Tag: mark sanford

Fiscal Report Card on the Governors

We released Cato’s report card on the fiscal policies of the governors today. We calculated data on the taxing and spending habits of 45 of the nation’s 50 governors, between 2008 to August 2010.

The governors are scored from 0 to 100 on seven separate taxing and spending variables. The scores are aggregated and converted to letter grades, A to F.

Four governors earned an “A” this year: Tim Pawlenty of Minnesota, Bobby Jindal of Louisiana, Mark Sanford of South Carolina, and Joe Manchin of West Virginia. You can read the report to find out what these governors did right from our limited-government point of view.

As it turns out, the residents of these four states seem to like the fiscal stance of their winning governors, who favor tax cuts and spending restraint.

Pawlenty has a 52 percent approval rating in quite a liberal state.

Jindal has a 74 percent approval rating.

Manchin has a 69 percent approval rating.

Sanford has a 55 percent approval rating, despite the troubles in his personal life.

Governors shouldn’t just focus on being popular in a superficial sense. These polls tell us that governors who focus on cutting taxes and spending in an honest and intelligent way will be supported by the people.

Injustice of State Subsidies

My colleague Chris Edwards made a good point yesterday in his post on the injustice of federal subsidies.  The wrangling between the states to haul in the federal largesse is wasteful, and getting worse.  But the underlying issue in the article Chris cites — a state using taxpayer money to lure a company away from another state — is another wasteful activity that is all too common.

Instead of competing with other states to attract industry by lowering taxes and reducing regulations, it seems most state governors prefer a politically opportunistic method I call “press release economics.”  Here’s how it works:

A state “economic development” agency offers an out-of-state company (or even an out-of-country company) tax breaks and/or direct subsidies to locate some or all of its business operations in that state.  Most likely, the business would have located there anyhow due to myriad factors including demographics, transportation logistics, and workforce capabilities.  Sometimes several states will engage in a “bidding war” to get a business to set up shop within their borders.  The governor of the “winning” state will then issue a press release citing the new jobs and capital his administration has just brought to the state.  The locating company usually tells the press that the winning state’s package helped seal the deal.  The company and the governor’s press staff then typically arrange a photo-op at an orchestrated ground-breaking ceremony for the new facilities.

If a state is already bleeding jobs, as is often the case in the current economy, such press releases and photo-ops can be a political coup.  Moreover, the governor will have given up, or foregone, relatively little in tax revenue in comparison to, say, cutting the state corporate income tax.  This also leaves the governor with more money to spend on various vote-buying programs. I’m picking on governors, but the legislature generally prefers the press-release economics route for similar reasons.  And if you’re a governor, why risk the headache of engaging the legislature in a fight over reducing corporate taxes, unemployment taxes, or any other tax — including personal income taxes and sales taxes — that effect industry when you can take the easy win?

Am I too cynical?  Actually, I had first-hand experience with this issue when I worked in state government.  My suggestion that the governor eliminate or reduce the state’s high corporate income tax rate, and “pay for it” — at least in part — by getting rid of the state’s corporate welfare apparatus, was routinely ignored for the reasons I cited above.  That one would be hard-pressed to find support among the economics profession for the state corporate welfare give-away game means little to the majority of policymakers and their minions who naturally favor short-term political gain over long-term economic gain.  That other companies already located within the state are stuck paying the regular tax rate, and are thus put at a competitive disadvantage, is a secondary or non-concern as well.

Another issue that I won’t delve into here is the fact that these giveaways often blow up in a state’s face when the locating company ends up not producing the jobs it promised and/or it relocates to another state or country after pocketing the free taxpayer money.  Anyhow, journalists should be on the lookout for more press-release economics schemes coming from the states as revenues remain tight and politicians become desperate to demonstrate they’re “doing something.”  Journalists should examine a state’s tax structure when a taxpayer giveaway is announced to see if perhaps the governor is masking economic-unfriendly fiscal policies.

Note: South Carolina Gov. Mark Sanford proposed late last year to do exactly what I recommended: eliminate the state’s corporate income tax, offset in part by the elimination of corporate tax incentives.  There is hope.

A Dialogue on School Choice, Part 2

The South Carolina legislature is currently considering a tax credit bill intended to give parents an easier choice between public and private schools. It would do this by cutting taxes on parents who pay for their own children’s education, and by cutting taxes on anyone who donates to a non-profit Scholarship Granting Organization (SGO). The SGOs would subsidize tuition for low income families (who owe little in taxes and so couldn’t benefit substantially from the direct tax credit). Charleston minister Rev. Joseph Darby opposes such programs, and I support them. We’ve decided to have this dialogue to explain why. Our initial comments were posted Tuesday. The next installment is here.


Rev. Darby Rev. Joe Darby

First Response

Since this is a “dialogue,” let me focus on something that Andrew said in his first installment – that public education “…has failed because it lacks the freedoms and incentives that drive progress in every other field.” I take that as a defense of the “free market,” where competition allegedly leads to quality and success. I don’t think that the “free market” is the best model for education. To quote African Methodist Episcopal Church Bishop John Hurst Adams, one of my mentors, “the free market has limitations when it comes to the human condition, because it’s an amoral concept that ‘lets the market decide’ who swims and who gets swept away.” That’s applicable to the standard argument that private school choice would improve public schools through “competition.”

The first schools established for African-Americans following the Civil War were private schools. They sometimes, however, exclusively accepted the children of the black upper and middle economic classes while excluding the children of former slaves who struggled economically to survive. Public schools for African-Americans were decidedly and intentionally inferior, and the irony is that the opponents of quality public education in Charleston, South Carolina in that era included affluent African-Americans who saw good public schools as a threat to their private schools.

Public funds going to private schools would revive that tradition, for every tax dollar that “follows” a child to private schools in tough economic times will lead to understaffed and under-equipped public schools. Public school funding is set by legislators who are well aware that their constituents without children in the schools are loathe to fund them, and who’ve catered to those constituents by cutting funding for public education. There can be no true “competition” between public schools that only receive public funds and private schools that would have public and private funds at their disposal, for the free market turns on available capital.

The economic crisis now rocking markets in our nation and the world is also instructive. That crisis was, at least in part, created by policies that deregulated the free market and promoted not only innovation, but sheer greed which crafted a shaky, “house of cards” economy that has collapsed and taken people down with it. The lesson now, as it was during the Great Depression, is that unregulated free market activity can have disastrous results. I believe that the current financial crisis is also an element in the push for Private School Tuition Tax Credits. Many private schools are hurting because parents who can no longer afford high tuition are considering public school alternatives – private schools are hungry for the “bailout” that the pending South Carolina legislation would provide.

America makes the lofty claim in our Pledge of Allegiance to be “one nation under God.” If we’re serious about that, then we should heed the words of the Jesus who is seen as the Messiah by Christians and as God’s prophet by Jews and Muslims. He said that the Creator’s standard for right behavior includes equitable treatment for all people. That equity is at the heart of public education but is not a factor in free market competition, where the vagaries of the market decide outcomes and impact success in life. I said so six years ago in one of my conversations with my friend Mark Sanford, the Governor of South Carolina. He laid out his argument for private school choice over more funding for public schools in familiar, logical and compellingly Libertarian free market terms, but he never answered one question that I asked – why can’t we provide good public schools because it’s simply the right thing to do?

***

The Rev. Darby is senior pastor of the AME Morris Brown Church in Charleston, and First Vice President of the Charleston Branch of the NAACP.

Andrew Coulson Andrew Coulson

First Response

Glad you brought up the objective studies, Joe, but you only mentioned one of them. I recently collected every scientific study I could find comparing outcomes between public and private schools (Journal of School Choice, vol. 3, no. 1). I came up with 65 studies that compare student achievement, cost-effectiveness, parental satisfaction and other measures. The results overwhelmingly favor private schooling. What’s more, the least regulated, most-market-like school systems stand out as the best of all (here’s an earlier version of the paper).

Interestingly, there’s one study I couldn’t include because it wasn’t released ‘til a few weeks ago. It’s the 3rd year DC voucher study (the successor to the one you mentioned), and it shows that students who’d been attending private schools for the full 3 years are 2 school-years ahead of their public school peers in reading! Even including the kids who’ve only been in the program for 1 year, the vouchers are now producing significant gains.

And there’s no evidence that school choice weakens the public schools. Professor Jay Greene looks at this question in his book Education Myths. He finds that public schools either improve under school choice programs, or are unaffected. So even the families that don’t choose to attend private schools will likely be better off, and certainly no worse off, than they are now.

Who would be the biggest beneficiaries of the SC education tax credit bill? Low-income kids. As noted in the preamble at the top of this column, only low-income families would be eligible for tuition aid from Scholarship Granting Organizations (SGOs). The amount of aid each family could receive from an SGO is not capped, so that assistance can be allocated based on individual need. Pennsylvania already has such a tuition-assistance program, serving over 40,000 students with bi-partisan support.

Parents who earn enough to owe state taxes would be eligible for direct tax credits to offset their own kids’ education costs, but those credits are explicitly capped (at around $2,800, if their kids are not zoned to attend a “failing” public school – more if they are).

It’s certainly reasonable to wonder how poor families would cope with transportation and any non-tuition costs, but we can just look at how scholarship tax credit programs are working in states like Pennsylvania and Florida: some schools provide transportation, some are within walking distance, some families form carpools, and others use public transportation. Tens of thousands of poor children manage to get to their private schools under these programs every day, and to obtain uniforms for the schools that require them. Many others do so even without scholarships.

As for wanting to start by fully funding public schools… we’re already there. The 2007-08 budget for Charleston public schools lists total expenditures at over $548 million (p. 21) for 40,202 students (p. 4). That’s $13,650 per pupil – more than the state and national averages, which are both about $12,000. These numbers are vastly higher than the median U.S. private school tuition, which the Department of Education reported as $3,500 in 2003-04 [the most recent year available]. And only about a fifth of private school revenue comes from sources other than tuition. Even if tuitions have doubled since then, they’d still be barely half of Charleston’s per pupil spending.

I’ll have to wait ‘til next time to address your concern about the history of school choice, since I’ve run out of word count. In the meantime, here’s a thought:

There’s nothing wrong with trying to fix the public schools. But you don’t lock kids in a burning building while you try to put out the fire.

***

Andrew Coulson is director of the Cato Institute’s Center for Educational Freedom, and author of Market Education: The Unknown History.

NYCLU: Repeal REAL ID

The New York Civil Liberties Union has issued an impressive report calling for the repeal of the REAL ID Act.

No Freedom Without Privacy: The REAL ID Act’s Assault on Americans’ Everyday Life” is a thorough look at the federal government’s national ID law, which states have refused to implement.

Less than a year ago, when it was clear that no state would be in compliance with the national ID law by the May 2008 deadline, then-DHS secretary Michael Chertoff granted waivers until December of this year, even to states that have statutorily barred themselves from complying. One of those states was South Carolina, whose governor Mark Sanford (R) has been a leading REAL ID opponent. The report cites him favorably for that.

Last year, bills to repeal the national ID law were introduced in both the Senate and House. With President Bush sure to veto, and Secretary Chertoff sure to demagogue a REAL ID repeal, the bills did not move. The political dynamics have changed since then, of course.

“Though the Real ID Act is not a household name,” the report says, “it is a central component of the Bush Administration’s assault on Americans’ liberty and privacy rights, and one that if not repealed now would forever change the fabric of American life.”

In its finite wisdom, the federal government often doubles down on bad policies, but the REAL ID Act is ripe for repeal. The law can’t be fixed, and there is no such thing as an acceptable national ID card.

Terrible Example, Mr. Secretary

Here’s something rich from U.S. Education Secretary Arne Duncan: According to The New York Times, yesterday Duncan smeared South Carolina Governor Mark Sanford as a reform obstructionist because Sanford wants to turn down education stimulus money.

“For South Carolina to stand on the sidelines and say that the status quo is O.K., that defies logic,” said Duncan.

That’s right, Duncan had the gall to frame as a protector of the status quo the same governor who for years has been crystal clear that schooling in his state is dismal and that school choice – which takes power away from politically ferocious, government-schooling special interests and gives it to parents – is the key to real change. It’s also the same desperately sought after reform, by the way, that President Obama and his education secretary are happy to let die a slow – but politically convenient – death in Washington, DC.

And what do Secretary Duncan and his boss have in mind for South Carolina? The same worthless, failed education “solutions” too many politicians have proffered for decades: spend ever more money and talk big about the better results you’ll “demand” but never get. That makes the politicians look like they care about “the children” while really rewarding the politically potent, school-choice-hating, accountability dodging unions, administrators and bureaucrats who live off the status quo and serve not the kids, but themselves.

So let’s get something straight, Mr. Secretary: If you want real change you actually have to do something different, something that attacks real problems, and with his crusade for educational freedom that’s exactly what Governor Sanford has been doing. In stark contrast, so far all the Obama administration has offered is a lot of bluster, and a lot more money for our hopeless education monopoly.  And that, Mr. Secretary, is truly acting like the status quo is O.K.

Sanford Rejects Faustian Bargain

Yesterday, as expected, South Carolina Gov. Mark Sanford became the first governor to reject some of his state’s share of stimulus funds, spurning $700 million (of the about $8 billion headed his way) that he said would harm his state’s residents in the long run.  South Carolina’s General Assembly (controlled by Republicans who have long opposed Sanford’s attempts to cut spending, lower taxes, and generally reform government operations), using a provision of the stimulus bill inserted by Rep. James Clyburn (D-SC), nevertheless plans to seek the funds without the governor’s support.  They cite section 1607 of the American Recovery and Reinvestment Act of 2009, which provides that, notwithstanding a requirement for gubernatorial certification of a request for funds:

If funds provided to any State in any division of this Act are not accepted for use by the Governor, then acceptance by the State legislature, by means of the adoption of a concurrent resolution, shall be sufficient to provide funding to such State.

The question arises, setting aside the relative merits of both sides’ positions, whether the governor (or someone else) could challenge this “alternative certification” provision on constitutional grounds.  Here are some initial thoughts:

A state executive (and/or citizens of the given state) could bring colorable claims under the Tenth Amendment (powers not delegated to the federal government are reserved to the States and the people) , state separation of powers (legislature exercising executive power), and the non-delegation doctrine (Congress delegating its legislative authority to non-federal actors). Whether such challenges would be successful is a different matter.

The strongest claim would probably be under a combination of the Tenth Amendment and state law (depending on what the state constitution and statutes says about the federal grant process), especially given that much of the federal money is likely to come with strings/mandates attached – or would otherwise pervert state budgeting processes (as Sanford spelled out in a letter to state legislators). That is, depending on the particular program funds in question, it could well be that the federal government is doing an end-run around the state executive in “commandeering” (a term of art taken from the important Supreme Court case of Printz v. United States) state agencies without the full lawful acquiescence of the state government – i.e., without presentment of a bill for the executive to sign in the normal course of legislative action.

Moreover, I’m not sure how federal legislation could lawfully trump a state constitutional/statutory provision requiring that, say, federal monies only be accepted by state agencies subject to executive certification. If it could, then what’s to stop the federal government from putting in a further alternative provision allowing certification by majority vote of a state supreme court, let alone by town councils, agency heads, or any other imaginable alternatives? No, a conclusion to the contrary seems facially contrary to the separation of powers, disrupting state political structures in a way that the federal government cannot do by simple legislation.

As a caveat, the above analysis hinges on the substance of the relevant state constitution and statutes (and I haven’t yet thoroughly studied South Carolina’s, though I suspect they’re favorable to the points I’m making). The point is, it is not at all clear that Section 1607 should be considered safe from legal challenge – though courts will likely go out of their way to avoid constitutional conflicts or deciding what they may characterize to be “political” questions.