Larkin Warner | November 6, 2008

Hoping Against HOPE

Larkin Warner

A respected Oklahoma economist explains why the teacher union’s latest funding push would be bad for the state.

The virtually eternal quest by Oklahoma’s public education establishment for greater state funding has now taken the form of its HOPE (Helping Oklahoma Public Education) initiative petition.

Signatures have been obtained to call for a vote on a significant change in the fiscal structure of Oklahoma’s state constitution. The change to be implemented by State Question 744 will require the legislature to provide funds which would enable pre-K through 12 expenditures per pupil to match or exceed the operational expenditures per pupil averaged for the six surrounding states of Arkansas, Colorado, Kansas, Missouri, New Mexico, and Texas. All six states exhibit higher expenditures per pupil than Oklahoma. After a three year phase-in period, the additional state common school expenditures are estimated to be $850 million.

I count myself as being strongly in favor of more fiscal resources for Oklahoma’s common schools. However, the HOPE initiative, if adopted, would not be good for either the state or for the long-run support of public education.

This is not the place for a detailed discussion of the relationship between expenditures per pupil and student performance. I am well aware of the work of Eric Hanushek and others (including OCPA) indicating no positive relationship between spending and performance. When faced with extensive econometric findings on such a topic, I find it necessary to ask an ultimate question of whether the conclusions are reasonable in the context of what we know about the real world. My own experience as a teacher at a relatively poorly funded university and as a staff participant in the designing of the remarkable “MAPS for Kids” program for public education in Oklahoma City leaves me with no doubts that, when properly managed, more resources make for better schools.

By now the major arguments against HOPE have been covered in the media. I will touch briefly on these arguments and will place HOPE in the context of the recent history of major initiatives to improve funding for Oklahoma public education. Then I will add a concern that has not received much attention by asking whether it’s a good idea to load up the state’s constitution with rigid requirements concerning state taxes and expenditures.

How We Got Here

With apologies to Alexander Pope, “Hope springs eternal in the human breast” certainly applies to Oklahoma public education over the past couple of decades. There are two basic ways that supporters for more state fiscal resources for common schools have attempted to achieve their goals. First, and most important, is the regular effort by supporters to obtain more money through the normal annual legislative appropriation process. Second, there is the attempt to change the fundamental structure of state finance through changes in statutes requiring regular earmarking of new revenues, through judicial rulings with respect to adequacy of funding, and now with a proposed constitutional amendment which essentially earmarks an expenditure level. Let’s remind ourselves of a bit of history.

House Bill 1017 was a comprehensive education reform measure approved in 1990. Fiscal provisions included several increases in tax rates, with the additional revenue to be applied to education. Supporters of common schools had to be very pleased with the adoption of this measure. They were perhaps even more pleased when a state question calling for its repeal failed in 1991. However, they should have been distressed when, as a reaction to a series of state tax increases of the late 1980s and of HB1017, the tax-fatigued voters of Oklahoma in 1992 approved a constitutional amendment which virtually mandates a statewide vote for any tax increase (State Question 640).

In hopes of further changing the structure of education finance, the Oklahoma Education Association (OEA) and several school districts brought suit against the state and its legislature charging that inadequate funding violates three sections of the Oklahoma constitution. In the spring of 2007, the Oklahoma Supreme Court upheld the decision of a district court rejecting this approach to the determination of state public school spending.

Thus, in 2007 education supporters faced (1) the experience of great success in earmarking new taxes in the H.B. 1017 legislation, (2) the prospect of failure should an attempt now be made to raise state taxes for education because State Question 640 would require a statewide vote, and (3) the fact that there was no chance of making an end-run around the legislature by getting the courts to determine adequacy of expenditures.

Cuts to Other Agencies a ‘Mathematical Certainty’

One of the strategies not yet attempted involved the constitutional mandating of an expenditure increase. This resulted in the HOPE initiative petition. This petition does not contain any explicit requirement for increased taxes. In fact, the OEA publicity supporting the initiative petition asserts that no increases in taxes will be required to finance the measure.

The OEA says that “if common education had received the same percentage of funding each year since passage of HB1017 in 1990 (roughly 39 percent), today our schools would be adequately funded.” This apparently applies to the share of legislative appropriations. However, this conclusion does not fit with the data reported by the state’s Office of State Finance in its “Schedule I” reports. In the 1991 fiscal year (FY-91), public education received 33.83 percent of total state appropriations; the share for the State Department of Education in FY-08 was 35.20 percent.

In addition to funds flowing to schools from the legislative appropriations process, total state outlays for K-12 education also include various earmarked revenues as well as money connected with federal programs. In the 2007 fiscal year, according to the Oklahoma Office of State Finance’s Schedule III report of expenditures from Treasury funds, public school education received 22.78 percent of all state government expenditures. In FY-91, the public school education share of total state expenditures was slightly higher at 23.58 percent. It would have taken an additional $126 million in FY-07 for the state to match its performance in FY-91. This is far short of the $850 million expected as a result of the HOPE initiative.

There is little doubt that the full implementation of the provisions of the HOPE initiative will present a significant challenge to the legislature and governor. Barring the deus ex machina of unprecedented economic growth in Oklahoma as compared with surrounding states, achieving the expenditure per pupil requirements of State Question 744 will require significant reallocation of appropriations across the various functions of government.

Expenditure cuts on non-K-12 education functions will be a mathematical certainty. We might ask under what conditions will Oklahoma’s common education leaders publicly support major cuts in expenditures on Medicaid, highway infrastructure, corrections, or higher education in order to finance an $850 million reallocation of state outlays to common schools? The backlash to such a reallocation from other needed functions of state government would be profound and lasting. Indeed, the supporters of the HOPE initiative petition might well hope that the measure is ultimately unsuccessful, because the long-term effects of its implementation would not be favorable to Oklahoma’s public schools.

Constitutional Handcuffs a Bad Idea

But there is a more fundamental point that I want to emphasize. SQ 744 represents another provision further ossifying the fiscal structure of Oklahoma state government. Oklahoma is, in principle, a representative democracy in which elected representatives determine state policies—subject to the will of the people exercised at regular elections. However, from the outset in the early 1900s, Oklahoma’s populist roots have been important in providing for direct democracy through the initiative and referendum. This orientation has resulted in a state constitution which is far too long and filled with provisions which should be in the statutes rather than in the constitution. I make my point by challenging readers to actually compare the U.S. Constitution with Oklahoma’s. The U.S. Constitution is short, to the point, and enduring; the Oklahoma document is one of the longest of the state constitutions, is not well organized, and is anything but enduring.

In this era of dynamic and unpredictable change in the structure of the global, national, and state economies, the last thing Oklahoma needs is another fiscal mandate within its constitution. The state should be in a position in which it can recalibrate its revenue system and expenditure patterns in response to changing economic conditions and voter preferences. The constitutional earmarking of specific revenue sources for particular functions is a big source of rigidity. But the constitutional earmarking of a specific expenditure such as public education is even less desirable, especially when the required expenditure level is determined by fiscal policies in six other states.

Thus, in the final consideration, my opposition to SQ 744 flows from my view of Oklahoma’s need for a more streamlined state constitution. For example, it would be beneficial if the state’s tax structure became more flexible as a result of the repeal of SQ 640. Flexibility could be achieved within the context of a requirement that changes in the structure of revenue sources have a neutral impact on total receipts.

I believe more money truly is needed for the state’s public schools. I, for one, would like to see Oklahoma’s common schools position themselves to gain more support through the annual legislative appropriations process. This would require more authentic accountability, a more rational structuring of school districts, and acceptance and pride in both supporting and out-competing charter schools.

Larkin Warner is Regents Professor Emeritus of Economics at Oklahoma State University. The views expressed are his own, and do not necessarily reflect the views of OCPA.

Larkin Warner

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