The debt ceiling, default, and education

Chris Tessone / July 29, 2011

We're looking at a long weekend for politicians, journalists, and finance professionals as the debt ceiling fight goes into extra innings. The House leadership has delayed a vote on the Boehner plan due to dissension in the Republican rank and file, and odds for a major deal don't look great. What are the implications for education if a deal doesn't happen?

The most immediate impact will be that the wall of money flowing on a regular basis from the feds to state and local governments may stop, since bondholders will get priority if the debt ceiling is not raised. States will have to contend with a loss of Medicare and Medicaid support, typically the largest portions of state budgets along with education. It's hard to imagine this not impacting states' education spending. Even short delays may force districts that are living "check to check" with no reserves to borrow cash. Minnesota schools have already been forced to do this by the government shutdown there.

The longer-term impact, even if a deal is reached, would come from a ratings downgrade on America's debt. Districts routinely sell bonds to finance the construction or renovation of school buildings, and these bonds, like US Treasury bills, are rated by credit rating agencies. Moody's has warned that if US sovereign debt is downgraded, these so-called "muni" bonds would also be downgraded. This would cause interest rates to rise on many of these bonds,

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The debt ceiling, default, and education

Florida protects charter school facilities funding

Chris Tessone / July 26, 2011

Florida deserves kudos for protecting about $55 million in funding for charter facilities in the face of budget cuts, but they're catching a lot of flak from traditional school advocates, EdWeek reports:

School district officials across Florida are bemoaning the Legislature's decision to cut traditional public schools out of?PECO?the Public Education Capital Outlay program. The state's 350 charter schools will share $55 million, while the approximately 3,000 traditional schools will go without.

"Every cent allocated for school construction went to charter schools," complained Lee Swift, a Charlotte County school board member who heads the Florida School Boards Association.

Swift said lawmakers should focus on "properly funded traditional schools" instead of pressing for more charters that drain resources from the traditional schools.

Charters are growing around the state, however, and many districts are stagnating or losing enrollment. Districts have also been flush with cash for construction in recent years even as charters have received less funding. Last year's Ball State report on charter funding inequity states that districts in Florida "encumber funds or withhold local sources from total funds available before providing charter schools with their 'fair share.'" Charters were already getting a raw deal before this measure was passed.

Florida has done the sensible thing by protecting a growing and historically underfunded sector of its education system.?Traditional public schools will continue to tap local sources for construction and maintenance, revenues that charters don't have access to. Cutting all schools equally, or

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Florida protects charter school facilities funding

Short term waste, long term pain

Chris Tessone / July 19, 2011

New York City is closing down its ineffective and poorly designed merit pay system in light of a RAND report published yesterday. Mayor Bloomberg and Joel Klein made a terrible deal to get the pilot program into the city's contract with the teacher unions, giving teachers an option to retire at 55 years of age with 25 years of service instead of age 62. Gotham Schools points out that these pension costs will likely leave a much more lasting mark on NYC than the short-term program they enabled.

There's a basic lesson in financial management here for district leaders: match the time period of your liabilities to the assets or services they pay for. Don't put yourself on the hook for decades of payments in exchange for a five-year pilot.

? Chris Tessone

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Short term waste, long term pain

Money is not the problem, Nick

Chris Tessone / July 18, 2011

It's funny that Nicholas Kristof compares the education system to an escalator in his column in this weekend's New York Times. We know a great deal about broken escalators here in DC ? our subway system is full of them ? and the reason they're so often out of order has as much to do with bad management and absurd union rules as it does with resources. (Unsuck DC Metro had an illuminating post about this late last year.) As in public transit, so in public education: how we spend our education dollars is an important and widely ignored problem. Instead, we've mostly preferred in years past to hike tax rates and throw more money at the problem, to little effect.

Kristof tries to shame budget-cutting governors by comparing our education spending here to our commitment to education in Afghanistan. It's hard to imagine a worse comparison, given that Afghanistan spends about four percent of its meager budget on education, down precipitously from the level of spending in 1980. The US spends about 14 percent of every public dollar on education, and the level of spending has increased steadily for decades, even accounting for inflation. Kristof complains that we "scrimp at home" and "don't invest in our kids' futures," yet we spend more than half a trillion dollars annually on K-12, nearly a full trillion if you count higher ed. Accountability for how these dollars are spent

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Money is not the problem, Nick