Wednesday, November 14, 2018

Educational Funding Policy

Proposals for Changes in Educational Funding

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In a discussion on my facebook, we're talking about what we'd like to see in a Democratic party platform. As some of you know, I'm kind of a tax policy nerd, and I was asked for details about how I'd restructure educational funding. It got long, so I'm putting it here. If you are not a wonky nerd, this post will have nothing of interest. OTOH, I've tried to keep this readable with minimal background knowlege, so some bits are a little over simplified. Feel free to ask questions, or for more details, in the comments! If you're my friend, and want to join the discussion, you can do so here: https://www.facebook.com/sara.someone/posts/10106298492821833 . I've done my best to verify all the facts and figures in here, but if something is wrong, please let me know and I'll fix it.  Almost all stats here come from the dept of education.  I live in Pennsylvania, so when I talk about "state level" that's what I'm talking about.  I live in the Woodland Hills school district, which is a national embarrassment currently under federal investigation for civil rights abuses, but I won't go there in this post.  Across many measures, PA is generally considered to pretty average educationally.  I'm mostly going to talk about K-12 education.  I don't know enough about preK education to say anything relevant.  I'll write a separate post about financing post-secondary education.

Intro: What is the shape of the current market for education in the US?

In the current 2018-2019 school year:


  • There are about 57 million school-age children in the US, who are the consumers.
  • There are about 3.6 million teachers, who are the producers.  
  • Total spending on K-12 ed is about $650 billion (about $13K per student).  
  • About 3.6 million kids graduate from high school each year, 92% from public schools.

In general, the government has four tools to intervene in a market, including the market for education:
  1. Purchasing power: For example, negotiating prices for prescription medications purchased by Medicare.  Many agricultural and other commodity subsidies are implemented this way, with the gvt buying up "excess" production to artificially inflate prices.Single-payer systems (such as "Medicare for all") are an extreme case of this where the gvt is the ONLY purchaser (this called a "public monopsony").  There are not many public monopsony markets in the US.  You would think that military systems SHOULD be an example of this, but US companies sold more than $56 billion dollars of weapons of war to purchasers other than the US gvt (both private mercenaries like Blackwater and foreign governments).  
  2. Taxes: Taxing "bad" stuff and subsidizing "good" stuff with rebates or deductions.
  3. Regulation: Restricting the sale of "bad" stuff and requiring the purchase of "good" stuff.  For example, we regulate the sale of tobacco and require the purchase of health insurance.
  4. Public Provision: Some stuff, the government is the sole (or majority) provider of.  For example: national defense, emergency services, infrastructure, and education are all (more or less) publically owned.  (that is, to say, the means of production are public)  
All of these mechanisms are at play in education.  Going backwards up the list:
4) About 90% of current K-12 students are in public schools.  Of people currently enrolled in post-secondary education, about 3/4 are in public colleges.  These percentages have been roughly stable over the last several generations.  Of private K-12 education, 36% of students are in Catholic schools, another 39% in other religious schools, and 24% are in secular schools.  About 3% of school-age children are not enrolled in school (most of these are home schooled).  Another way to say this:  Of 1000 kids ages 6-18, roughly 900 go to public school, 53 go to religious schools, 17 go to non-religious private schools (prep schools), and 30 are not in school at all.
3) Private education is very regulated, although regulations vary greatly between states.  PA is among the more restrictive states. 
2) This is the least used tool in K-12 education policy.  Many people think private K-12 tuition is subsidized or tax deductible, but largely it is not.  OTOH, tax subsidies are very much in play for preK and post-secondary education.
1) Publically funded grants and scholarships, such as private school vouchers or Pell grants are examples of this.

I don't feel like we need to either incentivize or discourage private vs public school decisions.  I think that arguments about whether or not we should funnel money "away" from public schools and "to" private ones, and also arguments that families should be able to choose "the school that's best from them" are distractions from the more relevant point that everyone is entitled to the best education we can give them, and decisions about what kinds of education are best are better handled by licensing than tax policy.  In what follows I'm going to talk about how to fund the 90% of K-12 and 75% of post-secondary education that is publicly produced.  I don't know much about preK education, so I'm not really going to talk about that at all.

What do we spend on public education?

In total, the US spends about $640billion on K-12 education, but only $24billion of that is federal.  
Nearly all educational spending (about 80%) goes to labor costs, of which nearly 60% is spent on teacher salaries.  Teaching is not currently very automatable, and there is nearly overwhelming evidence that says less students per teacher is better, almost no matter what.  For this reason, we cannot really decrease the amount of labor needed.  Since, we have a growing national teacher shortage, which in some fields (including secondary math and science) is reaching crisis levels, in the absence of significant reforms in teacher training, recruitment, and retention (which I will talk about some below) or dramatic changes in retirement, health care, and other benefits, we should expect per teacher labor costs to continue to rise. That means that education costs are expected to continue rising for the foreseeable future at greater than inflation rates.

The national median per-pupil expenditure per student for public K-12 education is about $11,750 per year, but this caries VERY dramatically state to state and school district to school district, from a low of $7000 in Utah to a high of about $22,400 in New York.  Within each state, this also varies excessively among districts.  PA spends about $15K.  Some examples from the greater Pittsburgh region: City of Pittsburgh: $23K.  Woodland Hills:$17K.  Upper St. Claire (a rich white district): $18K.   Differences in spending do not obviously correlated with differences in performance, until you control for the demography.  MOST DIFFERENCES IN PER PUPIL EXPENDITURE ARE BECAUSE SCHOOLS ARE FORCED TO OPERATE OUTSIDE THEIR SCOPE OF PRACTICE BECAUSE OF SHITTY SOCIAL PROGRAMS.  It is much, much cheaper to educate students who are homed, safe, healthy, and well-fed.  Policies on how to make a dent in this problem below.  (but, we cannot fantasize that changes in school tax policy are enough to address our nation's shameful poverty problem.  I'll talk about the ways I think education CAN address the problem below.

The overwhelming majority of educational funding happens at the local level.  In almost all places, schools are funded via property taxes.  This has the effect of ghettoizing schools.  HOWEVER, there is limited federal ability to impact this. 


My proposals, which are all paid for:

Expanding the net investment income tax to income earned in S corps and lmt partnerships.  This affects only those who earn more than $200K per year from investments.  That should raise about $13 billion in the first year after implementation.  With that $13 billion, I would spend:

approx $3 billion on teacher housing subsidy grants.  These grants would be ONLY for teachers who live in the catchment area of the school where they teach, and would be pegged to median income of families with a child in the school.  That is, the less money the average student has, the more money the school has to spend on housing grants.  It's hard to calculate how much this would cost, because I can't get reliable data on how many teachers live in their catchment area, and I do not know how to predict how much this would change those numbers.  $3.6 billion is if every teacher lives in their catchment area.  This helps to "level the playing field" by making low-income schools more competitive in attracting teachers, and also allows them to hire more of them.  It also encourages schools to be run by the people they serve, and strengthens community investment in the school.  When teachers live in the same communities as their students, they are better able to directly address those students needs.  Additionally, it incentivizes people in low income neighborhoods to consider teaching as a career.

$10 billion to hire about 150,000 new social workers and medical professionals in low-income schools.  I would weight this aid toward the lowest income schools.  That's about 1 new person for every 125 low income students.  I don't have more specific policy on this, but would be interested in talking about it.  These two, I would like to see structured so they incentivize school workers to live in the district.

Implement a financial transaction tax similar to the DeFazio-Harkin.  This would barely impact anyone but extremely wealthy financial speculators, and would raise $50billion, which I would spend to hire 300,000 new teachers of Civics, Economics, Statistics, and Personal Finance, again weighted toward low-income schools.  That's one teacher for every 15 students; ie enough to give EVERY student in the country a teacher in those fields every year.

Impose a new progressive estate tax, starting with 1% at estates over 1million and scaling up to 35% for estates over 5 million and 60% for estates over 10 million.  This would raise about 50billion per year. 

Spend it on before and after school child care, mentoring and enrichment programs in foreign languages, sports and fitness, arts, crafts, and trades, music, computers, nutrition & cooking, gardening, and other recreation in low income schools.  This is give every low income student in the US with an after-school mentor. (assuming those mentors cost about $45K per 20 students) . Since, presumably, not all families will choose to enroll their students in these programs (I can imagine a lot of churches will run their own competing programs, for example) there should be enough.

Expand the National School Lunch Program (which feeds about 30 million kids for about 13 billion dollars, or about $2.40 per meal) to also include breakfast.  Fund this with a 1.5 cents per ounce tax on sweetened beverages.  (similar to the Philadelphia soda tax).  Assuming that the average American drinks only half as much soda as the average Philadelphian, this would raise about 9 billion dollars or $1.60 per meal for 30 million kids.

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