Minnesota Management and Budget has forecast a tiny surplus in the state budget for the current biennium. Great. But as Commissioner Jim Schowalter observes, “we still have lots of IOU’s” to pay back-including the “school shift” of $2.7 billion.
The press release also shows another cloud on the horizon: “The forecast shows a projected deficit of $1.1 billion for fiscal years 2014-15.”
Uh-oh.
The state’s spending trajectory is still unsustainable.
Breaking the chain between street address and the school a child attends-school choice-is not only moral, it works. Education Week recently ran a commentary from nine scholars who make that point. The nine, who include representatives from the American Enterprise Institute and the Thomas B. Fordham Institute, say that in 20 years we have learned a lot about how to design choice programs, as well as how well school choice works. The article’s title reflects its content pretty well: “What research says about school choice.”
Studies about the effects of school choice-tax credits, vouchers, charter schools, and other options-have focused on three questions: Does choice benefit students who receive vouchers, tax credits, etc.? Do choice programs have an effect on schools as a whole (that is, what about the students who don’t participate)? Does it have a beneficial effect on the public purse?
The answer to the first question may be summed up as, “students who participate are not harmed, and in some cases they are helped.”
The answer to the second question is similar, though the evidence for voucher programs is stronger than it is for charter schools.
As to the third question, “the net impact of school choice on public finances is usually positive and has never been found to be negative.” (No surprise there; as far as I can tell, school choice programs always spend less in public money, on a per-pupil basis, than district schools.)
The authors rightly point out that our evidence on the effects of school choice are limited by the fact that school choice programs are very limited, both in size and in scope. School choice programs enroll well under 5 percent of all school-aged children. That means economies of scale or innovations that might come from a wider marketplace of education haven’t been seen.
They authors add that much public debate has focused on the demand side of education-how many students and which ones participate in school choice programs. The supply side of schooling, which is trapped in red tape and a 100-year-old mindset, can’t be ignored.
In short, school choice is an important part of the puzzle when it comes to “quality education,” however you define it. But it’s a part that, based on the evidence as well as normative reasoning, demands more attention.
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The authors include a helpful list of studies on the effects of school choice. I would paste it in here, but it’s much too long-a good problem to have!
While government needs taxes to run, not all taxes are equal in their effect. A new report from the Tax Foundation-State and Local Sales Taxes in 2012-evaluates the burden of state and local sales taxes across the United States. It shows great variation. State sales tax rates range from 0 percent (Alaska, Delaware, New Hampshire, Oregon), to 7.25 percent (California). Some states have local sales taxes, while others do not. And of course states define the “base” differently: Some tax food and clothing while others don’t.
If you look only at state-level taxes, Minnesota has the seventh-highest burden in the land, behind California, Indiana, Mississippi, New Jersey, Rhode Island, and Tennessee.
Local sales taxes in Minnesota are widespread or high as they are in some other states. So when you add in the burden of local sales taxes and rank the states, Minnesota drops from its position as the seventh-highest-taxed state (in sales taxes). But in the “new” position of 17, it’s still more heavily taxed than other states. When you consider all taxes, Minnesota is the seventh-most heavily taxed state.
Relying on the income tax, whether personal or corporate, presents a lot of challenge for state lawmakers as well anyone who depends on the state budget. For one thing, income taxes, especially progressive ones, are prone to boom-or-bust revenue cycles. (Minnesota has the 44th-heaviest burden of personal income taxes, so it’s quite a relevant point.) This means that the state has to scramble whenever hard times come, and that lawmakers are tempted to build unsustainable growth into the budget when times are good. Aside from cutting back from spending (a good thing in itself), the way to budget stability is to change the mix of taxes that government depends on. To quote from Russell S. Sobel (West Virginia University) and Gary A. Wagner (University of Arkansas), “the retail sales tax, when it includes food, is quite a bit more stable than is the individual income tax, and that when it excludes food it is about as variable as the income tax.”
Given all this, I wouldn’t mind seeing a higher sales tax rate if it meant lower rates in income taxes.
