Mortgaging the Future of Schools

March 14, 2012 at 1:33 PM Leave a comment

What is a healthy debt load for a school district or other education authority to carry? Taking a first glance at the funds flow and balance sheets of a handful of school districts, there seems to be a wide variation in debt and debt servicing obligations. Investments in facilities and carrying unfunded pension benefits would account for most of these liabilities. So who is minding this store?

One of the key strategies for elementary and secondary education reform is decentralized funding of students. Directing dollars to mission just makes good financial sense. So does economic analysis of the production function that supports student learning. However, a less tangible benefit of this movement would be the improved transparency of financing decisions overall. In fact, to keep the primary mission of educating children intact, we need to get a handle on prior commitments of funds that will crowd out future investments in our children.

School districts across the nation have spent money on facilities or promised generous pensions to retirees in a manner that belies the shallow pockets of finance available to them. Cities and towns generally share control over their district school budgets and building funds with school committees, composed of elected or appointed local citizens. Often, a small number of committee members drive fiscal decisions, and they tend to be tightly aligned and like-minded incumbents. The depth of insight into the long-term financial impact of politically expedient decisions cannot be underestimated.

Decisions to mortgage the future of schools cannot go unchecked. Nor can they be swept into a blanket funding formula that rewards the highly leveraged at the expense of those who have been more prudent fiscally. We need to assess the solvency of all school systems and develop policies to serve the children equitably in the future. In the meantime, we need to go forward with attempts to develop weights for direct student funding that goes to current operating expenses, not to finance excess liabilities.

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Entry filed under: Financial data.

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