Ideas to Improve Pennsylvania's Fiscal and Economic Health

:: Fat Facts of the Week ::

There are few things in Pennsylvania that $21,827,691,342.60 cannot buy. Yet, with his budget proposal, Governor Rendell expects taxpayers to believe that $11,485 in per-pupil spending is simply not enough to adequately educate Pennsylvania’s children. In fact, not only does the Governor think we need to spend more on public schools—he thinks that in order to improve education we need to expand the public school system into preschool education. From the 1986-87 to the 2005-06 school years, taxpayer spending on government-run K-12 schools increased from $6.6 billion to almost $22 billion—a 72% increase after adjusting for inflation.

Current spending costs nearly $4,400 in state, local, and federal taxes per Pennsylvania household. The Commonwealth spends more on public education, per-student, than all but five other states (adjusting for cost of living differences), and ranks 4th in average teacher salary. Between 1996-97 and 2005-2006, Pennsylvania’s public schools have added over 43,000 staff—teachers, administrators, and support staff—while enrollment increased by only 26,000. Thus, for every new student, schools added 1.6 staff. How is the return on our investment?

Pennsylvania continues to rate near the bottom in SAT scores, finishing 47th among the states in average total score in 2006. Among the 13 states and DC with a 70% or higher participation rate, Pennsylvania ranks 11th in average SAT Score.
SAT scores in Pennsylvania remain stagnant. The average composite score for Pennsylvania students has changed only marginally since 1987; the 2006 results were 0.3% below what they were in 1987.
The more time students spend in public schools, the further behind they fall. At both the state level and in local districts, proficiency rates on the state test get worse as our children get older, bottoming out on the 11th grade test.
In Philadelphia, only 27% of 11th graders are proficient in math and 33% in reading. Harrisburg City schools are even worse—only 15% of students are proficient in 11th grade math and 28% in reading.
On the National Assessment of Educational Progress (NAEP) test, used to evaluate state standards, Pennsylvania students score much worse. In 2005, NAEP results indicate that most 8th grade students in Pennsylvania were below their grade level (only 36% proficient in reading and 31% in math).
A recent report from the Manhattan Institute indicates that Pennsylvania’s real graduation rate is 81%, but only 40% of students graduated ready for college in 2002.

Clearly, more dollars have failed to produce more scholars in Pennsylvania. While our investment in public schools continues to escalate, the effect on student learning remains negligible. We should not be celebrating marginal improvement in test scores while tens of thousands of children are left behind. It is clear that without substantive reform of our school system, we will never achieve the level of performance our parents and communities demand and children deserve.

:: Diet Tip of the Week ::

Instead of increasing spending on the latest fad in public education, expanding Pennsylvania’s Educational Improvement Tax Credit (EITC) would dramatically improve educational opportunities for children while reducing spending and property taxes. The EITC offers corporate tax credits for donations to approved scholarship and educational improvement organizations.

The cap on EITC credits for FY 2006-07 is $59 million—$36 million for approved K-12 scholarship organizations, $18 million for educational improvement organizations, and $5 million for Pre-K scholarships. Scholarship must be awarded to low- to moderate-income families to be used for tuition at the school of their choice. This program is immensely popular among parents, but supply is not meeting demand. Businesses willing to donate are denied a tax credit under the cap on the program, while hundreds of low-income families are denied a scholarship to send their children to a better or safer school.

With an average scholarship amount of just over $1,000, the EITC offers families the opportunity to choose the right school to send their children to, at a fraction of the cost of district-run schools. A recent report by the Milton and Rose D. Freidman Foundation touts the fiscal benefits of school choice. The report estimates that the scholarship portion of the EITC has saved taxpayers a net of $144 million since 2001:

An estimated 154,000 students have received a scholarship through the EITC program, including 32,000 in the 2006-07 school year.
The EITC has provided tax credits totaling $161 million for donations to scholarship organizations since FY 2001-02.
Assuming a mere 30% of students would have returned to district schools in absence of the scholarship, school districts saved an estimated $305 million in instructional expenses.
In other words, for every $1 dollar in EITC tax credits, school districts save at least $1.89 in instructional costs.

In his budget, Governor Rendell proposes a $539 million increase in funding for public schools, but an increase in the EITC of only $1.4 million. Yet over 14% of students attend non-public schools, and many more would if they had the means to do so. If we applied the Governor’s proposed increase proportionately by enrollment, we would increase funding to school districts by $465 million while expanding the EITC by $74 million. An expansion of the EITC would encourage the private sector to continue providing educational services while offering low-income families more educational options for their children.

:: Toward a Healthy State ::

Governor Ed Rendell’s budget proposal for the 2007-08 fiscal year includes $75 million for “Pre-K Counts”—a taxpayer-funded program which would provide grants to school districts, Head Start programs, and government-approved providers at a projected cost of $6,750 per child. “Free” preschool would be made available to parents of 11,100 children in the first year (and a projected 30,000 students by year two) in certain areas of the state, without regard to family income.

Gov. Rendell’s “Pre-K Counts” will send more taxpayer money to school districts and Rendell Administration-approved schools to create and operate preschools. Ironically, the push for universal preschool is in response to the poor academic performance of the same system that will control the vast majority of “Pre-K Counts” money and academic standards. Yet the solution is to further expand that struggling system’s scope? Advocates of universal preschool intend for every three- and four-year-old child to have access to government-run or government-approved preschools at taxpayers’ expense. While supporters argue that state-provided preschool saves money over the long-term, the research suggests that the benefits of such programs are frequently overstated while the negative consequences are ignored. In contrast to proposals for taxpayer-funded universal preschool, a coalition of organizations is pointing to Pennsylvania’s successful model of funding preschool education for low-income families—the preschool Educational Improvement Tax Credit (EITC).

The preschool EITC provides tax credits to corporations that contributed money to state-approved scholarship organizations.
The preschool scholarship portion of the EITC—is currently limited to $5 million per year—has provided nearly 11,000 students over the last three school years at a per-student average cost of $1,370. Gov. Rendell’s “Pre-K Counts” program would cost taxpayers $75 million per year at an average per-student cost of $6,750—five times greater than the costs of EITC-funded preschool.
The EITC promotes educational and academic diversity by encouraging private, religious, and public delivery of preschool education. “Pre-K Counts” will promote a homogenous approach in which government bureaucrats make important decisions, and the values of Harrisburg—rather than the values of parents and school communities—are taught.
The EITC encourages businesses to take an active role in funding preschool options for families, whereas “Pre-K Counts” will cost state taxpayers and lead to higher school property taxes.