@NCCapitol

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Fact Check: Senators debate education spending, constant dollars, fairy tales

Posted June 23, 2015
Updated June 24, 2015

— Once upon a time – last week really – senators were debating the state budget, which isn't usually the subject of fairy tales but can, on occasion, go down a rhetorical rabbit hole.

As he debated an amendment to the $21.5 billion proposal, Sen. Harry Brown, R-Onslow, the chamber's senior budget writer, called attention to the fact that, in terms of raw dollars, the Senate budget would spend more on K-12 education than any of its predecessors. House and Senate budget writers still need to come to a compromise deal before a final budget bill will be sent to Gov. Pat McCrory.

"This budget spends more on K-12 education than ever in the history of this state – ever," Brown said.

Brown's remarks prompted Sen. Josh Stein, D-Wake, to get up and ask if Brown was sure that's right. Stein pointed to figures showing that, if you account for per-pupil spending and inflation, North Carolinas still hasn't caught up to pre-recession spending on public schools.

"You can play with some numbers, but to me, total dollars spent in education tells it all," Brown replied.

That paved the way for Sen. Tom Apodaca, R-Henderson, to huff and puff and blow down the notion that lawmakers should be considering anything other than what they're actually spending.

"It always kind of makes me nervous when someone stands up that probably never made a payroll in their life, probably is not too used to signing the front of a check, but they want to start talking about real dollars, adding inflation, arbitrary figures, this and that," Apodaca said. "This is dangerous because we deal in actual dollars. That's what the world deals in – actual dollars."

Saying that the Senate shouldn't deal in "fairy tales," Apodaca continued, "I feel like I'm in 'Alice in Wonderland' with some of the terminology coming out of that back row," a reference to Democrats who occupy the back row of seats in the Senate chamber.

THE QUESTION: Does, as Brown said, "total dollars spent in education" tell all, or is there more to the story? Does considering inflation and per-pupil spending amount to telling "fairy tales" that have no business in the hard-nose bean counting of the state budget?

THAT'S REAL MONEY: First, let's get the obvious out of the way: Brown rightly says that, if you do not correct for inflation or how many students are in the system, North Carolina is spending more than ever before on K-12 education.

But does that really "tell all?"

Not if you're an economist.

"If you're trying to understand how a certain amount of spending compares to another year, then the only sane, the only rational, the only correct way to do it is in constant dollars," said Andrew Brod, an economist and senior research fellow at the University of North Carolina at Greensboro's Center for Business and Economic Research. "A dollar today is not the same as a dollar 50 years ago, and it's not the same as a dollar four years ago."

Since the cost of gas for school buses, textbooks, writing paper, computers and everything else rises over time, Brod said it would be "nonsensical" not to consider the weakening buying power of each dollar in the education budget.

Far from being some ugly stepsister of an economic theory looking to shoehorn on a mathematical glass slipper, accounting for inflation is Econ 101.

"The whole point is to put it in terms of things you're actually buying," said Tara Sinclair, an associate professor of economics at George Washington University and the chief economist for Indeed.com, a job search site.

When comparing what somebody spent in one year versus five or 10 years ago, Sinclair said, controlling for inflation is "economic rule No. 1."

So, while the state Senate proposes spending $8.32 billion on public schools next year, and that is more in raw dollar terms than any other year before, constant dollars tell a different tale. Figures produced by the General Assembly's nonpartisan Fiscal Research Division show that, in constant 2008 dollars, education spending has dropped from $8.1 billion in the 2007-08 budget year to $7.3 billion starting July 1 if the Senate budget were enacted.

Put another way, North Carolina K-12 system has roughly 10 percent less buying power at its disposal than it did 10 years ago.

PER-PUPIL SPENDING: Stein also raised the question of per-pupil spending, the amount of money per student the state spends on K-12 education.

Using raw, unadjusted dollars, the state Senate budget would spend $5,386.44 per student next year. That's more per pupil than was spent during the heart of the recession in 2010 but less than pre-recession years of 2007, 2008 and 2009. Those numbers look worse when adjusted for inflation, showing that, in 2008 dollars, North Carolina would spend $4,736.71 per pupil under the Senate budget proposal versus $5,511.08 10 years ago.

Sinclair cautioned that per-pupil spending may not be the best way to measure the effort or investment in education by the state.

"What we really need to think about is what quality of education we're getting for this investment," Sinclair said.

Numbers of teachers hired or the certain outcomes for students, such as standardized test scores, might be a better metric of the government's effort, she said.

Using the example of a car manufacturer, Sinclair pointed out that such a company's contribution to the economy would not be judged on how much money it spent but how many cars it produced. Unlike a manufacturer, the government isn't making cars or widgets, so spending is used as a proxy for its productivity.

"Maybe it's possible to have an excellent budget where you have more pupils in the classroom," she said.

The key word there is "maybe," said Michael Maher, an assistant dean with the North Carolina State University College of Education.

"I don't know what else is available if you want to look across districts or across states," Maher said.

There are other potential measures. For example, he said, you could look at what percentage of the overall state budget is consumed by K-12. Of course, that figure is influenced by how state spending is rising or falling on other, unrelated items, such as Medicaid, as much as it says anything about education spending itself.

Maher argued that, while per-pupil spending may not be an ideal metric, it does seem to correlate – at least on a state level – with such measures as test scores.

"Those states that seem to do the best tend to have higher per-pupil expenditures," he said.

That said, Maher and Sinclair noted that researchers have found a number or problems with using per-pupil expenditures. For example, Massachusetts is a state that spends more per pupil but also has a higher cost of living than North Carolina. So, the higher amount of money per pupil spent in Massachusetts may simply correlated to higher housing costs, and therefor higher teacher salaries, than any extra effort.

Also, there are variables on per-pupil spending even within North Carolina. In addition to state spending on schools, each county has the option of paying more toward K-12 schools. So, the actual per-pupil spending in bigger, wealthier counties such as Wake County is higher than in smaller, rural counties such as Franklin County.

Fact Check RedTHE CALL: Your fact-checker vacillated on whether or not Brown's "total dollars spent in education tells it all" statement earned a yellow or red light on our fact-checking scale. Had this exchange stopped with Brown, the call would have easily been a yellow light. He was playing up his chamber's budget and was right in overall dollar terms. While raw dollars lack context, certainly they're easy to understand, and it's atypical for lawmakers' annual budget documents to adjust for inflation.

However, Apodaca's "Alice in Wonderland" defense of his colleague could throw this into red light territory. When asked whether he was serious or maybe engaging in a bit of hyperbole. Apodaca said he was serious.

"From best I remember, there wasn't much inflation over the past eight years," Apodaca said Monday, adding that Stein's figures date back to 2008, about the time federal fiscal stabilization money first became available as part of the stimulus.

However, the state didn't start plowing stimulus funds into K-12 education until 2009-10. Stein's chart breaks out stimulus spending as a part of overall education spending.

"It just wasn't a fair comparison," Apodaca insisted, pointing out that teachers saw few raises during the recession.

"During a recession, you've got to treat it like a business, cut where you can to keep it tight," he said of the budget.

While stimulus funds could complicate the calculation of how much money the state had available, they don't alter the need to account for inflation. The Bureau of Labor Statistics' consumer price index has ranged from 0.8 percent to 2.9 percent over the past eight years. While that's not out of control, failing to control for some measure of inflation could lead to an over-estimation of spending of somewhere between 14 percent to 17 percent, Brod said.**

Stein was making an economically sound, if unwelcome to his Republican colleagues, point. While he may not have proved the emperor has no clothes, inflation is far from a fairy tale. Brown opened the door by declaring his chamber's budget proposal the most generous toward education in the history of the state. We give the smack-down of Stein's point a red light.

3 Comments

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  • Benjamin Kite Jun 23, 2015
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    _BUSINESSES_ which disregard inflation, won't be in business very long.

  • Walter Smirth Jun 23, 2015
    user avatar

    Senator Brown was born in 1955 and in terms of 1955 dollars, the education budget is wonderful. But he is the "senior" budget writer in the senate. That says plenty about the competence of the senate.

  • George Herbert Jun 23, 2015
    user avatar

    Economics 101. I think Apodaca would fail that course.