls into the dust bunny category above.  Instead, the legislature should craft language that grandfathers any existing special levy now in force into the local districts' current local operating levies (in the odd event one doesn't exist, the special levies would be pooled together to create a standard levy), and let districts work with the aggregate funding without worrying about whether they comply with each special levy's restrictions.

6.  Here's another, bolder thought: in an effort to stabilize education funding while we work out the budget and restructuring at the state level, the Minnesota legislature could authorize an automatic extension for two years of any local levy scheduled to expire within the next biennium.  Why would that be helpful?  First, it would remove the huge budgeting uncertainty that exists in every district where a levy is scheduled to expire during a biennium when the state budget will almost certainly have to cut (or at best, hold steady) education funding. Second, it would maintain stable tax rates for local communities.  Granted, tax rates would not decrease, but they would not be threatened with an increase either.  Third, it would relieve everyone involved from having to go through the process of a levy referendum - expensive and time-consuming for district staff who have to prepare all the data and deal with submission, approval and reporting requirements, divisive for communities during a time when communities are already exhausted from financial pressures.  A two year extension would, in effect, 'calm the system', and provide some breathing space for everyone from MDE to the legislature to school boards to communities while we restructure our public education system in Minnesota.

Simplfiying the budgeting and allocation process will allow school districts the ability to focus on their most important priorities, ease the contortions that legislators, staff members and the public have to go through to understand and administer the process, and might even save a little money to boot as districts spend less time searching for all the little scraps they can find to make up for general fund formula reductions. 

21st Century Public Education

Minnesotans believe in public education. Our state's founders believed in it so strongly that it was written into Article 13, Section 1 our state's constitution: "UNIFORM SYSTEM OF PUBLIC SCHOOLS. The stability of a republican form of government depending mainly upon the intelligence of the people, it is the duty of the legislature to establish a general and uniform system of public schools. The legislature shall make such provisions by taxation or otherwise as will secure a thorough and efficient system of public schools throughout the state."

In the last thirty years of the education wars, Minnesotans of various stripes have tried to reinvent, circumvent, shut down and compete with our statewide public school system. I have been one of them, because I believe that parents should be able to choose how their children are educated and that competition improves performance in any endeavor.

However, I'm also a Constitutionalist.

As a Constitutionalist, and as a Minnesotan, I have to understand that Minnesotans value public education. It is the most accessible, most affordable means of education that most families in Minnesota have. Abolishing or dismantling public education in Minnesota would be unconstitutional. And since the reality is that public education will remain the most accessible, most affordable form of education for most families, we should also heed our state constitution's requirements to make it thorough and efficient.

Note to Governor Dayton: that doesn't mean throwing more money at the system.

I've spent nearly 8 years serving on a local school board here in the Twin Cities. We have made some amazing progress in transforming our district's educational systems to better serve our students. Our high school has been listed in Newsweek's Top 1,500 High Schools for three years in a row. Our AP and other exceptional learner programs have some of the highest per capita ratios of disadvantaged students of any district our size. We serve a higher proportion of special needs students than most other districts in Minnesota because parents have confidence in our capabilities to educate their children. Our district's superintendent was the first superintendent in the state of Minnesota to base her entire potential salary increase on merit alone.

And we've done it with lower tax rates and lower per-pupil spending than almost any other district in the metropolitan area.

In this series of posts, I will outline the kinds of reform that public education really needs to allow it to perform in the 21st century. I believe in competition as much as I ever did, and I believe that public education can perform just as well as any other educational option if we have the flexibility and call to innovation that our districts need to get the job done. Public education is a core Minnesota value: let's get it right.