Why Won't Someone Think of the Children?! ;-)

The typical debate about K-12 education starts almost exactly as follows:

"Have no illusions. INSERT PROPOSED CHANGE HERE will gut public schools.  Don't we want ALL our children in America to have a good education?"

Almost all Americans fail to understand education is primarily a state and local function.  Why federal dollars are involved at all is an excellent question no one really asks.

I've volunteered at afterschool programs funded by federal dollars, sometimes called Title I schools. Most of the money goes to existing teachers, not kids. (I was an unpaid volunteer who decided to continue volunteering after teaching a financial literacy class affiliated with Junior Achievement.)  The goal seems to be to reserve as much money for existing staff as possible.  A principal in a different California district told me when she considered using general funds to expose students to organized activities by outside nonprofits, a tenured teacher complained the funds should be used first for teachers, and teachers should object or file a union complaint.

In any case, the afterschool program--funded with federal dollars intended to help schools with impoverished children bridge educational gaps--would hand out juice boxes and small snacks like wheat crackers or leave them out for children to take as needed.  In some schools, the kids play videogames. In one middle school, I ran into two unsupervised kids in a gym. When I mentioned I found two kids in the gym, the supervising administrator became angry with me for being alone with them, even though the gym should have been locked and the kids shouldn't have been in there in the first place.  When the gym was supervised, the kids played in a haphazard fashion, sometimes with deflated balls.  (By the way, I live about 10 miles from the school, and a single family home costs around 700,000 USD in the district--about three times the nationwide median price.) In short, federal dollars used for education and nutrition are sometimes babysitting programs with no educational value whatsoever.

92% of all K-12 funding comes from state and local sources, and taxpayers are no longer as tolerant when it comes to inefficient federal spending. Why should taxpayers in Kansas, Indiana, and Minnesota pay millions each year to California teachers for afterschool babysitting programs that do nothing to improve educational outcomes? And why can't states do these programs themselves instead of relying on slush funds from nationwide taxpayers? If a program is important to local voters and has mostly a local impact, shouldn't they fund it with their own tax dollars or increase taxes as necessary? (I suppose they could borrow money, which would be a great opportunity for Congress to pass a law mandating all local government programs be funded at least 95% by local or state taxes and not debt--to the extent the local government receives any federal dollars.) [Update: I just realized my proposed Congressional check on states won't work. States will just shift state spending obligations to the federal government, which has greater and almost unlimited borrowing capacity.  Instead of issuing state bonds at higher and higher interest rates--essentially stealing from future generations--states will just ask the feds for more money and then horse-trade with more fiscally-conservative states to get that money. For example, a California legislator needing x dollars for y and z program would tell Kansas, Nebraska, and Iowa that they can have the next five years' defense contracts in their states, as long as they put a provision in the defense bill giving California federal grants for x and y programs.  Without integrity and some sense of long-term consequences, no law or proposed change will fix substantive problems. Sigh.]

The consequences of corruption, which include inefficient government spending, can unfortunately include wholesale elimination of programs. This doesn't preclude administrations from instituting new programs that accomplish the goal more efficiently and without employing the formerly corrupt employees. While no one enjoys change and new responsibilities, without them, governments will stagnate.  Governments that fail to adapt to change will promote protectionism and a desire for the "good ol' days," which are never as good as anyone thinks.  What is giving rise to voters' lower tolerance for inefficient government programs? (aka "compassion fatigue") 

1.  Lessened accountability. Anyone familiar with California's government unions knows they promote systemic corruption.  Some police officers use excessive force, and even when the evidence is on camera, the worst that follows is paid vacation or reassignment.  Why?  Because police unions have passed laws defining "excessive force" in their own favor.  (What's the definition of "sex" again, Mr. Clinton?) When you can invent your own dictionary, the law can't touch you.

Police unions and their lobbyists know that protecting the worst amongst their members--it's a fraternal order, after all--causes the general public to mistrust all cops, even good ones.  Incredibly, they don't care.  They assume with enough marketing and political influence, they will always be able to protect themselves--even at everyone else's expense.  When you don't know whether the officer who just pulled you over has used excessive force and gotten away with it, you're not going to vote to increase tax dollars to the police.  You won't trust any of them.  From the perspective of political lobbyists, however, it doesn't matter.  You can complain, but dispersed voters, even if right, cannot effectively counter political and legal moves by groups, even if wrong.

It's the same concept with teachers--who only teach about 158 to 180 days a year in California.  Many of them refuse to do volunteer work for the benefit of the school, which reduces the school's role as a positive influence on the community.  In the past, if Johnny was falling behind, maybe a teacher tutored him one-on-one for an additional 15 minutes, without pay.  Today, teachers unions counsel members not to do any volunteer or additional work during contentious budget negotiations.

Such tactics aren't new--California's teachers unions campaigned against one of the best teachers in the world and drove him back to his native Bolivia ("Faculty colleagues and union officials complained that his extra hours and large class sizes set unhealthy precedents for other teachers and violated existing work agreements.")  They, too, have passed laws favoring themselves over all other taxpayers, making it almost impossible to shut down underperforming schools or to eliminate even the most egregious pension loopholes.  Meanwhile, teachers' pensions grow at guaranteed rates, regardless of actual tax revenue. Incredibly, some teachers still wonder why the public has turned against them.

2.  Reduced accountability isn't leading to better performance or results.  One potential upside in protecting government workers is some of them will be encouraged to try new programs or take more risks.  That hasn't actually happened.  California still doesn't have universal pre-school, despite guaranteeing K-14 education receive at least 40% of each year's budget (see Proposition 98).  Educational outcomes are still primarily determined by two factors: 1) parental educational levels; and 2) parental income levels. ("America: the worst caste system in the world, but with new and improved propaganda"?) 

Worse yet, most 6th to 12th grade programs don't teach in ways that promote better analytical ability or better citizenship. Americans are likely to learn WWI started when Archduke Ferdinand was assassinated, but such knowledge is worthless without some overall context, including incorporating modern information such as NATO and internal independence movements. In short, not only is critical thinking or logic absent in K-12 courses, even the material taught is useless because it usually lacks any connection with modern-day knowledge or practical skills.

3. As governments have become less accountable, businesses have become more responsive to consumer needs, giving corporate leaders more credibility than politicians. With the exception of a few outliers, most Americans will sooner read a book by Nike's CEO or a professional athlete than any politician not named Obama.  When you think of prior leaders like Eisenhower and Kennedy--people who captivated the entire world--this shift from political to corporate power is a dramatic change. How did it happen?

Globalization forced businesses to compete and provide individually-tailored solutions while governments reduced competition--and therefore accountability--through gerrymandering and other legal mechanisms. While businesses were behaving more nimbly, American voters forgot their political systems' numerous checks and balances allow only incremental change.  In other words, once a political change is enshrined in law or through vested power, it is as close to permanent as one can get.  Once vested, power removes some portion of a country's political flexibility and its ability to absorb anything radically new--an issue for anyone who believes America's economic, social, and innovative engine runs on immigration and tolerance.

To avoid reform and making hard choices, governments--as well as corporations--have been relying on debt to prop up unsustainable legal and benefit structures that make Jim Crow's "separate and equal" look tame by comparison.  (Say what you want about Southern racists, but even they didn't argue that "separate and unequal" was defensible, like government unions are doing now with their different compensatory and disciplinary rules for government workers.)

Corporations and real estate developers have relied on debt, too, but have usually done so to facilitate new products or changes (moving to the cloud, new condos, etc.).  In contrast, governments have used debt to make change more difficult and to support separate and unequal legal structures.

4. The above phenomena have led to ineffective remedial responses.  This is to be expected, because remember: America's political structure only allows incremental changes because of its numerous checks and balances, which generally operate against non-military governmental overreach but also against removing vested interests that harm the public trust.

On the federal level, governments have responded by trying to reduce expenses and costs as much as possible--without regard to quality.  One way to reduce expenses, given the lack of fiscal checks and balances within most government entities, is to hire contractors.  Yet, even this approach is no longer working, because most businesses now understand their goal is to submit a low bid then increase costs over time through negotiations and add-ons.  In other words, governments have made internal hiring too expensive because of unsustainable benefits and no real incentives for timely delivery, forcing them to rely on more efficient outside workers, who themselves have become corrupt over time. (Study private prisons if you're curious for details.)  Also, even if costs are kept in-line, the service under contract might be so clunky, it forces consumers to rely on costly experts to navigate the system. (Talk to anyone who's navigated the Covered California website for more details.)

Bottom line: governments are no substitute for culture.  If your culture is filled with hubris, inefficiency, unsustainable legal structures, and a lack of critical thinking and compassion, your government won't be able to do anything.  Anyone who can set up private or external systems will do so--if only out of a desire to get things done.  When this self-segregation inevitably occurs, people stuck in the mainstream will complain, but in America, only incremental change is possible, so individual complaints, regardless of merit or veracity, will generally go nowhere.  Society will fracture and eventually decline as the best and brightest move away or find more accountable systems that allow them to prosper.  And that, boys and girls, is why every empire eventually collapses or becomes a military dictatorship, where some force feeds off of dissatisfaction and overrules all established rules and opposition, especially minorities.  In short, it's a scary time to be an individual in America.

"Civilizations die from suicide, not by murder." -- Arnold Toynbee

© Matthew Mehdi Rafat (2017)

Bonus: I keep saying I'm going to write more about people and non-economic culture, but you can't really do that in America.  The average American in 2017 is in debt, more uptight than almost any other culture, hasn't read more than two books in the past year, and is generally unaware of his or her exposure to constant propaganda. (80% of the TV commercials I recently saw were military-related and for soda and alcohol.  The alcohol commercial, for a low calorie beer, featured semi-professional athletes engaged in vigorous exercise.)

The most interesting Americans I've met in the last 22 years are immigrants or ones who have traveled to at least 10 countries starting at a young age.  If the most interesting Americans are the ones exposed to non-Western cultures, perhaps the best places to study culture are outside the "West."

Pro tip: if you are enamored with "Western" life but desire a bit more soul, try Buenos Aires, Argentina. If money isn't a concern, visit Santiago, Chile.

Flashback from 2010: https://willworkforjustice.blogspot.com/2010/09/teachers-unions-running-california.html 

Retired California Teachers Receive Lump Sums of $500,000

Oh, those poor, poor California teachers. They only get lump sums of $500,000 when they retire. Wait, what? Oh, you didn't know that? Keep reading.

"Of the 12,568 California educators who retired in fiscal year 2007-08, the median number of years on the job was 29 years. The average CalSTRS pension was $48,180 per year, which was about 62 percent of the average highest salary." See here [Update: link no longer works.]

Assuming a 6% rate of return and 29 years of retirement, you and I would have to save up almost $17,200 every single year for 29 years straight to get the same level of retirement income as an average California teacher. Why? Because most of us would have to buy an annuity on the open market to get something similar to a pension.

To give you an idea of how expensive these pensions are, let's do the math: to get $48K a year for 17 years, we would have to generate a nest egg worth about $500,000. Basically, California taxpayers provide the average California teacher with a nest egg of $500,000 upon retirement--the market cost of paying someone about $48K a year for 17 years of retirement. (Note: Hypothetical assumes you start teaching at the age of 31 and work 29 years, which means you're 60 years old. You then retire and then expire at 77.)

Will most Californians have at least $500,000 when they retire? If not, why are they responsible for guaranteeing the average teacher an annuity worth about $500,000? Also, how many of us can afford to save $17,200 a year? Even if private sector employees maxed out their 401(k)s, they couldn't put $17,200 a year in the account [as of 2011]. And people still think teachers, on average, are underpaid. Perhaps the newer and younger ones are--but that's not the taxpayers' fault. It's the union's fault for creating and enforcing a compensation system that shoves so many available taxpayer dollars in the back-end of a teacher's career rather than in the front.

P.S. Want to do the annuity calculations yourself? Here is one version of an annuity calculator.

Bonus: It looks like I may have underestimated the value of the pension. More here. The Money Blog calculates that as of 3/2011, a $300,000 lump sum would would get you just $1300/mo in annuity payments.

Also, see Margaret Collins, July 1, 2011, “Delay Taking Social Security, Add Annuity to Survive Retirement”: “For example, a contract [annuity] purchased for $95,500 by a 66-year-old couple in Florida may provide $4,262 a year until the death of the surviving spouse and include increases for inflation."

Bonus II: from Joel Klein, The Atlantic, June 2011:

[C]onsider the financial burden that comes with providing lifetime benefits. Given the time between first putting aside the money to fund such a “long-tail exposure” and having to begin paying it, the amount “reserved” by the employer necessarily depends on a host of imprecise assumptions—about the rate of return that the money invested in the pension fund will earn, about how long employees will live, and even about how much overtime employees will work during their last few years, which is normally included in calculations of the amount of the pension. Each dollar set aside this year to cover the ultimate pension exposure must be taken from what would otherwise be current operating dollars.

Consequently, elected officials have had every incentive to make extraordinarily optimistic assumptions about the pension plan—or to simply underfund it—so they can put as little as possible into the reserve. Unfortunately, but predictably, that’s exactly what has happened: most states “assumed” they would get an average 8 percent return on their pension reserves, when in fact they were getting significantly less. Over the past 10 years, for example, New York City’s pension funds earned an average of just 2.5 percent. Now virtually every pension plan in America that covers teachers has huge unfunded liabilities. A recent study by the Manhattan Institute estimated the total current shortfall at close to $1 trillion. There’s only one way to pay for that: take the money from current and future operating budgets, robbing today’s children to pay tomorrow’s pensions.

Unintended Consquences: Meredith Menden on Teacher Pay

Meredith Menden wrote a sarcastic Facebook note titled, "Are you sick of highly paid teachers?" proposing to pay teachers directly like babysitters, i.e., $19.50 a day. $19.50 x 30 kids x 180 days a year = $105,300 a year. Let's take Ms. Menden's idea further and actually consider paying teachers directly. First, we have to figure out how much each of us are paying teachers now.

In 2009, Californians filed about 12.8 million tax returns. (http://www.ftb.ca.gov/aboutFTB/Tax_Statistics/2009_Filing_Season_Statistics.shtml)

California's annual budget is about $89 billion. The annual budget number is different from the amount available in the general fund. The general fund is basically the state's operating budget and includes money that covers the day-to-day activities of various state programs. The state's annual budget number includes expenses outside the general day-to-day activities of various state agencies and is therefore higher than the amount available for its general fund.

About 40% to 50% of the general fund usually goes to K-12 education. For 2011-2012, when including college funding, about 55% of the general fund will be spent on all education (DOF link here), with about 42.8% spent on K-12 education (see Governor's eBudget summary).

In 2011-2012, Jerry Brown is proposing that we spend $37.7 billion on K-12 education: http://www.ebudget.ca.gov/StateAgencyBudgets/6010/agency.html

So California plans on spending about $38 billion on K-12 education in 2011-2012--and that only includes the amount received from the state. (K-12 schools receive more funding from other sources, but we'll ignore those sources for now.) Each state tax filer is paying about 3K a year on K-12 education. Instead of giving that money to the government each year, why not return it to each taxpayer and add another 1K, even to people who do NOT generally file tax returns (i.e., poor people)?

Under this system, a poor parent would get an additional 4K a year to spend on his or her child's education. A married couple with two children would have 4K to spend on each child's tuition. A married couple with only one child could receive up to 8K. If parents don't spend the full amount on schooling costs, they would be required to spend any excess money in the county where they live. All recipients with K-12 children must spend at least 2K of their 4K on K-12 tuition. Payments and purchases would be tracked using something similar to our current EBT card system.

Adults who have no desire to attend school or who have no children would receive 2K in tax credits but must spend the money within their county of residence. Depending on the state's finances, this proposal could be extended to college students to help them pay for tuition. (Instead of increasing college tuition costs as we're doing now, we might be able to help college students reduce higher education costs).

Taxpayers who earn more than 125K a year in adjusted gross income would not be eligible for the 2K tax credit or 4K tuition credit. Once again, any tax credit not used on tuition or reducing a person's tax liability will be loaded on a card that must be spent on a business physically located in the taxpayer's county of residence.

More ideas: teachers would be hired based on one year contracts. A month before the end of the school year, a majority vote of the parents by secret ballot could remove the teacher. Requiring that all recipients with school-age children must spend at least 2K of their 4K on K-12 tuition gives teachers a *minimum* salary of 60K a year (assuming 30 kids--2 x 30). Parents who have only one child would have to pay 4K a year (2K each is required to be used for school), which would increase the teacher's salary beyond 60K in many cases. The money would go into a common pool and be divided among the different teachers in science, math, English, etc. In exchange for higher pay, teachers would be responsible for their own health care and retirement, just like many people in the private sector. With so many more people buying individual health and dental care plans, the overall cost of individual insurance plans would fall, creating an indirect benefit for poor people, the uninsured, and the self-employed.

If parents want to spend more on teachers, they can give them up to 120K (4 x 30) or more. If you're concerned about poor people in California, many poor people live in the Central Valley and way up north. 60K a year--the minimum salary--is good money in places like Fresno, Bakersfield, outskirts of Sacramento, etc. Of course, millions of poor people live outside of the Central Valley and in more expensive places like L.A., San Jose, etc. Most likely, these parents would have to spend their entire 4K voucher on a local school (if we assume more affluent neighborhoods will vote in higher salaries for teachers). However, poor parents will still have more choices and more of a voice in their children's education because teachers would have to cater directly to them to get their votes at the end of the year. In any case, under this proposal, all poor adults, even those without children, would receive 2K more every single year.

One issue is factoring in the increase in expected tax returns. Obviously, there will be more than 13 million people filing taxes if they know they will get between 2K to 4K. Also, we would have to create a new agency to investigate fraud/kickbacks, supervise the annual secret ballot vote, verify residency, prosecute parents who don't send their kids to school, etc. But if existing funding sources are inadequate, let's assume we could implement at least two measures to cover any expected shortfall: one, raise sales taxes (that's what we're doing now when we have a shortfall); and two, force all government employees making over 100K to take a 15% pay cut down to a minimum of 100K. We may not have to implement either of those measures if we handle additional sources of funding wisely. Lest we forget, we haven't even included federal money and local property taxes, which are around 11% and 21% of K-12 school funding (See here). Those are tens of billions of dollars of existing funding we have not yet discussed or included in our calculations.

Another note: we would have to cut P.E., which means we would teach five subjects instead of six subjects (e.g., English, math, science, social studies, and one elective, e.g., a foreign language, logic, music, etc.). The ambitious high school students could enroll at the local community college if they wanted more classes.

There are some important factors I haven't considered (e.g., what if parents have more than two kids? how do we best count the votes of divorced and/or single parents?), but we can see that existing funding is enough to improve the education system and also assist low-income parents. Whatever we're doing now is not assisting the children of low-income parents, so we ought to be open to all ideas. Why not consider a plan that would help increase accountability, pay teachers more, and help poor people? Most studies show that academic success tends to be influenced most by levels of parental income, parental education, and parental involvement. The proposed idea addresses all three aforementioned factors.

Update:

1) Complaint: not all poor people live in the Central Valley, and private schools are expensive.

Response: the poor people in the larger cities would probably have to use the full amount of their 4K vouchers to attend public schools, but they would still have more choices. Remember that under our current system, poor people must currently enroll their children in a pre-determined school, regardless of whether it is failing or dangerous. Giving parents a voucher for 4K allows them to consider charter schools and to demand more accountability.

Some people have said that private schools cost more than 4K a year. Well, some do, and some don't. Right now, we don't have much competition in schooling, and rich people are the ones with options. However, once we establish a voucher system, it is likely that new charter and new private schools that cost between 2K and 4K annually would crop up and be available to everyone, not just rich people.

And remember: we're not eliminating public schools or forcing anyone to attend a charter school. All we're doing is demonstrating that we can double teacher pay using existing resources (and still have plenty of money left over). All public schools would be required to enroll students with 4K vouchers. The true debate centers around the process the parents would use to determine whether they would have to use 2K or the full 4K amount of their vouchers, i.e., is it a majority vote of the class, school, county, etc.?

2) Complaint: healthcare coverage would be difficult on the private market, because you are switching tens of thousands of teachers from group coverage to individual coverage.

Isn't it true that under Obamacare, insurers must cover all individuals regardless of pre-existing conditions? In any case, the health insurance issue is a separate topic that can be addressed via state or federal legislation.

3) Complaint: the proposed idea eliminates administrators and other non-teaching staff.

The proposed idea eliminates administrators and other non-teaching staff so we can pay most teachers more money. We can modify the plan to add more money for basic maintenance costs, which are not a large portion of California's existing education budget. About 80 to 85% of California's K-12 budget currently goes directly in the pockets of school employees. (http://www.ed-data.k12.ca.us/articles/article.asp?title=teachers+in+california) If we can resolve the school employee funding issue, which is about 85% of the battle, we can easily deal with the remaining 15%.

To the extent we cannot replace the remaining funding needs by increasing sales taxes or decreasing the salaries of high earning government employees, remember that we have not included additional sources of funding. Only 61% of K-12 school funding comes from the state. As discussed above, the federal government provides an additional 11% and local property taxes provide another 21%. (See here.) In short, our calculations above have not included tens of billions of dollars of existing funding. Even without including the additional sources of funding, we have devised a system that could potentially double the average teacher salary in California.

4) Complaint: poor kids sometimes receive their only meal of the day at school. What about cafeteria staff?

An additional 2K a year gives parents over eleven dollars a day to replace any missed school lunches (assuming 180 school days). In schools that require the full 4K voucher, we can require the schools to feed children at least once a day. See response to number 3 above. Again, we have not considered other sources of funding from the state, local property taxes, lotto sales, etc.

5) Complaint: what about the existing pension and medical benefit obligations we owe to retired teachers?

The proposed plan eliminates unpredictable, unsustainable liabilities for incoming teachers in exchange for higher pay. Basically, teachers get paid more and taxpayers get more budget flexibility and predictability.

What about existing and retired teachers? The studies I've seen indicate that existing plans to cover such liabilities are underfunded by around $30 to $50 billion. We can apportion a set amount each year from federal or local property taxes to cover existing liabilities owed to retired teachers. If we spread out the funding over thirty years, we should be able to cover existing liabilities. We could also change the way benefits are calculated for existing teachers, such as increasing their contributions to pension and medical plans.

6) Complaint: what about making sure that all students, nationwide, are learning the same basic skills?

Remember: we haven't touched sources of federal money in the above calculations. The federal government usually provides about 11% of education funding in California.

In exchange for accepting federal money, the federal government can require schools to fail students who do not pass a basic competency test at the end of the year. Results would be released before parents vote on whether to retain their child's teacher. Under this method, parents would have a nationwide standard to measure both student and teacher performance while also giving teachers more flexibility in how to teach.

Bonus: Did you know the average California teacher receives the equivalent--at least as of 2011--of about $500,000 when s/he retires? Never heard that before, huh? Funny how the teachers' unions don't mention that. More here.

Teachers' Unions: Running California Politics?

Do you have any idea how much California spends on education? Where does all that money go? If you're not sure, keep reading--you might be surprised.

The California Teachers Association has been the largest individual lobbyist in California over the last decade and has spent more than $200 million on campaign contributions and lobbying efforts.

From California's Secretary of State website, which apparently stopped publishing these reports in 2005-06.

Teachers' unions have also been effective lobbyists at the federal level. Unions have received federal money for 400,000 jobs. According to the White House, "Additional federal aid targeted at preventing [teacher] layoffs can play a critical role in combating the [economic] crisis. Such aid would be very cost-effective. There are no hiring or setup costs...The American Recovery and Reinvestment Act of 2009 included some of this aid for 2009 and 2010. The recipient reports filled out by states and school districts show that, last quarter, Recovery Act funds supported more than 400,000 education positions. (White House blog, June 12, 2010)

August 11, 2010: the gravy train continues for unions, even as the private sector continues to bleed jobs--"The [$26 billion] legislation would funnel $10 billion to school districts to rehire teachers who were laid off, or prevent additional cuts just before the school year begins. Advocates estimate the money would keep more than 160,000 public education positions." More here.

Being one of the largest individual lobbyists in California has its rewards:

"In 2007, more than four-fifths (82.9 percent) of statewide spending for schools went to pay for the salaries and benefits of teachers and other staff."

From a California Dept of Education affiliated website (Jan 2010, "Teachers in California"): "Although there is some variation, expenditures on salaries and benefits for all employees typically make up 80 to 85% of a district’s budget, with the bulk of it going to teachers." More here. [Note: Ed-Data website no longer allows a direct link to the aforementioned statistics; for now, go to link and search for "Teachers in California" link.]

"According to the CTA's parent union, the National Education Association, California teachers were the nation's top-paid, with $64,424 average annual salary in 2007-08." More here.

From State of California website: "California ranks almost last in student achievement." "California has the highest average teacher salary of any state in the country." (http://www.lao.ca.gov/reports/2011/calfacts/calfacts_010511.aspx) [Added May 9, 2012]

"Because the termination process requires years of documentation, it not only is costly but it also seldom works – 91 teachers have been dismissed over 10 years in the entire state. Of those dismissals, 19 were based on unsatisfactory performance, while the vast majority were for egregious conduct." [Added August 1, 2014, from CS Monitor, "Vergara v. California," by Daniel B. Wood, 1/28/2014)]

As a result of Proposition 98, California is legally required to use a large portion of the growth in General Fund revenues for K-12 education. Basically, Prop 98 forces California to use at least a certain percentage of its revenue for education, even if California needs funding for other projects, and even if it constrains funding for other portions of the state's budget. Prop 98 passed (barely) with a 50.7% vote and amended the state Constitution, Article 16, Section 8. Here's subsection (a):

From all state revenues there shall first be set apart the moneys [sic] to be applied by the State for support of the public school system and public institutions of higher education.

Post-Prop-98, California tends to direct about half of its General Fund towards education. How much are we talking about in overall K-12 education spending? Total funding for K-12 education was projected to be $68.5 billion in 2008-09. For fiscal year 2006-07, K-12 funding was $55.1 billion. Again, 80 to 85% of this money goes into district employees' salaries and benefits, with the bulk of it going to teachers.

California state generally provides about 61% of total K-12 funding. The federal government provides an additional 11% and local property taxes provide another 21%. (See here.) (Update in 2019: lottery revenues now provide over a billion dollars each year.)

Seen June 2019 in California supermarket.

By the way, how's your 401(k) doing? Worried about your retirement? California's government employees don't have to worry so much. CalPERS has approximately $200 billion for their retirement. In addition, public school teachers have their own pension fund called CalSTRS. As of September 2009, CalSTRS was the second largest public pension fund in the United States and is currently the seventh largest public pension fund in the world. [CalSTRS had assets of $154.6 billion as of May 31, 2011--and is still underfunded by tens of billions of dollars.] Like it or not, you and your children will be paying for California government employees' safe jobs and safe retirements. And if the pension fund managers make mistakes or turn out to be Bernie Madoffs, too bad--you're going to make up the difference, because taxpayers are ultimately on the hook for every penny of government employee pensions.

[For more on California politics and government unions, click HERE (detailed article by Troy Senik, Fall 2009) and HERE (chart).]

What's the problem with having teachers' unions control such a significant portion of California's tax dollars? First, teachers lack a system and culture of accountability. Even the worst teachers can stay employed until retirement, and there isn't much anyone can do about it. Meanwhile, in the private sector, employees cannot typically under-perform for long and retain their jobs.

Second, teachers receive benefits far beyond what is necessary to retain or motivate them. After 25 years, California teachers can retire and receive annual pensions of $69,000. As of 2010, if you or I wanted to receive a stable $69,000 a year in retirement, we would have to save at least a million dollars in 25 years--and we're not even including the costs of the lifetime medical benefits some government employees receive (Note: for teachers, medical benefits can vary based on individual school districts). In short, we are overpaying tenured teachers, especially retired teachers, and we do not have the money to be so generous. To make matters worse, the cost of paying retired teachers is so staggering, we cannot afford to pay newer teachers higher wages. As a result, many new teachers quit within five years.

Third, Americans used to understand that union and government jobs were favors given to family members or politically-connected people. The Boston Irish, for example, used to joke that police jobs were "Irish welfare." Things haven't changed much. Unions and the government hire people they know and like, and in my experience, the testing and interview processes are mere procedure and show. (The government can score your interview responses however they like, while giving minimal weight to an initial objective/multiple choice test.) Nothing will change until government hiring becomes transparent and more objective. Until then, a vote for a California Democrat or pro-government-union candidate is a vote for non-accountability; a two-tier employment system where government employees get better benefits than non-government employees; and overly subjective hiring practices.

Michael Moore can talk all he wants about his idyllic youth and the union jobs that created the Michigan middle class. What he doesn't tell you is that back then, a hamburger, fries, and soda cost 85 cents and a gallon of gas was about 32 cents, so it was possible to create a middle class at very little cost. These days, public sector unions are running a tab of trillions of dollars, much of it borrowed from future generations of Americans, i.e., children.

Americans need to understand that the greatest threat to American prosperity isn't necessarily a foreign one. Most empires collapse because of overreach and inflation, which is usually caused by excessive government spending and borrowing. As Arnold J. Toynbee once said, "Civilizations die from suicide, not by murder." We would do well to heed Toynbee's sage words. Our respect for educators, firefighters, law enforcement, and other government employees is causing us to commit fiscal suicide. Surely we can provide essential services without bankrupting our children. Thus far, however, we've been unable to strike the appropriate balance.

Bonus: from Joel Klein, The Atlantic, June 2011:

[C]onsider the financial burden that comes with providing lifetime benefits. Given the time between first putting aside the money to fund such a “long-tail exposure” and having to begin paying it, the amount “reserved” by the employer necessarily depends on a host of imprecise assumptions—about the rate of return that the money invested in the pension fund will earn, about how long employees will live, and even about how much overtime employees will work during their last few years, which is normally included in calculations of the amount of the pension. Each dollar set aside this year to cover the ultimate pension exposure must be taken from what would otherwise be current operating dollars.

Consequently, elected officials have had every incentive to make extraordinarily optimistic assumptions about the pension plan—or to simply underfund it—so they can put as little as possible into the reserve. Unfortunately, but predictably, that’s exactly what has happened: most states “assumed” they would get an average 8 percent return on their pension reserves, when in fact they were getting significantly less. Over the past 10 years, for example, New York City’s pension funds earned an average of just 2.5 percent. Now virtually every pension plan in America that covers teachers has huge unfunded liabilities. A recent study by the Manhattan Institute estimated the total current shortfall at close to $1 trillion. There’s only one way to pay for that: take the money from current and future operating budgets, robbing today’s children to pay tomorrow’s pensions.

Update in 2017: a more recent post on this issue is HERE.


Update on April 2017: "61 percent of budgetary expenses are related to instruction, followed by 35 percent for support services, 4 percent for food services, and less than 1 percent for enterprise operations. Trying to infer salaries... is tricky, because salaries and benefits will be reflected across the categories, appearing in instruction, support services and enterprise operations. Generally speaking, a school district spends between 80 and 85 percent of its entire budget on salaries and benefits, meaning only 15 to 20 percent remains to address all of the rest of the budget’s priorities and needs... Salaries account for 67 percent of the budget, followed by 22 percent for employee benefits, meaning that school districts have spent close to 90 percent of their instructional budget on staff and benefits."  (From AASA.)

Are Teachers' Unions Bankrupting States?

How many non-government workers receive guaranteed pensions? Almost no one. Yet, teachers and other government employees have negotiated so many benefits for themselves, they are hurting future generations of students and teachers:

Although it is generally acknowledged that education is the foundation of every modern society’s future prosperity, schools unfortunately will have to compete with retirees for scarce dollars. This competition is uneven, because retirees have a legal claim on promised pension benefits that supersedes schools’ budgetary needs.

Basically, the more generous we become with pensions, the fewer benefits we can give current teachers and current students. For example, let's assume a state has 100 dollars in tax revenue. If it has to pay a retired teacher or police officer a pension almost equal to his or her regular salary, that's 90 to 100 dollars that the state can't use on hiring a new teacher or a new police officer. Or, as the report states, "Education finance is a zero-sum game: the more that is spent on closing pension funding gaps, the less there is to spend on reducing class size or improving instruction."

Note: "California, the most populous state, has the largest unfunded teacher pension liability: almost $100 billion." Yes, that's billion with a "b." See here for more.

Day of Action for California Public Schools? Seriously?

Apparently, there's going to be a Day of Action for California public schools tomorrow, March 4, 2010. Here's a response I wrote regarding this so-called "Day of Action" to someone who was protesting "public education cuts":

Correct me if I'm wrong, but California's Constitution still requires that public schools receive first crack at any state revenues, right?:

From all state revenues there shall first be set apart the moneys to be applied by the State for support of the public school system and public institutions of higher education.

So when you refer to "cuts," you mean that in the midst of a recession, tax revenue declined across the board, right? Not just for teachers, but for most government programs, right? (The less taxes/revenue a state receives, the less money it has to fund all government programs, including education.) That means in order to maintain education spending at the same levels as last year or the year before, some other government program has to be cut, right? So if you really think about it, anyone complaining about "cuts" to education is really asking people outside the public education sector to give public school teachers and public schools preferential treatment, even when the money to maintain other government programs and services doesn't exist.

Without spending cuts, including cuts to education, California has only two other options: raising prices (i.e., UC tuition increases); or forcing other people to pay more taxes (e.g., the higher sales tax, which disproportionately hurts the poor). Am I missing something here? I'm sure we all wish we could fund wonderful government programs, including education programs, but if the money isn't there, then what do we do? How much more can we expect individual taxpayers in California to pay so that teachers, schools, and teachers' unions benefit?

FYI: according to the California Budget Project, "In 2007, more than four-fifths (82.9 percent) of statewide spending for schools went to pay for the salaries and benefits of teachers and other staff."

Another example: let's assume like the state of California, I have no savings. If I make less money in 2009 than I did in 2008, and I want to maintain the same level of spending I had in 2008, what do I need to do? I have to borrow money, i.e., use my credit cards. A state, however, has no credit cards. If it wants money, it has to issue bonds, sell assets, or get loans to raise revenue. Unfortunately, California is in the hole $20 billion, and it can't sell $20 billion worth of assets. It needs to borrow money, which is another way of saying it needs to borrow against the future income of its residents, namely, the kids.

When educators say they want more money to help the kids or to invest in children, remember: they are actually saying they want to take money away from the next generation of kids to help themselves. When someone says, "Think of the children," you should say, "Darn right, we need to think of the children. That's why we need to cut spending, so we don't have to borrow money from our kids to fund government programs." I'm just sayin'.

Counterpoint: California Spends Less on its Students.

Teachers' Unions

The NYT on schools:

http://www.nytimes.com/2009/10/15/opinion/15kristof.html

The effort to remove the [allegedly incompetent] teacher is expected to cost about $400,000, and the outcome is uncertain. In New York City, with its 80,000 teachers, arbiters have removed only two for incompetence alone in the last couple of years.

Whoa.

Bad Teachers: the System Will Protect You

Good teachers, especially the newer ones who haven't had their idealism stamped out, should be treasured. Bad teachers, on the other hand, absolutely tick me off:

http://www.latimes.com/news/local/la-me-teachers3-2009may03,0,679507.story

Kathleen Collins, associate general counsel for L.A. Unified, explained it this way: "Kids don't have a union."

Why do California taxpayers--who are footing the enormous education bills--put up with this?

GE's former CEO Jack Welch talked about teachers' unions at a recent Commonwealth Club event in Santa Clara. He said if you support teachers' unions, you're not pro-kids--you're pro-management. He's correct--teachers' unions represent teachers, not children. If teachers' unions cared about children, they wouldn't make it so hard to get rid of under-performing teachers. They'd also give up some of their lavish benefits, which would allow taxpayers to pay new teachers higher salaries.

A Teacher Speaks Out

A local California schoolteacher has singled out excessive benefits as one reason for the her district's budget shortfall:

http://www.mercurynews.com/opinion/ci_11967689

Poor district leadership and an inadequate state budget are not the only reasons for East Side's problems. The sacred cow of the East Side Teachers Association is medical benefits that cost over $27.3 million a year. East Side is the only district of its size in Santa Clara County that pays 100 percent of employee benefits. Although admirable, this extracts an enormous financial toll. Add paid benefits for each member of the board of trustees and medical coverage for retirees under age 65, and the cost skyrockets.

Teachers' unions have set up a pyramid scheme where the older teachers reap the benefits of the system and leave scraps for incoming and younger teachers. It's time for a change, and unless more tenured union members are willing to cut their benefits or make sacrifices, children will continue to suffer.

Out of the Fire and Into the Frying Pan?

The WSJ's Greg Hitt reports that the stimulus plan isn't really going to taxpayers--much of it is going right into the hands of government workers. See January 13, 2009 article, "Stimulus Proposal Aims to Aid State, Local Governments."

In a nutshell, President-elect Obama has asked Congress to give him more taxpayer money--more than the $700 billion already printed. Purportedly, this new money would be used to stimulate an economic recovery. The problem is, much of it will go to a new "education stabilization fund," or into the pockets of government workers. Under the proposed plan, $80 billion would go towards programs benefiting teachers' unions.

Is this change, or just maintaining the status quo?

Public Pensions: Rotting from Within

With all the talk about earnings per share and future profits, it's easy to forget that a country's stock market won't experience a bull market if the country spends more than it collects. This is the basic law of business, and it doesn't change just because government is involved. One area that needs a closer look is public pensions.

Pension Tsunami is a website about public pensions, and it's definitely worth a look. Here is one recent article on San Jose public pensions, focusing on police officers and firefighters. (The San Jose Mercury article contains the chart posted above.)

Most people respect police officers and other public safety workers, but there is no reason for any public worker to receive more benefits and a higher salary than the average private sector worker. When government employees receive higher salaries and benefits than private sector employees, private citizens end up protecting and serving the government--an odd reversal. This is because private sector taxes and IOUs (bonds) are used to finance government expenditures, and those monies come from the private sector. If there is an imbalance, government will have to run up deficits to keep paying itself, creating an imbalance that will devalue the currency (due to the need to print more money to pay for the higher-than-normal benefits) or cause inflation. Thus, whenever the people work to serve the government instead of the other way around, fiscal responsibility will not exist.

There's also the small matter that America was created so private citizens would not have to kowtow to kings or an insulated, domineering government. In short, American government was designed to serve non-government citizens. America's founders would probably disapprove of a political system where people work primarily to serve and pay their government.

Even though the evidence favors treating government workers no better than private workers, it will take a massive paradigm shift to educate the public about the danger of excessive government spending/benefits.

First, television glorifies police officers, D.A.s, and other government workers, while accountants and small businesses don't get any airtime. I still remember my CHiPs costume when I was a kid--but I don't remember seeing any bank teller or taxi driver costumes on Halloween. When the average American watches hours of television, public sector workers have an advantage because they are portrayed as more important than private sector workers--even though it's the private sector workers who are footing the bill.

Second, most of the people teaching our children are government workers. As a result, most students spend eighteen years in a system that has no incentive to educate them about the true costs of excessive government spending and exclusive government benefits. This systemic education failure not only aggrandizes teachers' unions, who have no incentive to reform themselves, but also creates a class divide. Rich people tend to send their children to private schools rather than public schools. In addition, many top government workers, including President-Elect Obama, send their children to private schools. When the children of the middle class and poor spend eighteen years in a different system than the children of the rich, class conflict is virtually guaranteed.

This is why allowing parents to have the option of charter schools is so important. With charter schools, public schools have competition--which usually improves performance--and public schools no longer have a monopoly on education. In general, the public opposes monopolies, knowing they typically produce less innovation and high performance; however, when it comes to charter schools, much of the public is against them. This is surprising, because vouchers are the easiest way the middle-class and poor can escape the monopoly of public schools. When the public views teachers' unions as the Microsofts of education and charter schools as the Googles of education, change will happen.

There are simple ways to resolve the problem of entrenched government. One, require all government workers to have medical and retirement benefits only available to private workers. If a 401(k) is good enough for private sector doctors and lawyers, why do D.A.s and teacher get better retirement benefits in the form of guaranteed pensions? If the average private sector worker doesn't get lifetime medical benefits, why should government workers get such an expensive benefit? (By the way, if we actually equalized medical benefits, all Americans would probably get subsidized healthcare coverage.) When government workers have to use the same services as the public, they have more information about how the average person lives and more of an incentive to fix problems.

Two, institute term limits for all government workers. If we have term limits for the president and other representatives, why allow lifetime jobs for other government workers? A reasonable term limit would be 10 to 15 years. After this time period, a government worker could not go into any other government position and would have to earn his keep in the private sector. The knowledge that a government job is not a lifetime position would incentivize the government worker to improve his/her skills for the inevitable day when s/he applies for a non-taxpayer-subsidized position.

In addition, the turnover would be beneficial to the younger population, who could learn significant job skills through government work and then use those skills in the private sector. It would be like having a government-funded apprenticeship, where future leaders would be trained by experienced government workers to serve the public. Experienced government workers would begin training the new crop of workers from Year 13 to Year 15.

Doing it this way, government would be a non-fossilized place. This moderate turnover (as opposed to almost non-existent turnover) would allow new ideas to flourish in government. It is true we would lose skilled government workers to the private sector, but the key is to train newer workers to ensure a consistent stream of skilled government workers.

In the end, if America wants another bull market, it needs to return to budget surpluses. Demanding that our government not spend more than it collects is one way Americans can help get our country back on track.

More on public pensions here.