Thursday, August 19, 2010


Saving Stimulus

This is one of those “individually rational, collectively insane” moments.

The New York Times reported that some of the federal stimulus money that was supposed to save the jobs of teachers, police officers, and other public employees is instead being squirreled away by states and school districts, in anticipation of even lower tax revenues next year. The quote that jumped off the screen for me was:

“We’re a little wary about hiring people if we only have money for a year, but we know that’s the intent of this bill,” said Jeff Weiler, chief financial officer for Clark County schools.

Exactly so. And yet, the whole point of a stimulus is to be spent quickly for maximum impact.

We’re facing something similar here. We have some ARRA money for this year, and it has certainly helped us deal with the fallout from disappointing state revenues. But the ARRA (stimulus) funding will go away next year, whether the recession goes away or not. (Even if it does, education funding typically lags recoveries by a year or two.) Given that the federal fiscal year overshoots the state fiscal year -- don’t get me started -- there’s a pretty good argument to the effect that it’s prudent for the college to save what it can, while it can; if we’re going over a cliff a year from now, any cushion is better than none.

Short-term funding can work when the emergency itself is short-term, or when the projects being funded are short-term. It’s great for abrupt emergencies, like natural disasters, or for one-off tasks, like replacing a furnace. But it’s a terrible fit for staffing, and a ridiculously terrible fit for tenured staffing.

If you have a realistic expectation of having to let somebody go next year, how eager will you be to hire this year? Especially in cases in which they get tenure this year? The termination costs alone...

I don’t mean this as an anti-stimulus argument. I’m convinced that it has made things somewhat less bad than they otherwise would have been, and to the extent that we’re able to buy time, it’s at least possible that revenues will rebound enough (and quickly enough) to avoid catastrophe. If it tides us over, great. And it has allowed us to address some lingering capital needs on campus that probably would have gone neglected even longer than they already have. In some cases, replacing old and inefficient equipment with new and more efficient equipment may even redound to some savings in ongoing energy expenses, which is all to the good.

But saving permanent staff requires long-term money. It requires sustained, predictable, don’t-mess-with-it, long-term money. For colleges without huge endowments -- that is, for every community college I’ve ever seen -- that makes short-term infusions look like good candidates for saving.

If we really want to save permanent jobs -- and I absolutely believe we should -- we need a structural change. We need dedicated, long-term, predictable, don’t-mess-with-it funding that the institutions themselves control. Right now, by default, that usually means tuition. This is actually one of the drivers of the cost-shift to students: tuition is much less subject to the whims of state legislators than state aid is. When your costs are mostly fixed and your funding maddeningly variable, you’re up against it any time the state has an issue. Cost-shifting to students equates to sustainability, from the institution’s perspective, even if it’s severely damaging from a social justice perspective. If we want permanent staffing and low tuition at the same time, we need a hugely different funding model. Stimuli are great, but on the ground, institutions will do what they need to do. If you want to change what they do, change their needs.

To play by the intended rules of the stimulus -- that is, to blow it all quickly in the name of ginning up local demand -- would be institutionally suicidal. Yes, it would (at least arguably) be of great collective benefit, at least in the very short term, but it would require a level of denial bordering on negligence.

I’m only surprised that this is news.

We face the same issue, and the budget we were shown for this year (and projections for next year) allocate some money into the rainy day fund for just that reason.

But we do that dance every year, good or bad. And how do you say which pocket those dollars came from, or which ones some other line item came from? A good argument could be made that we are using our ARRA funds this year for capital investment (replacing computers that should have been done two years ago) and other similar expenses that have been deferred when we slashed them from our budget.

I'm not so sanguine about tuition as a stable source of income. Sure we control it, but we set those fees long before we know what enrollments will be. Heck, we STILL don't know what enrollments will be this fall! As you note when you attack tenure, enrollments fluctuate. Our state funds are more reliable than enrollment estimates, but at least we have tuition that is high enough to cover the marginal costs when sections get added. (And I'll take a state formula over property taxes any day, even though the latter is more predictable.)

I don't understand your remark blaming tenure for your management problem. I guess you can blame permanent faculty instead of permanent staff if you wish, but at our college the annual state funds pay for all permanent instructional staff and upper admin with enough left over to turn on the lights. Students pay for everything else. You can demagogue any issue by saying taxes pay for the part you don't like, but the fact is you can draw the line anywhere. Only the bottom line counts.

You see, you can divide it up any way you wish, particularly if you are good with rhetoric. Take your statement the other day that "Over 80 percent of my college’s budget is labor, and instruction is the single largest part of that." That is true here as well, yet the cost of every person in the classroom (wages and benefits) is less than 40% of the budget. We are only the SINGLE largest item because the non-teaching employees are broken down into multiple groups. Administration would be biggest if that was not done.
I'm a bit confused, DD. I could be mixing you up with another blogger, but I could have sworn you've said that there's little incentive to save money, because the CC will just cut your budget by the same amount the next year. Under that logic, you might as well spend it now. Or am I misunderstanding the situation?

I was thinking along those lines as well - if you don't spend the money they will cut if from your budget next year (making the assumption that if you didn't spend it you obviously didn't need it and won't need it next year).

But, I suspect that because this is Federal "stimulus" money it is being handled/seen differently; it is suppose to be a "one-time" deal. They cannot cut it from next year's budget since it wouldn't be there anyway. But, can they take it back?

DD and others, is that correct? if it is not spent this year can they "take it back"? or can you spend it anytime you want?
Even if you're spending it, it could be on stuff that is non-hiring-related.

The problem with the jobs package is that it was TWO ORDERS OF MAGNITUDE too small. So of course it isn't doing what it is purported to be doing, because it's just pissing in the ocean.

We need another trillion dollar stimulus, and we'll need another one next year, until the financial sector stops being a money laundering business for casino gambling. Or else we can accept 10% unemployment indefinitely as a fact of life, as the Obama team apparently has.

Who would have thought that it would be "Yes we can . . . eat cake."
"I’m convinced that it has made things somewhat less bad than they otherwise would have been, and to the extent that we’re able to buy time, it’s at least possible that revenues will rebound enough (and quickly enough) to avoid catastrophe."

I'm convinced that the stimulus had the opposite effect. It enlarged the debt so much that job-killing tax increases are now inevitable. Employers face too much uncertainty to be able to create new jobs, and this won't change for many years.

Here's a thought experiment. If we could bring unemployment down to 5%, and so boost tax revenue while reducing unemployment expenditures dramatically, but the way to do it is to suspend or eliminate the corporate tax, would you favor that change? Why not?
Post a Comment

<< Home

This page is powered by Blogger. Isn't yours?