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September 10, 2010

K-12 Tax & Spending Climate: Federal Bailout for Schools Could Hurt More Than Help

Wisconsin State Senator Mike Ellis:

Recently, school districts across the state learned they were set to receive millions of dollars in federal funds to retain, rehire or hire new educational support staff. While this infusion of cash may seem appealing to districts that have had to lay off employees, the requirements on how this money can be used contain a potential trap that can ensnare district budgets in lingering deficits for years to come.

Specifically, the federal guidelines state that these one-time funds must be used to cover on-going expenditures - they can only be used for compensation, benefits and related expenses for school employees. That's exactly how structural deficits are built. To understand the potential pitfalls for schools, just look at the state's recent budget history.

A History of Deficits

State government has been mired in bad budgets for a decade now. It is a bipartisan problem that has been practiced by Democratic and Republican governors and legislatures alike.

Throughout the 1990s, the economy was strong and revenues consistently grew faster than had been projected when the budgets were put together. Budget surpluses were a regular occurrence. Politicians got complacent, creating costly new programs, confident that revenues would grow enough to cover their excess. There were always a few legislators, however, who warned that the day would come when the revenues stopped flowing as wildly as they were and the surpluses would vanish. The surpluses were one-time revenues that should never be used to pay for ongoing expenditures.


School Districts Beware

Now school districts across Wisconsin could fall into the same trap if they're not careful. Those federal dollars look promising now, but don't count on them being there again next year. Every employee that is rehired, every new employee hired with these federal dollars, faces the very real prospect of losing that job next year when the money runs out.

The state is broke. In our current budget, state support of schools was cut by more than $300 million and we still face a $1.2 billion deficit in 2011, so don't look for state government to fill the hole. The only other recourse is the property tax and in this economy when people all over Wisconsin are struggling to stay in their homes, that would be folly.

The history of state budgeting in the last decade should be a valuable history lesson for school boards and administrators all across Wisconsin - one-time money can never sustain ongoing spending. It will only lead to digging an ever-increasing hole of deficit year after year. It's time for government - and that includes school districts - to do what hard-working families across the state have already done. Face the facts. Make do with less.

Locally, the Madison School District's 2010-2011 budget will raise property taxes by about 10%.

Related: K-12 Tax & Spending Climate: Wisconsin State and Local Debt Rose Faster Than Federal Debt During 1990-2009 Average Annual Increase in State Debt, 7.8%; Local Debt, 7.3%.

Posted by Jim Zellmer at September 10, 2010 9:46 AM
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