States Need Flexibility, Not a Bailout

(Guest Post by Dan Lips)

Following Wall Street and Detroit, the nation’s governors have joined the growing line on Capitol Hill—begging Congress to save their states from looming fiscal shortfalls. The National Governors Association sent a letter to Congressional leaders asking states to be included in the next economic stimulus package.

New York Governor David Patterson made the plea in person before the House Ways and Means Committee on Wednesday: “As part of a comprehensive second economic stimulus package, states need direct and immediate fiscal relief.”

But not all governors are looking for a federal handout. South Carolina Gov. Mark Sanford offered Chairman Rangel’s committee a different view—begging Congress not to give states more federal dollars. Instead, he called for greater freedom and flexibility from federal mandates.

In his testimony, Governor Sanford warned that a federal bailout would only fuel further out-of-control state government spending:

Essentially, you’d be transferring taxpayer dollars out of the frying pan – the federal government – and into the fire – the states themselves. I think this stimulus would exacerbate the clearly unsustainable spending trends of states, which has gone up 124 percent over the past 10 years versus federal government spending growth of 83 percent…

…State debt across the country has also increased by 95 percent over the past decade. In fact, on average every American citizen is on the hook for $1,200 more in state debt than we were 10 years ago. There seems to be no consequence, and indeed a reward, for unsustainable spending growth by states. In effect, sending $150 billion more to states would produce another layer of moral hazard – already laid bare at the corporate, individual and federal levels in recent years.

Rather than a bailout, Governor Sanford urged Congress to give state greater freedom and flexibility from government mandates and regulation:

Give us more flexibility. Give us more in the way of control over the dollars we already have and less in the way of costs. Give us more options, not more money with federal strings attached.

Among the costly mandates Governor Sanford referenced was No Child Left Behind. Designed to help improve learning opportunities for students, NCLB comes with a heavy compliance burden. According to the Office of Management and Budget, NCLB increased the annual paperwork required of state and local governments by 6,680,334 hours (or $141 million). That means it would take one person a miserable 762 years to complete just one-year worth of NCLB compliance!

The result of this red tape is that more dollars are consumed by the bureaucracy and less is actually available for use in the classroom.

There is a better approach. Governor Sanford and leaders in other states should call on Congress to adopt policies like the A-PLUS Acts, which would let states opt-out of No Child Left Behind and receive their share of funding in a block grant with less regulation. Doing this would give state and local leaders the freedom and flexibility to use scarce tax dollars on local initiatives to improve opportunities for disadvantaged children.

Giving states more flexibility in how federal funds are used makes more sense than another federal bailout.

Cross posted at The Foundry.

(Edited for typos)

9 Responses to States Need Flexibility, Not a Bailout

  1. I agree with you, Dan, that we need to limit NCLB to testing and reporting requirements rather than prescribing interventions or other more instrusive actions. And I agree with your opposition to a federal bailout for spend-happy states.

    But the reality is that $141 million for administration of NCLB is chump-change. That amount represents less than .03% of all K-12 education spending. It’s almost rounding error and has nothing to do with why the states are in hock up to their eyeballs.

  2. matthewladner says:

    Sanford’s idea is an excellent one: no bailout, more flexibility with federal funds. Education is almost certainly not one of the bigger fiscal opportunities (health care takes the prize), but I would certainly like to know why my state, which already had a system of testing and school accountability when NCLB passed, needs to have two bloody systems for ranking schools (one state and one federal).

    It’s simply idiotic. It’s hard enough for parents to make any sense of school ratings without having two seperate ranking systems.

  3. Greg Forster says:

    It doesn’t need to have two systems. The state chooses to have two systems because it prefers to do so. And there’s no reason the state couldn’t make the evaluations clear and easy to read . . . if it wanted to.

  4. danlips says:

    Jay, i should have made clear that the $141 million was only the new paperwork caused by NCLB. As we know, the federal role in education has imposed a heavy compliance burden on the states for a long time.

    For example, a 1994 GAO report found that there were 13,400 federally-funded full time employees in state education agencies that worked to implement federal programs — three times the amount of peopel who work at the Dept headquarters in DC. That report found that compliance with federal programs consumed 41 percent of the SEA budget (even though the feds were providing only 7 percent of funding for educaiton at the time).

    You are right, though, that state spending to comply with federal education programs isn’t the cause of states’ fiscal troubles. But the question I was trying to raise was whether states would be better off if they had more freedom over federal funding. And whether education might be better if states could pull funding from ineffective programs and spend it on state initaitives.

    Perhaps the current fiscal crisis will force governors and other state leaders to consider this question.

  5. matthewladner says:

    You are right, the state could simply drop its own system of ranking schools in deference to the Feds. It would make much more sense however for the officials elected by Arizona voters to determine Arizona education policy to decide these matters, rather than a one size fits all DC system.

    The Bush crowd forgot their federalist principles and badly overreached with NCLB. If you look at states with actual success to point to in education, like Delaware, Florida and Texas, the success seems to have little to nothing to do with NCLB. If you want to really do education reform, you have to summon the will to do so at the state level.
    The idea of some grand federal fix may seem pretty absurd a couple years from now if President Obama has put in portfolio assessments to replace standardized testing.

  6. Greg Forster says:

    Or if Arizona’s elected officials decided NCLB really was all that burdensome, they could just tell the feds to go stuff it. The feds pay Arizona lots of (my) money to particiapte in NCLB. If it were a bad deal for Arizona they wouldn’t participate.

    Of course, Arizona’s officials might decide to take the NCLB money in spite of the fact that it’s a bad deal for Arizona, because it happens to be a good deal for certain special interests whom the officials favor. But that’s a problem for Arizonans to take up with their elected representatives.

  7. matthewladner says:

    Arizona has seen two different bills to opt out of NCLB make a good deal of progress with bipartisan support. One passed the Senate, one passed the House in different years.

    Whether or not it is a “good deal” isn’t, however, the point. The public school system operates on maximizing revenue- they would take federal funds even if Washington ordered them to dig a giant hole in their playground and fill it back up with dirt, and repeat all year long.

    The point is whether it makes any sense to attempt to micromanage public schools from Washington DC with a one size fits all system. It doesn’t. The A-Plus bill would be a modest step towards showing greater deference to states by allowing them to negotiate a single system of testing.

  8. danlips says:

    You’re right, Greg. They could turn down the money. But that’s pretty tough to do. Arizona gets more than $592 million each year from the federal government from programs under NCLB.

    The question we should ask is whether the states could spend that money more effectively than the federal government. Right now, states are forced to some spend that moeny on programs that the federal government itself has deemed ineffective and/or duplicative. As mentioned above, alot of it goes to basic compliance and administration. Policies like A-PLUS would give states more control over how funds are spent while still requiring states to maintain testing and public reporting.

  9. […] Title: States Need Flexibility, Not a Bailout Jay P. Greene?s Blog […]

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