Analyst says teacher ‘bail out’ trades short term gains for long term pain

CapitolBeatOK Staff Report

Published: 11-Aug-2010

WASHINGTON, DC- The House Jobs Bill or House Resolution 1586 passed the House of Representatives yesterday (Tuesday, August 10) and was forwarded to the President for his signature.  The measure has been touted by supporters in Congress and the administration as beneficial for teachers and local governments.

However, state budget expert and President of, Bob Williams, warned that while this bill provides temporary relief, the ultimate impact will very painful for taxpayers.  According to Williams, “states may only use the funds to pay salaries of employees and the bill prohibits the spending from being used to add to ‘rainy day funds’ or to reduce state debt.  The bill also forbids states from reducing education expenditures below FY 2009 level.  Thus, states would be barred from reducing spending to address their current budget shortfalls.” 

Reiterating points he made earlier in an interview with CapitolBeatOK and other online news services, Williams also warned states that “these federal bailouts not only allow state governments to skirt fiscal responsibility with fungible federal money, but they forbid them from cutting spending or reducing debt.”

H.R. 1586 passed the House originally and was amended in the Senate sponsored by Sens. Reid (D-NV) and Murray (D-WA).  This bill adds $26.1 billion in temporary federal bailouts for states partly paid for with permanent tax increases, spending cuts, and rescissions.  Within this $26.1 billion, is $10 billion for state education budgets that can only be used to pay salaries for teachers.

The catch within this “blessing” is that if the states reduce their educational spending from last year, they will not be able to receive the money and the money cannot be used to help the states reduce their debt.  States are receiving additional jobs stimulus will hurt them next year, they are prohibited from making any kind of reforms to lower education spending. 

 The federal stimulus funds, however, will increase state budget problems next year when this additional federal aid ends. The approved measure only provides funding through the first six months of 2011. When that six months ends, state spending will be $26.1 billion higher, but the states will have $26.1 billion less to spend. States do not have the funds to plug the hole left by the expiration of the federal funds.

In the end, William argues, the short-term fix by Congress will increase the states’ long term fiscal deficits.

“Spending $10 billion to save 160,000 teachers doesn’t add up,” the release from Williams said. The U.S. Education Department estimates that the education fund would preserve the jobs of about 160,000 teachers and other educators. That works out to be $62,500 for every teacher position saved, while the National Education Association (NEA), states that the national average teacher salary in 2008-09 was $54,319, and the average starting salary is $34,935.

The State Budget Solutions Project which Williams runs describes itself a “non-partisan, positive, pro-reform, proactive and anchored in fundamental-systemic solutions.” The group’s goal is “to successfully engage political journalists/bloggers, state officials and opinion leaders in a new way of thinking about state government and budgets, fundamental reforms, transparency and accountability.”

NOTE: Pat McGuigan contributed to this report.