Thursday, October 13, 2011

The Cost of Monopolies

Jon Caldara of the Independence Institute, when asked if teachers are paid too much, said, "How would we know? The reason that I say that is, there is a government monopoly for education…"  

Proposition 103 is on your ballot. It’s a huge increase, advertised as being for education (although the legislature is not required to spend the money on education.) IF it really does go to education, a major chunk of will probably go to increasing teacher compensation. It’s reasonable to ask if teachers should be paid more. 

I met many teachers while I was on the campaign trail in 2010. Every one impressed me as a caring, devoted, hard worker. They expressed a sincere desire to make a difference for the youth they teach. Teachers, like all of us, want to do good and also better their own lives. That’s a common instinct for all of us, and it’s what led to America’s prosperity.

Wages and benefits, like other valuable resources, are controlled by supply and demand. That’s the essence of a free market. In times of full employment employers often find it difficult to find workers. To entice people to join their companies they offer higher wages than other companies who are competing for those workers. If the strategy is successful the companies that are losing workers have to raise wages. At some point the businesses will either have to become more efficient or pass the increased costs on to customers. Those who can’t will lose customers. If they go out of business, their laid-off workers add to the supply. The fresh supply of new job-seekers reduces wages. In a free market for workers, wages never quite reach stability, but are always moving toward balance. 

In contrast, public education is a monopoly with wages set by union demands and school board acquiescence. Public teacher unions will always push for higher wages and benefits, regardless of sustainability, because public education simply won’t go out of business. Taxpayers are forced to meet the demands of these unions because the consumers (parents) never have to pay directly for the product. In contrast, private sector unions often give up some of their benefits to help in the survival of their industries. 

Back to Caldara’s question about how much public school teachers are paid: we can look at schools that compete for the same teachers but aren’t compelled by a union contract. This won’t give us a complete answer, because the supply of teachers is mostly consumed by public schools, but it could give us an indication.  
 
 
In 2007-08, private school teachers were paid $13,000 less than their public school counterparts, and that doesn’t even include the far superior benefits most public schools offer. So do private schools have trouble finding qualified teachers at a considerably lower price?  

Compared to private schools, public schools are free. Private schools must offer enough value to persuade parents to pay for them. If private schools could not get enough teachers, or if they were only able to hire teachers rejected by public schools, they would not be able to compete for customers. Who would pay thousands of dollars every year to put their children in poorly staffed schools? The existence of successful low-paying private schools indicates that they can find good teachers. 

Meanwhile, unions are sending good teachers to the unemployment lines. There are about 50,000 public school teachers in Colorado. If unions agreed to accept lower wages and benefits for teachers, every 25 cents per hour in reduced compensation would allow our public schools to retain 3-400 teachers. Would public schools be able to find enough teachers at lower wages? 

Principal Pat Gardner of Broomfield Academy (a private school) tells me that she quickly gets 40 qualified applicants for every open full time teacher position. After that she quits taking applications. Broomfield Academy pays less than public schools. Granted, working for a private school has other benefits. Because of the greater freedom to hold students and parents accountable, a teacher can be more effective. Does that added benefit make up for less pay? As Caldara said, how can we know?


Tuesday, October 4, 2011

Stuck With a Dishonest Tax Increase

There will be no floor debate, no committee hearings, no amendments. Proposition 103 is already written, and if we approve it we are stuck with it.

Boulder Senator Rollie Heath’s Proposition 103 increases sales and income taxes to raise over $500 million per year, supposedly for education. I applaud Senator Heath for properly proposing this tax increase. He’s following our constitution’s Taxpayer’s Bill of Rights (TABOR) that requires tax increases be voted on by the people.  A whole slew of groups are trying to circumvent and destroy TABOR. 

The Colorado Supreme Court ruled that property taxes could be increased without our vote. They also ruled that removing a tax exemption is not a tax increase, leading to the “Dirty Dozen” tax increases in 2010 which killed businesses and jobs. The legislature raised fees instead of taxes to get more money, and we got a huge increase in our vehicle registration fees.

Westminster City Councilman Bob Briggs sued the state to end the Taxpayer’s Bill of Rights. Separately, Lobato v. Colorado would more than double education spending, creating a crisis that would require emergency tax increases. It’s another end-run around our Taxpayer’s Rights. If this assault on TABOR continues, our right to vote on taxes will soon be but a cherished memory. 
But Senator Heath got this one right. At least he’s asking us for more tax money. That’s where my appreciation for Heath’s efforts ends.

Heath and his campaign to raise taxes have been, shall we say, less than honest. Heath used fourth grade students as campaign props without asking permission. Robo-calls say it’s a time-out in cuts to education instead of a tax increase. The website for Prop 103 falsely claims that the new revenue will go to education. 

The biggest deception of all is in the proposed law itself. It requires the money raised by the tax increase to be spent on education. This is pure folly. Heath knows it and yet it’s his biggest selling point. 

The legislature is under no obligation to spend the money on education. Prop 103 is a law, and it is only valid until it is superseded by another law. That law is the budget. Prop 103 will not automatically move money into education. It must be done through the budget, a law that is passed every year by the legislature. They are not obligated to write the budget in accordance with Prop 103.

Heath could have written this as a constitutional amendment to direct the new taxes to education. He chose not to. He knows that the money is not required to be spent on education, yet he and his campaign continue to sell it that way. Heath is also not telling you if the money is spent on education it will create two huge education budget cuts.  

The 2012-13 education budget would have roughly $783 million in extra revenue for education. In 2013-14 there will only be $533 million in extra revenue. That’s a $250 million cut. And when (or if) the temporary tax increase ends in 2017, education funding would lose over $500 million. 

As disheartening as all of that is, the second worst part is that there is no plan for this additional spending to improve education. There is no correlation between higher levels of funding and improvements in educational outcomes as many studies have shown. AJTT.org compares spending to outcomes. Washington D.C. spends more per pupil than 47 states and is ranked dead last in outcomes. North Dakota is outspent by 41 states and has the 6th highest quality educational system. Money spent on education funding will not guarantee better education. 

Now for the worst part: Prop 103 is a job killer. A study by Economics International Corp. found that the proposal would result in a loss of 30,500 jobs. The average family of 4 will pay $400 per year to lose those jobs. 

A dishonest tax increase. Future education cuts. Huge job losses. Is this what we want to be stuck with?