Thursday, October 11, 2007

Public school sticker shock

[This column by Steve Anderson and Brandon Dutcher appeared August 26, 2005 in The Oklahoman.]

According to official state government reports, the per-pupil expenditure in Oklahoma’s public schools in 2003 (the latest year for which data are available) was $6,429.

Unfortunately, that figure is not even close enough for government work.

In a newly released study, we discovered that the real per-pupil cost that year was a sobering $11,250.

How can the "official" reports be so far off the mark? Unlike private-sector businesses, the government's school accounting systems simply exclude many significant costs when computing expenditures. Hey, why not? It’s not like anyone ever calls them on it.

Until now. Using generally accepted accounting principles (GAAP) as promulgated by the Governmental Accounting Standards Board (GASB), we compiled the federal, state, and local expenditures on K-12 public schools in Oklahoma that are readily verifiable through third-party sources.

Unlike the government, we counted all the costs that would be included on a regular financial statement. A few examples:

• retirement benefits as a cost in the year incurred;
• depreciation costs;
• spending via “dedicated revenues” which are funneled directly to schools without going through the appropriations process; and
• pension debt added to the Teachers’ Retirement System each year (politicians are notorious for in effect using a "credit card" to provide benefits to current and future retirees).

Disturbingly, there are even more costs which could have been included but which did not lend themselves to measurement and/or categorization precise enough for our study. (For example, there are many K-12 costs that are carried on the budgets of other government agencies, such as remedial-instruction costs borne by the higher education system and school-employee costs borne by Medicaid.)

Even without including those sorts of costs, $11,250 is a formidable sum. Think about it: Oklahoma taxpayers are getting public education at elite private school prices (K-12 tuition at Oklahoma City's most elite private school ranges from $9,000 to $13,790). Raise your hand if you as a taxpayer are pleased with your return on investment.

There are nearly 200 private schools in Oklahoma, and $11,250 would pay the annual tuition (in any grade) at all of them except three. Indeed, the average tuition at Oklahoma private schools is a mere $4,162.

We pity the trial lawyer who will have to argue for the Oklahoma Education Association (OEA) that Oklahoma schools are, um, "chronically under-financed." The union is suing to ensure that every child receives a "constitutionally adequate education," even though the constitution – which gives the responsibility to the legislature, not the courts – doesn’t contain "adequacy" language. Even if it did, one would be hard pressed to argue that $11,250 is not adequate.

Of course, as the state's largest newspaper has pointed out, "for the OEA, enough is never enough. 'Adequate' funding is a moving target."

What's really unfortunate is that chunks of concrete are falling on motorists even as the monopoly school system is inhaling this much cash – some of which is coming from motor vehicle tax revenues!

If the CEO and finance division of any publicly held company attempted to influence public opinion with misstated financial data to this extent, they would be subject to criminal and civil prosecution (Enron and WorldCom leap to mind). Indeed, according to scholar Frederick Hess, a former public high school teacher now serving at the American Enterprise Institute, "school accounting guidelines would bring smiles to an Enron auditor."

Oklahoma taxpayers deserve better than this.

[Steve Anderson is a research fellow for the Oklahoma Council of Public Affairs (OCPA) and a certified public accountant with private- and public-sector experience. He was formerly a state-certified teacher with 17 teaching certifications. Brandon Dutcher is OCPA's vice president for policy.]

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