‘Perfect Storm’ in Education Will Hit Indiana in Three Years

June 1, 2009

For release June 3 and thereafter (549 words)
It made a great movie. In October 1991, a northeaster created by three merging storms combined with other factors so rare that the situation could not possibly have been worse. This “Perfect Storm” created waves 10 stories high and winds of 120 miles an hour.

Now, in the year 2009, a perfect storm in education policy is forming. And as in 1991, three storms are merging:

•    The American Recovery and Reinvestment Act of 2009 (the “stimulus” bill);
•    The excessive regulation of public schools; and
•    The politicization of public schools.

Gov. Mitch Daniels estimates that about 1.3 billion stimulus dollars (borrowed money) will be spent on education in Indiana. With this new money, however, comes increased federal regulation. Washington already has announced new reporting and accountability measures to manage the stimulus bill.

The money will have to be paid back with interest, much of it to foreign investors. It will be used to prop up education spending that exceeds state revenues.

A simple example illustrates the problem. If your family overspends its income this year by $628, and by $7,246 next year and by $2,835 the third year, your family’s accumulated deficit will be $10,709 by the end of the third year.

At the end of each year your family informs you that they just can’t suffer the pain of budget cuts. They ask you to borrow money to cover the deficits. You will need to borrow $628 to cover the first year’s deficit (the loan would be for three years); you will need to borrow $7,246 to cover the second year’s deficit (the loan would be for two years); and you will need to borrow $2,835 to cover the third year’s deficit (the loan would be for one year).

Assuming you get an interest rate of seven percent, the $10,709 deficit will increase to $12,097 by the end of the third year. Now, instead of reducing your family spending by only $10,709, you will in three years need to reduce it by $12,097.

If five zeros are added to each of these sample deficits, they become $62,800,000, $724,600,000 and $283,500,000. Why five zeros? That gives you the amount of Indiana’s projected deficits for fiscal years 2009 through 2011 as set out in the state web site.

The real problem, however, is even more complicated than our example. The governor has asked that four criteria be met when spending the borrowed stimulus money: 1) create jobs; 2) spend with speed; 3) spend prudently; and 4) create assets of lasting value whenever possible.

Further, the U.S. Department of Education has issued guiding principles for school districts spending this money: 1) spend it quickly to save and create jobs; 2) ensure transparency and accountability; 3) thoughtfully invest one-time funds; and 4) advance effective reforms.

About now you should feel the winds picking up. Note that all of these guidelines are vague and open to differing interpretation. The only one unlikely to be disputed is the call to spend the money quickly. When the stimulus money dries up in three years, though, massive layoffs will be necessary if it is used to hire staff.

It is then that we will experience the full brunt of this perfect storm in education policy.

Jeff Abbott, Ph.D., J.D., an adjunct scholar with the Indiana Policy Review Foundation, teaches in the education department at Indiana University-Purdue University at Fort Wayne. Contact him at jabbott@inpolicy.org.



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