November 25, 2019
Time for an Education Tax Increase
Over the dozen or so years I’ve penned this column, I’ve allocated considerable space to education issues. That is natural for an economics and business column. Nothing better predicts the income of a region as does the average educational attainment of its citizens. And, nothing better predicts population growth in the U.S. than the quality of local public schools. Here in Indiana, we spend about half our tax dollars supporting education, and almost all the rest mitigating the ill effects of poor education. Education isn’t just an economic issue, it is the economic issue of our times.
I arrived in Indiana at an exciting time for education. Faced with stagnant school performance, the state instituted broad reforms, making Indiana the poster child for school choice. Over the next ten years, about one in seven Hoosier students took advantage of school choice. Most chose to attend local public schools outside their home district. Today, a higher share of Hoosier schoolchildren attends local public schools than did before school reforms. Yes, Indiana families choose private and charter schools at a lower rate than they did in 2007, even with the voucher program.
School reform worked. Since 2013, Indiana students have consistently outperformed the nation on standardized tests. In the competition for students, the clear winners were Indiana’s traditional public schools. I speak not only as an economist, but as a parent. In 2010, my family relocated our three children out of a selective university school to one of Indiana’s local public schools because it was a better school.
By most objective measures, school choice may be Indiana’s single most successful public policy change in half a century. Today, improving educational attainment should be the most important public policy issue before us. Yet, school choice is at risk because we have spent too few resources on the most successful competitors in school choice, our local public schools.
At the end of the longest economic recovery in U.S. history, Indiana now spends less per student on K-12 education than we did in the first year after the recession. Nearly all the new tax revenue Indiana collected over the past decade has been spent on remediating low levels of educational attainment. Since 2010, we spent hundreds of millions of dollars more on Medicaid expansion, and we spent over 200 million dollars more last year to help families in foster care. We spend about a billion dollars each year on workforce training, perhaps half of which is remedial education.
Most of these program expenses come from individuals with inadequate education. Yet, we ignore the most effective and least costly interventions. As a state, we are like the homeowners who pay to have the ceiling fixed and repainted each year instead of having the leaky roof fixed.
Three years ago, the Indiana General Assembly worked through the tough problems of funding roads. This necessitated serious analysis and a tax increase. We should be grateful and proud of this work and the political courage that brought it about. But, compared to the negative effects of low educational attainment in Indiana, our roads have always been paved with gold. Our schools are far less well-funded.
This week more than half of Indiana’s schools closed because teachers brought this complaint to the statehouse. I must admit I don’t know if Indiana teachers are overpaid or underpaid. We certainly don’t have a shortage of qualified teachers in Indiana. What we do have, and I think the evidence is now clear, is a shortage of teachers willing to work for the salaries they receive. After all, jobs for college grads are plentiful and pay well. The shrinking summer schedule makes holding a supplemental job very difficult for teachers, and states that pay better are hiring. That makes keeping good teachers difficult. I simply note that that is how labor markets work, and those of us who value free markets should be happy for it.
The Red for Ed day is a symptom of a much bigger problem. I know the organizers wish to make this about pay, but I hope everyone in Indiana will understand the matter is far more important to our state than a pay raise for teachers. After all, it isn’t the job of the general assembly to pay teachers, but to fund effective education. I think the evidence clearly indicates we pay too little for what we want and need. It may be an unpopular thing to write, but if Indiana needed a tax increase for roads, we darned well need more money for education.
About the Author
Educational Attainment, the 21st Century Fund and the Future of SchoolingIndiana ranks 42nd in educational attainment.
Big Savings for Ending Prevailing WageMy statistical models show that repealing state prevailing wage laws save taxpayers money.
Re-Thinking Economic Development A large share of the most mobile families—perhaps half—no longer need to live near where they work.
Money Illusion and InflationPrice fluctuation could cause inflation to last longer, but it didn’t cause the inflation, it simply extends the pain.View archives