Do you have a big, expensive idea to improve public education? Maybe you鈥檇 like to close the huge funding gaps that trap low-income students in substandard schools, or create free, high-quality, universal prekindergarten. Or rebuild the crumbling school infrastructure, create scholarships for the next generation of scientists and engineers, and finally give good teachers the pay raise they deserve. If you have these or other pricey aspirations, then get ready鈥攜our once-a-decade window of opportunity for state spending is starting to open.
State budgets, shrunk and desiccated over the last four years, are coming back to life. The National Association of State Budget Officers recently reported that state spending grew by more than 6 percent in both fiscal years 2005 and 2006. Researchers at the Rockefeller Institute of Government, the research arm of the State University of New York, found that state revenues are growing at the fastest rate in nearly 15 years.
This should come as no surprise. The last recession ended more than four years ago. If history is any guide, the next one is still years away. Consider the starting dates of the last seven recessions: March 2001, July 1990, July 1981, January 1980, November 1973, December 1969, and April 1960. Delay the December 1969 date by a single month, and it鈥檚 been almost 50 years since an economic downturn began in the second half of a decade.
TalkBack: What do you think? With state budgets improving, is the financial opportunity to tackle big education issues right around the corner? What should be the top spending priorities if money is available? Submit your comments here:
But the good fiscal times won鈥檛 start rolling just yet. States are still making up lost ground from the last fiscal crisis. The most likely moment for big state budget surpluses, and the opportunities they provide, won鈥檛 be in the next fiscal year, 2007, but in those that immediately follow. The key is understanding this: Surpluses don鈥檛 happen because of strong revenue growth. They happen because of unexpectedly strong revenue growth. Politicians, being politicians, will spend every dime forecasters tell them is coming. But they can鈥檛 spend money they don鈥檛 know will be there.
State revenue forecasters are conservative by nature鈥擨 know, I used to be one. They鈥檙e still gun-shy from the recent, difficult recession, and are very likely to underforecast future revenues. That鈥檚 what they did in fiscal 2005, when 45 out of 50 states got their revenue forecasts wrong, and every one of them guessed too low. They鈥檒l probably make the same mistake again.
Which means there鈥檚 a good chance that the beginning of 2007 and 2008 (some states write budgets every other year) will bring a New Year鈥檚 gift that many newer legislators have never before received: lots of extra money to spend. Inevitably, a mad scramble for dollars will ensue, as every special interest worth its name grabs for a piece of the pie. Old, unfunded programs will be dusted off and given a new, 21st-century polish. Those who oppose government spending on principle will argue for giving the money 鈥渂ack to the people.鈥� Loud arguments will follow; some people will win, and some people won鈥檛.
And then, just as quickly, the money will disappear, as the business cycle does what it always does, wringing out the excesses and inefficiencies of the expansion, cutting revenues before righting course again.
The opportunity to tackle big issues simply doesn鈥檛 come along every day. There are good reasons to believe that day is coming soon.
It might not work out that way, of course. Past performance is never a guarantee of future results. And there surely won鈥檛 be as much money as in the salad days of the late 1990s, when state coffers were swollen with income taxes paid on capital gains earned during the historic run-up in the stock market and state expenses for Medicaid were temporarily held back by declining welfare rolls and cost savings from managed care.
It鈥檚 certainly true, too, that public schools can鈥檛 be fixed simply by giving them more money. But that doesn鈥檛 mean that there aren鈥檛 real problems out there that cost real dollars to solve. The opportunity, and funding, to tackle those issues simply don鈥檛 come along every day. There are good reasons to believe that day is coming soon.
So my advice to reformers is this: Assemble your forces, marshal your arguments, and get your interest groups in line. Introduce legislation this year, even though the money鈥檚 not there yet, so you can get a sense of who your friends and (more important) your enemies really are. Then get ready to come back and fight hard for the resources you believe students truly need. The fiscal window of opportunity is opening, but it won鈥檛 be open long.
