By Watson Scott Swail, President & Senior Research Scholar, Educational Policy Institute

I had the pleasure yesterday of presenting at The Council of State Government’s Annual Conference in Palm Springs, California (and yes, I now want to move to Palm Springs). This event brings together approximately 600 legislators and staff to talk about issues impacting states and the nation. And while the people and resort were most pleasant, the discussions were discomforting.

States across the US are in a perilous situation. Budgets have been partially rescued this year by the American Recovery and Reinvestment Act (ARRA), but this federal support barely provides a tourniquet on a deep wound in state budgets. Yesterday, the National Governors Association (NGA) issued a press release illuminating the dire conditions at the state level:

In fiscal 2009, states were forced to reduce General Fund expenditures by 4.8 percent and are expected to reduce fiscal 2010 General Fund expenditures by at least 4.0 percent, marking the first time that state spending has declined in back to back years. The severe national recession drastically reduced tax revenues from every revenue source during fiscal year 2009, and revenue collections are forecasted to continue their decline in fiscal 2010. As state revenue collections historically lag any national economic recovery, state revenues will remain depressed throughout fiscal 2010 and likely into fiscal years 2011 and 2012.

Overall, state revenues declined 7.5 percent in fiscal 2009, which for most states ended June 30, 2009. Revenues will likely continue on this downward trend for another one or two quarters before turning up slowly.

The weakening of state fiscal conditions is reflected in the $250 billion in budget gaps faced by states between fiscal 2009 and fiscal 2011. Of the $250 billion, states closed $72.7 billion in budget gaps during fiscal 2009 and $113.1 billion before the enactment of their fiscal 2010 budgets to bring them into balance with drastically declining revenues.

Download the full press release here.

Perhaps the biggest worry at the state level is the impact of the current economic crisis on education. States provide the majority of all funding aimed at education, and approximately 60 percent of all state revenues are used for education purposes. While the ARRA has served as a stop-gap for broad education cuts across the states, staffing and programs have not been unharmed. State budgets cannot withstand 7.5 percent revenue declines without significant impact.

What is often forgotten in these conversations is that the budget crisis will not end this year or next. In fact, it is generally agreed that the budget situation could be worse in 2011 than it is today, once the ARRA funds have disappeared.

During the panel session, one legislator asked our panel, “Given that money is off the table, what do we possibly do?” Ahhh. A good question. But no simple answer. The truth is that it is difficult to improve our education system and situation without a renewed infusion of funds. Economists can argue in theory about efficiencies and doing more for less, but it is difficult to produce in the real world. It isn’t that it can’t be done, but that requires significant reforms which seem to elude us in education.

In answering the question, I laid out some priorities that states should consider in tackling the budget difficulties while simultaneously looking toward improved education. Here are some of my unvarnished comments:

Although the United States scores are “middling” in international tests (e.g., TIMSS, PISA), the best students in the US score at the top of the distribution. US education is not in crisis, but it can be better.

It also isn’t that our system has deteriorated. Conversely, we probably do a better job today than ever before. But the world has caught up and looks at education in a different way. Education is a higher priority in many nations. Our biggest enemy in the education battle is the status quo; not trying to improve.

We are ill-served with focusing on “being the best in the world,” mostly because, depending on the indicator of choice, we cannot fulfill that goal. There will always be some other country that is a bit better, on average, than we are in the United States. Our goal should be to be better than we are, not the best.

The goal should be toward increasing educational equity–not by lowering the ceiling or bringing down our top students, but rather, raising the floor up. If we reduce the educational inequities across race/ethnic groups and income spans, we will increase our collective capacity to compete on a global level. We won’t do this by focusing on making our brightest students brighter, but by increasing the educational capacity of the masses. The focus should be on the educational capital for society at large, not one segment of it.

More funding can help, but it isn’t the answer. The US spends more per capita than almost every nation in the world. In fact, according to the OECD, only three nations spend more than the US on education: Norway, Switzerland, and Luxembourg. Taken together, the population of these three countries total 13 million; about 4 percent of the US population. It is an issue of scale, to a point. Of course, we also spend more taxpayer dollars per capita on health care and clearly that hasn’t provided us with the best medical care in the world. It’s more than money.

Improvement ultimately rides on education innovation. We need to find better, more effective and efficient ways to educate all students in a manner that motivates and prepares them for a creative and fulfilling existence.

They may be sexy, but charter schools and voucher programs won’t improve our system. Charter schools started as mostly a Republican strategy to move toward vouchers, but the Clinton Administration picked up the charter banner and expanded federal funding in that area. The Obama Administration is pushing charters further, regardless of the empirical studies that suggest that they don’t work.

We should shift focus from “small class size” strategies, which also have been shown limited in their impact, to improving the capacity of our teaching force (see my commentary of…). Marc Tucker and the National Council on Education and the Economy, in their publication Tough Choices or Tough Times, recommended significant increases in teacher pay in order to attract a higher caliber of teacher, re-tool our educational structure by embedding postsecondary and training into the secondary system, and improve our teacher preparation and professional development. These are doable if we have the resolve.

It isn’t necessarily about lengthening the school day or year. It’s about using our time more wisely. As a former teacher and as a parent, I know how students spend their day. They do what we require. No more. We need to have higher expectations and change the daily conditions and structure of the school day.

Provide incentives to get parents more involved in their child’s education. If parents don’t want to be involved, we have to find ways to get them involved. Provide tax credits to parents for attending back to school night and teacher-parent conferences. Really.

Extend our educational innovations into higher education. We need more efficiency at the postsecondary level, too. This is the only way we can possibly harness the rising costs of higher education and make college somewhat affordable. We need experiments.

Create savings accounts for children when they are born, paid for by taxpayers. If we can give child tax credits, we can create education savings accounts. Students and families are more likely to plan for education past K-12 if they knew that a savings plan was waiting for them.

Somehow, we need to reduce the impact of politics on education. Perhaps that is a naïve comment, but we need to get passed.

I would like to thank my fellow panelists, Bill Mathis of the University of California and Jamai Blivin of Innovate-Educate of New Mexico. Also a shout out to Pam Goins and Tim Weldon of The Council of State Governments. Great hospitality. I’m looking forward to EPI Palm Springs!