Stimulus Crazy

By Watson Scott Swail, President and CEO, Educational Policy Institute

Yesterday In recent Week in Review Commentaries, I’ve discussed the difficulty assessing the true nature of the current financial straits we find ourselves in. President Obama has spent an inordinate amount of federal funds trying to rescue the economy, and just this week, the G-20 announced it would infuse an additional $1.1 trillion dollars to the IMF to stabilize struggling economies.

On a domestic level, the first stage of stimulus funding ($44 billion) was just released to support public safety and education at the state level. The funding has caused a bit of a feeding frenzy among K-12 and postsecondary systems and institutions. In the end, I’d be interested in knowing how much money, effectively stimulus money, has been spent to date on lobbyists to attract stimulus funds, officially known as ARRA (American Recovery and Reinvestment Act of 2009). It is considerable, for sure, because every campus I visit or talk to is all about the ARAR and its share of it. To me, it reminds me of the site visit Alex Usher and I did last year to Saudi Arabia, where the tag line of Saudis was “my piece of the oil,” referring to the funds Saudi citizens get from oil revenue. That sense is alive and well within the stimulus package. Everyone wants his or her piece.

My worry is when funding becomes the holy grail of education. Whether at an EU conference about global competitiveness or a discussion about stimulus packaging or endowments, educators focus on getting the money, because they realize that money helps their world go around—too often without serious consideration of whether the end goals are met. We, too, aren’t insulated from this reality, as EPI must make financial ends meet. But there needs to be a red flag when the ideology gets reversed. And sometimes it does.

I’ve spoken about federal interventions and the metric from which we put value on these interventions. And, to be truthful, some people have not liked what I’ve said because they either disagree vehemently or they get that I’m right and I actually take the risk to expose it. The truth is, as soon as a program is created by the federal or state government, an evolution begins that slowly moves the discussion from student-centered to employee-centered. Because of the nature of the human condition, I don’t know how you veer away from this evolution. Perhaps we can’t. But it is a problem. I’ve seen this occur in several states recently, where the search for finances to save staff lines trumps the need and goal of the program itself. That’s not right.

The stimulus funds are a one-shot deal, and the reality is that in the next few years, the federal government may be forced to cut education and other funding, regardless of the President’s best intentions. The federal budget is in a far worse state than President Obama outlined on TV a few short weeks ago; a new unemployment report shows that the loss of jobs is far bleaker than we thought; and the reduction in troops and funds in Iraq will likely be outpaced by additions in Afghanistan. All told, this puts the US in a serious and dire situation. This is only the federal level. At the state level, we see brutal economic realities, part because of the economic situation, but to a greater degree by their inability and shortsightedness in preparing for an economic downturn that was obvious even to the least informed.

All but one state has a balanced-budget amendment that requires them to balance their budget each year. Most people support this legislation, because, since “we” have to balance our budgets, so should our states. But “we” also use mortgages, personal loans, and credit cards to hold us over the short term. The Educational Policy Institute uses lines of credit to account for fluctuations in revenue, which many companies do. But states, with the exception of special bonds, are limited in what they do.

The real fault is in a state’s ability to save money in a “rainy-day fund.” This is not to say they can’t do this, because many states have done so in the past. Rather, it is their inability to do so because of the short-sighted nature of politicians and the political cycle. Understanding that most legislators run on a two-year basis, essentially making the “run” for office a continual effort, they are too focused on winning and less about legacy. There is little value or incentive to look beyond two years, and certainly not beyond four years. How can we possibly create prudent public policy and funding systems when our outlook is barely beyond our nose? We can’t, and we don’t.

So, while this feeding frenzy continues, the stimulus act infuses money to help states in these lean times, at huge costs in deficit financing, and does nothing to change how we do business in our states’ capitals. There is nothing in place to curtail this type of lunacy from happening in 10 years, and if you look back at state budgets, this thing comes around every decade or so. They say that the importance of understanding history is so we don’t repeat our past mistakes. Evidently we need more historians, because we have this innate ability to perpetuate bad financial management at the federal, state, and local levels.

Enjoy the stimulus money, understanding fully that it gets worse from this point forward. There is a Darwinian sense to this downturn, because outreach, access, and student success programs—those that rely primarily on philanthropic funds for survival—are in for a hard stretch where some will survive and some will not. Will the best programs win? The pessimist in me suggests not—the best fundraisers will win, not the best programs. And that’s a shame.

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