States Don't Need a Bailout—They Need to Cut Spending

Taxpayers should urge policymakers at all levels of government to streamline.

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Carrie Lukas is the vice president for Policy and Economics at the Independent Women's Forum.

Those who prefer tax increases to spending cuts rely on the tried-and-true tactic of claiming that any spending reduction will take food from the needy and quality education away from children. That's the justification being used for Congress's latest effort to send the states a $26 billion bailout: Absent the federal money, proponents argue, states will have to fire teachers and other public workers, and children will suffer.

Taxpayers shouldn't buy this logic. State government spending—and, in particular, spending on education—has ballooned in recent years. There is plenty of room to cut without sacrificing essential programs or hurting education quality.

For fiscal year 2011, states are expected to face a combined budget shortfall of about $144 billion. That's a lot of money, but it's important to keep this spending gap in perspective. In the five years between 2003 and 2008 (that's the last year Census had the complete data), state and local governments increased annual spending by more than $500 billion so that total spending reached more than $2 trillion.

The increases between 2003 and 2008 came on top of previous record-setting spending hikes. State and local government spending was $730.5 billion in 1990. Even after adjusting for inflation, the 2008 level of spending represents a 67 percent increase over 1990 levels.

Much of that money was spent on education. In 2006, states and localities spent $728 billion (about 30 percent of their budgets) on education. Of that, $500 billion went specifically to K-12 education. Per pupil spending in the K-12 education system has been rising for decades. Between the 1996-1997 school year and 2006-2007, average per pupil spending increased from $7,891 to $10,041 after adjusting for inflation.

Unfortunately, there is little evidence that this additional spending has bought higher quality education. During the decades of booming education spending, reading achievement has stagnated, math performance has barely improved, and our graduation rate has hovered below 75 percent.

What increased state and local government spending has bought are more government workers. Between 1998 and 2008, the number of full-time equivalent state and local workers grew from 14.5 million to 16.7 million. More than half of those new workers were related to education. Growth in the number of teachers has far outstripped growth in the student population. In 1970, there were 22.3 students per teacher. By 1985, there were 17.9. And as of 2007, the student-per-teacher ratio reached 15.5.

Yet states and localities didn't just hire more teachers, they also hired more education workers outside of the classroom. In 1998, 5.7 million worked in the public education sector, but 1.7 million of those workers weren't involved in actual instruction. In the next 10 years, governments added another 400,000 workers who weren't involved in instruction at all.

Taxpayers should ask themselves what they get from this bureaucracy. Undoubtedly, there's a lot of paperwork associated with administering the public education system. Yet that shouldn't be an excuse for bloated government. Taxpayers should urge policymakers at all levels of government to find ways to streamline regulations and reporting requirements so that education dollars can be used to educate students.

In the wake of the recent economic crisis, states and local governments have been reducing spending. The National Association of State Budget Officers recently reported that states' general fund spending will be $52 billion (or 7 percent) lower than it was in 2008. That's a fine start. But voters should recognize that 2008 isn't an arbitrary baseline—it was the final year of a decades-long state government spending spree. Trimming back from that level is hardly austerity.

No governor or local official wants to cut spending or reduce public sector jobs. Yet the current budget crisis requires an honest look at government finances. States don't need bailouts to preserve bloated budgets. They need to make cuts and return government to a more sensible size.