Budget & Tax, Education

Proposal would raise teacher pay, tame the bureaucracy

February 23, 2018

Andrew C. Spiropoulos

State Rep. Tom Gann (R-Inola) has proposed a bill that will fund a teacher pay raise with investment income derived from the assets managed by the Commissioners of the Land Office (CLO). His bill will establish a separate fund dedicated to teacher pay raises, and I understand that Rep. Gann intends that the CLO will deposit money into the account only if the CLO’s investment income surpasses the amounts provided to schools in the previous fiscal year. In other words, schools will not lose any money they are already receiving—any money for raises will be on top of what they received in the last fiscal year.

Predictably, the managers of the CLO argue that the bill is both unconstitutional and unwise. It is difficult to see how anyone can argue that Rep. Gann’s bill poses a constitutional problem. The state’s constitution clearly states that the income derived from the permanent, primary fund shall be used “for the maintenance of the common schools of the State.” The principal of the fund must remain “inviolate” and cannot be “diminished,” but the income may be disbursed as long as it is dedicated to the use and benefit of the common schools. There is nothing in the constitution vesting sole authority in the CLO to determine how to use the income to benefit the common schools—it is up to the Legislature to decide how to best distribute any income. As long as the Legislature does not touch the corpus—which the bill does not—it can direct how the income should be allocated to the common schools.

My understanding is that the CLO’s objection is that the direction to allocate additional money to the teacher pay increase fund will require it to dip into the corpus, and thus diminish the fund. This argument is nonsense. The bill clearly states that the income shall be transferred to the new fund only if it exists—if there is no additional income, there is no money to transfer. Nothing in the proposal will cause the permanent fund to be diminished.

The real issue is whether it is good policy for the Legislature to order the CLO to spend income for this purpose. I think it is, and not simply because we need an immediate and funded teacher pay increase.  Most people will ask if it is possible there will be enough CLO income to help fund raises on top of what schools are already receiving from the fund. The answer appears to be yes. The CLO has not been distributing all its income every year to schools—it has been reinvesting a large portion of its income and growing the size of the corpus. So the real effect of Rep. Gann’s bill will be to direct the CLO to take the money they are now using to grow the corpus—and their power—and dedicate it instead to teacher pay increases.

We can see what sticks in the craw of the CLO managers. The managers do not want the Legislature to tell them how to manage the fund. They have built a large and powerful money machine—the fund’s portfolio is well over two billion dollars—and they want to continue to use this income to increase both their money and power.

The importance of immediately raising teacher pay is only one reason the Legislature should put the CLO on a shorter leash. While I see why it is sensible to legally protect the corpus of these funds, it is not good public policy to have ever-growing fiefdoms like the CLO or the Tobacco Settlement Endowment Trust (TSET) whose managers believe that their operation, for all practical purposes, should not be subject to legislative control. And we wonder why people believe they have lost control of our government.