Arizona Props 127 and 305: a fine pair of misfits

September 7, 2018

(Guest Post by Matthew Ladner)

Fall has arrived in an even-numbered year, which means that in addition to football there are also elections. Here in the Cactus Patch our political conversation has been even more boisterous than usual. Back in 2016 an individual deep in the council of left-of-center Arizona politics told me that the plan was to make the 2018 election about K-12 education and to run David Garcia for Governor. Garcia did indeed win the Democratic Party’s nomination (the Arizona Education Association announced their endorsement for Garcia at a RedforED rally last spring) and K-12 does indeed look to be the major election issue, so mission accomplished on both fronts. Ballot propositions may however have a much larger impact on school funding than the officeholder races, but not in the way commonly supposed.

Hysteria reigns supreme in the K-12 discussion. A steady stream of reports from the ACLU, the Grand Canyon Institute and the Arizona Republic’s ongoing Two-Minute Hate series on charters and choice programs appear to have been coordinated with impressive precision. Each of these things deserve to be addressed on their own merits (or lack thereof-it’s a mixed bag on substance imo with a spectrum ranging from good points to shallow propaganda) but as far as multi-organizational timed to an electoral calendar efforts go:

In the midst of all this political mosh-pit I saw something that struck me the other day- a Twitter avatar that said “No on 305/Yes on 127.” These reference two ballot propositions on the November ballot-Proposition 127 would require the state to generate half of it’s energy from renewable sources by 2030, while Prop. 305 will ask voters to either confirm or reject the expansion of the ESA program that passed in 2017.

The No on 305/Yes on 127 combo struck me because it seems extremely likely that Prop. 127 would take more money out of Arizona district classrooms than 305, and by a very wide margin. I claim no expertise on energy policy, but I found the take of the Washington Post and of Peter Zeihan in the Accidental Superpower on the subject to be compelling. So first off, some good news:

Things are headed in the right direction and it is mostly because natural gas is cheap, cleaner and is replacing the use of coal in generating electricity.

The Washington Post, not of anthropomorphic climate change denial fame, rightly celebrated this trend. Noting that natural gas reduces emissions by half the Post editorial board noted:

True, half the emissions does not mean no emissions. But the United States does not have to eliminate its carbon footprint all at once, nor should it. Doing so would cost far too much. Instead, natural gas can play a big role in transitioning to cleaner energy cheaply.

When something is far too expensive for the Washington Post editorial board’s tastes, it is a good idea to pay close attention. Peter Zeihan also addressed this topic in the Accidental Superpower. He generally buys the notion of anthropomorphic climate change, but noted that the next generation of power generation plants were being built to use natural gas due to market forces, that this was considerably cleaner than coal burning, and that the life span of these new plants would be about 30 years. Sometime in the next 30 years Zeihan reckons that one or more of the many possibilities for alternative energy will pencil out in terms of economic viability-we just don’t know which one(s) yet.

Google around a bit and you will read about experiments in everything from artificial leaves to fuel producing microbes to crystal encased nuclear waste fueled batteries to clean coal fuels. Which of these-or something else- becomes economically viable is anyone’s guess, but it is not likely to happen on a deadline adopted by Arizona voters in 2018. How much sense does it make to make a massive investment in alternative energy technologies before any of them pencil out, especially when some of them eventually will?

So back to Arizona, Prop. 127 and education. The conversion from coal to natural gas is already happening in Arizona. This is good because right now the Texas oil fields are simply flaring off natural gas as a waste product until the pipeline infrastructure is built to collect and sell it. In fact you can see the flaring from outer space:

The Wall Street Journal recently wrote that there was enough natural gas being flared off to power a small state-one million dollars worth per day. I volunteer Arizona to be that state rather just have them burn it off without generating any power and having us burn coal to generate our electricity. The transition from coal to natural gas has already begun in Arizona, and happily it is being driven by market forces rather than mandates.

Prop. 127 however will force the renewable issue and the companies that generate the state’s power have detailed the enormous costs to such a move. Consumer rates are estimated to double in price. Since the initiative does not define nuclear power as “renewable” so opponents claim Prop. 127 would necessitate the closure of the nation’s largest nuclear power plant which produces **ahem** zero carbon emissions and probably (I’m guessing) cost the GDP of a small country to build.

Given what would be a mad scramble to create renewable energy, one additionally suspects that it would damage the ongoing conversion of coal burning plants to natural gas. Converting coal burning plants to natural gas can be done but it takes time and money-but there is a payoff in the form of low natural gas prices-it pencils out, and is cleaner.  Natural gas capacity would not help meet the mandate so the time and effort to convert to natural gas seems very likely to be diverted on a snipe-hunt of utility scale alternative energy sources ready for prime-time.

Between the increased cost of electricity and the foregone taxes from plant closures, the Arizona Public Service Electric Company estimates a loss of $670,000,000 to Arizona education providers in their service area by 2030. The expensive rates would not stop in 2030. That’s a big hit to education budgets and is not a statewide figure, with APS serves only part of the state.

So let’s compare Prop. 127 to Prop. 305. The ESA expansion under voter consideration contains a cap on the total number of participants of 30,000. Arizona has about 1,200,000 students and often gains 30,000 kids annually. We’ve also learned in recent years that the number of district open enrollment students is approximately twice as high as charter school students, and charter school students outnumber private choice students ~3 to 1. So from the perspective of an individual district campus with enrollment loss, other district schools are the primary competition, charter schools a secondary source of competition, and private schools a distant third. Centrist Arizona Republic columnist Joanna Allhands pointed this out in a column shortly after the ESA expansion passed. Allhands is not a fan of the ESA program but she sees through boogy-man stories:

Arizona’s voucher-expansion bill isn’t going to ruin public education as we know it.

But first, before you start trolling me on Twitter:

Yes, public schools need more resources. Senate Bill 1431 does nothing to help them find it.

And no, I wouldn’t actually call this meaningful reform. It doesn’t address student achievement gaps or fund district, charter and private schools more equitably.

But it won’t be the death knell to your neighborhood district school. In fact, I’m not sure many will even notice a difference.

Allhands went on to posit that charter schools were already scratching much of the Arizona school choice scratch itch, and that there was no reason to expect a mad rush to private schools even with broadened ESA eligibility. She could have added by the way that while there are 4,500 ESA students statewide, Scottsdale Unified has 4,000 open enrollment students from out of district, and it is only one of Arizona’s 230 school districts. “Scottsdale is DRAINING MONEY from nearby school districts-we’ve got to STOP THIS!!!!” said no one, ever, oddly enough. The ESA expansion can serve as an important tool for families looking for the right-fit education for their child, but the program is nothing near the threat to school budgets as doubling their utility costs.

So my friends on the Arizona left are actively supporting a massive drain of funding out of Arizona classrooms (what you spend on air-conditioning cannot be spent on teacher salaries). Meanwhile they have also invested a large effort in putting another ballot measure up because in large part they fear that it will have a large impact on district finances but it won’t. Churchill told us that democracy is the worst form of government except for all the other ones that have been tried. I remain hopeful that voters will exercise good sense in all of this, but…

 

 

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The Brown and the Gray: It’s Already Started

October 7, 2015
PIE

Wonk action shot !!

(Guest Post by Matthew Ladner)

I had the opportunity to participate on a panel at the PIE Network conference in Scottsdale on a panel that used Arizona as the canvass to discuss important issues. A better look at this picture:

No special effects here this is an actual photograph of downtown Phoenix during a haboob– an Arabic word that roughly translates to “gigantic dust storm.” An haboob forms in a weather front in arid regions- thus in the picture your eyes are drawn to the beige dust cloud, note also the huge grey clouds in the background.

Fortunately you probably live in a place that won’t experience an Arizona-style haboob- at least not weather-wise. In terms of your state’s politics-get ready. It’s coming to get you.

Ronald Brownstein has written a series of articles in the National Journal about demographic change and inter-generational conflict under the theme of the Brown and the Gray. He describes the two massive generations: old and white Baby Boomers and above vs. young and brown population as two tectonic plates. The earthquakes have already started here in Arizona. Rather than dismiss Arizona as a remote backwater, you should pay close attention to what has transpired here and learn from our mistakes. Arizona’s demographics and attendant controversies lie in your state’s immediate future.

Regardless of which state you live in, over the next 15 years it will be getting much older and will have a significant increase in the Hispanic population, much of which will occur in the youth population. Paul Taylor’s book The Next America uses extensive polling data to paint a portrait of Baby Boomers as relatively wealthy but deeply miserable. Two sources of Baby Boomer anger: their Millennial kids still living in their house and a widespread view that the country has changed and no one asked for their permission. One cannot help but wonder how the inevitable grown up conversation about Uncle Sam’s $55 trillion in unfunded entitlement liabilities will worsen moods further.

MIT’s James M. Poterba performed a statistical study and found that an increase in the elderly population is associated with a decrease in overall public school spending, and that the effect is all the more pronounced if the ethnicity of the old varies from that of the young. Let’s concede that the Arizona N of 1 matches this story rather perfectly, but that it should be understood in a context of:

I am not inclined to weep if my state happened to expand public school staffing at a rate slower than the national average, given that the national average expanded staffing at a rate ten times greater than enrollment growth and received precious little for it in return in terms of student learning gains.

While I have more than my share of gray hair, I don’t think this qualifies me as an old grouchy white guy. I’m painfully aware that the future of Arizona rests on providing high quality education to all students-including Hispanics. Simply throwing money at a dysfunctional system may satisfy some sort of superficial need to show that you care, but it simply won’t do in terms of a solution. We need far more than symbolism.

I’m not sure how this story ends. The elderly depend heavily on government spending for health care and the young for education. Uncle Sam has a deeply troubling balance sheet and states have become very dependent on his largess. Deep-seated policy related pathologies define both health and education. A generational conflict over scarce resources looms, and it will have a barely if at all disguised ethnic subtext.

The only (relatively) happy path out of this fix lies in innovation-we need more effective and most cost-effective education and health care delivery systems stat. 

Our work has only just begun.

 


Arizonapocalypse

November 19, 2013

(Guest Post by Matthew Ladner)

Last week the Arizona Board of Regents released a report detailing the catastrophic failure of Arizona high-schools in preparing students for higher education.  Specifically the report traced the high school class of 2006, finding that half of the high-schools had five percent or less of students finishing higher education degrees or certificates within six years.  A mere 40 of the almost 460 schools produced 61% of Bachelor degrees in the AZ Class of 2006.

So, the news could have been much better. Here is the next shoe to drop- things are going to be getting increasingly more difficult in the years ahead.

The United States Census has produced population projections by state. Let’s see what the future has in store for Arizona. First a little context. Arizona’s current population is was about 6.5 million in 2012.

First challenge- a very large increase in the youth population.

Arizona Under 18

The Census Bureau projects a large year by year increase in young people.  The Census has projections for the 18 and under population, and also for the 5-17 population.  The 0-3 population is generally outside of the pre-school and K-12 system, meaning that the 18 and under population overstates the impact that the increase in the youth population will have on the state budget in 2030.  The 5-17 year old figure understates the situation due to 4 and 18-year-old students who will receive either preschool or K-12 assistance.

The next chart uses the Census Bureau’s projection for the increase in the 5-17 year old Arizona population, and puts it into context by comparing it to the size of the charter school and private choice populations of Arizona.  Arizona’s charter school law passed in 1994, and the scholarship tax credit program passed in 1997. The time between then and now is roughly comparable with the time span between now and 2030.

Arizona 5-17

Arizona school district enrollment is set to expand regardless of what we do on the parental choice front, just as it has for the last two decades. In the last two decades, the charter school law has produced a large number of those 40 schools that produced 61% of the BA degrees. In combination with the scholarship tax credit programs and the still nascent ESA program, they have taken the edge off of district enrollment growth in the aggregate.

Arizona does have high-quality charter operators who will continue to slowly but sure increase the islands of quality.  If the ESA program survives court challenge it may allow for a quicker pace of private choice expansion than the tax credit program. Creative destruction of the sort that might actually close dysfunctional schools, other than charters that fail to launch, is simply not in the cards.  The districts full of those 5% and under high schools will be going into the debt markets to build more dropout factories.

Or perhaps they will be running double shifts at the current dropout factories, as it will become increasingly difficult to finance new construction.

At precisely the same time Arizona will be dealing with a surge in the youth population, an even larger problem looms the growth in the elderly population. Again from the Census projections:

Arizona Elderly

For those of you squinting to read the numbers, that is an increase from 922,000 65+ year olds in 2010 to almost 2.4 million in 2030.

So let’s sum up the story so far- Arizona’s K-12 system currently does a very poor job in educating anything more than a thin slice of students.  Arizona has a vast increase in students on the way to coincide with an even larger increase in the elderly population.  Still with me? Okay, let’s keep going.

Demographers calculate age dependency ratios, and economists have found that they predict rates of economic growth. An age dependency ratio essentially compares the number of young and elderly people in a population to the number of working age residents. The logic behind the notion is that young people require a heavy investment in social services (primarily education) while the old also require a heavy investment (primarily in the form of health care and social insurance retirement benefits).  From the perspective of a state budgeting agency, young people don’t work, don’t pay taxes, and go to school. Older people are out of the prime earning years, often heavily use Medicaid. An age dependency ratio basically tells reveals the number of people in the young/old categories compared the number of people in neither category (i.e. people of typical working age).

The United States Census Bureau calculates an Age Dependency Ratio by adding the number of people aged 18 and under to the number of 65 and older and dividing it by the number of people aged 19 to 64. They then multiply the figure by 100 just to make things tidy. The formula looks like:

Age Dependency Ratio = ((Young + Old)/(Working Age)) * 100

Many people continue to work and pay taxes past the age of 65, making it inappropriate to view them as “dependent.” It is also the case however that many people above the age of 19 are still in school and thus are not yet working and/or paying much in the way of taxes. We all probably know hyper-productive 70 year olds and people in their 20s engaged in a six-year taxpayer subsidized odyssey of self-discovery that will not number “graduation” among an otherwise wonderful set of experiences. During periods of prolonged economic difficulties, moreover, it is obviously the case that lower rates of working age people will in fact be working, and thus making taxes.

Notwithstanding these important caveats, the broad idea behind age dependency ratios is to roughly assess the number of people riding in the cart compared to the number pulling the cart at any given time. People of course both benefit and pay into these programs at different stages of life, but the current ratios serve as a measure of societal strain.  What does the age dependency ratio for Arizona look like?

Arizona Age Dependency Ratio

Note that Arizona’s age dependency ratio in 2010 was already among the highest in the country. A social welfare state with 86 people riding in the cart for every 100 pushing it will not compute. In 2030, the Class of 2006 will be squarely among those expected to push the cart of the Arizona social welfare state.  How alarming and unfortunate then that many of them dropped out of high-school, and many more of them dropped out of college. The most immediate way Arizona can help address the looming crisis of 2030 is to get more students educated now.

I’m not sure how this plays out. I am certain that we have been thinking too small given the size of our challenges.

 


Federal Judge Strikes Down Campaign Matching Funds in AZ

January 21, 2010

 

(Guest Post by Matthew Ladner)

A federal judge has overturned Arizona’s misguided “Clean Elections” system, once touted as a national model, on First Amendment grounds.

The system was a terrible idea from the start.

Clean Elections gathered involuntary contributions from sources such as surcharges on parking tickets, and created a funding source for political campaigns. A candidate could run “clean” by gathering a proscribed number of $5 donations, and then would receive state funding.

Worse still, when facing an opponent raising funds the old fashioned way, the “clean” candidate would receive matching funds from Clean Elections. It is this matching provision which has been found unconstitutional in case brought by the Goldwater Institute.

So what was so bad about “Clean Elections” after all? Plenty. For starters, it represents involves compelled political speech. Second, it is subject to all sorts of gaming, some of which we have seen unfold, and some of which has yet to come.  The Phoenix New Times did a great job of laying out the gaming going on, including Republicans apparently recruiting Green Party candidates for legislative races that the real Green Party people had never met.

Greg Patterson, a former state lawmaker and Republican Arizona blogger, has delighted in noting that although Clean Elections was a project of Progressives, that one of the main results have been a more conservative state legislature. The centrist O’Connor House Project sums it up nicely:

Kill Clean Elections: Voters approved this system of publicly financed campaigns in 1998, hoping to reduce the influence of private donors and give less-wealthy candidates a better shot. Over the ensuing decade, though, Clean Elections has proved adept at helping extremists of both parties get elected. In a traditional campaign setting, the political views of these folks would prevent them from raising enough money to mount a legitimate campaign. But with Clean Elections, they need only collect a minimum number of $5 contributions to qualify for public funding. Talk of dissolving the system may be the nearest to bipartisan consensus of any of the government reforms being discussed.

Finally, the system works as an incumbency protection racket. If you are an incumbent with strong name recognition, you can run “clean” and the battlefield tilts decidedly in your favor and against any relatively unknown challengers. An unknown often needs the opportunity to purchase their name recognition, but the paltry base amounts provided by Clean Elections don’t allow for this. A traditionally financed candidate faces the disadvantage of having matching funds provided to their opponent, begging the question as to why anyone would make a donation to their campaign simply to watch it get matched by Clean Elections.

There are more problems still, more than I have time to write about.

The Goldwater Institute has received some grumbling about why it is we don’t like a system that helped produce a more conservative legislature. Note however that that same system ensured Janet Napolitano’s initial election as Governor (she ran clean, a Republican Congressman ran traditional, JNap won by 12,000 votes) and, oh yeah, IT’S JUST WRONG.  Political free speech ought to be protected as a sacred right. Speaking only for myself (GI hasn’t developed a position on this) the only requirement I believe is appropriate for campaign contributions is transparency- campaigns should take money from whomever they want, with the proviso that they report everything they take in a timely fashion.

Congratulations to GI’s Nick Dranias and the entire litigation team for a job well done.


Caught in a Trap…

February 27, 2009

briscocountyjrunderpressure

(Guest Post by Matthew Ladner)

Fox’s tragically under appreciated early 1990s western comedy The Adventures of Briscoe County Jr. had an episode where the heroes teamed up with a sheriff to pursue a group of bad guys into a local mine. The bad guys gave the good guys the slip, and then closed entrance to the mine with dynamite. The sheriff, who just happened to look and dress like a circa 1972 version of Elvis Presley declared in a Tupelo drawl:

We’re caught in a trap! Can’t walk out!”

Arizona’s legislators today find themselves caught in a trap that they won’t easily be able to extricate themselves from as well. Former Governor Napolitano drove the legislature to make a series of truly reckless budgets, driving state spending up at a rate far faster than state income growth. As real estate bubble revenue came pouring in, Arizona lawmakers made long term spending commitments with short term revenue sources.

The trap? Republicans now have the governor’s office and legislative majorities. Napolitano joined the Obama administration. Republicans are now in a position of either rolling this spending back to match revenues, or increasing taxes to preserve Janet Napolitano’s reckless legacy of expanding government. The beauty of the trap for Napolitano: she can watch the Republicans step on these bear traps from the safe distance of Washington DC.

These use of the plural in describing traps is deliberate. The Republicans have already enraged the state spending lobbies by fixing the badly imbalanced budget Governor Napolitano passed last year. The question is, having stepped on that trap, will they panic and stumble onto the next trap, which would be to raise taxes. This would incur the wrath of those of us who prefer low taxes and a smaller government.

In short, there are no easy options here, but some options are even worse than others. In fiscal year 2004, the Arizona general fund spent $6.5 billion. In 2007, that went up to $10.2 billion. The party was fun while it lasted, but our revenues are on a collision course with 2004, our spending needs to be as well. Napolitano’s mastery of Arizona’s Republicans will be complete if she forces the them to raise taxes in order preserve her vision of progress through bigger government from thousands of miles away. The whipped up hordes of the spending lobbies will not give them any credit, and principled small government conservatives and libertarians will be outraged as well.