Money, Money Everywhere
But not a dollar more for schools
A pair of stories from last week shine a bright light on Tennessee’s stubborn reluctance to fund public schools.
First, there’s this story about the billions in surplus dollars Tennessee is hoarding.
Governor Bill Lee and state lawmakers just used some of Tennessee’s largest ever budget surplus to fund a historically large incentive package for Ford Motor Company. Even after that deal, policymakers may still have at least $3 billion in unallocated funds to appropriate next year. This total includes a record-setting $2 billion for recurring items – and that’s before even speculating about routine revenue growth. For comparison, Tennessee’s total budget from state revenues this year was about $21 billion before the Ford deal passed.
Turns out, Tennessee continues to collect significantly more money than it plans to spend. Sycamore notes that through the first three months of the fiscal year:
Actual collections for October 2021 were about 22% higher than budgeted.
As of October 31, 2021, Tennessee had collected about 24% of the $16.5 billion in total budgeted revenue for the current fiscal year.
Collections through October were about $902 million higher (or 24%) than what was budgeted for the time period.
Significant surplus revenue has been a recurring story in recent years. It’s almost as if those in power are deliberately keeping money away from our public schools. It could be, as some have speculated, they are saving all that public money for a massive school voucher scheme.
So, the state has billions in surplus revenue and instead of returning it to taxpayers by way of investment in public schools, they’re just hoarding it. This leads to another interesting story - the state Funding Board and the recurring underestimation of revenue.
The Tennessee State Funding Board – the group responsible for setting the revenue projections used in state budgeting – met this week and got it wrong. Again. Like they do every single year.
Why does this even matter? Well, the Funding Board estimates are used to determine the parameters for the state budget. When the question is asked “why don’t we budget more for X,” the answer can be: The Funding Board says we won’t have that money.
Except, well, the Funding Board is wrong. ALL THE TIME.
Let’s look at the most recent evidence. This year, Tennessee is sitting on the largest budget surplus ever. EVER. That’s because state revenue came in at $2 billion ABOVE projections.
While the Funding Board is estimating growth for the upcoming (2023) fiscal year to be 2%, the Sycamore Institute notes that revenue for the current fiscal year is coming in at 24% above projections (so far).
Though this MIGHT be understandable given the COVID-19 pandemic, the reality is the Funding Board gets it wrong a lot – and this results in budgets that are significantly lower than revenue growth would allow. So, we now have a giant surplus while schools are significantly underfunded.
The Funding Board is Wrong — ALL THE TIME
That’s right, for five consecutive years starting in 2015, state revenue growth was double or more than what the Funding Board projected. The pandemic is no excuse. This is a planned, intentional underfunding of the state budget. Frankly, taxpayers should be furious. Money is being paid in so that the state may offer services. Then, the state is simply NOT offering the services. Or, they are offering services at levels well below what they should be.
K-12 funding is a great example. A bipartisan state body suggests we need an additional $1.7 billion to adequately fund schools. The money is there – in fact, nearly double that amount of money is there. And, we’re collecting around 24% more than planned so far this fiscal year. That’s a HUGE surplus. In fact, it’s nearly $1 billion in just the first three months of the fiscal year.
Back in 2020, the Tennessee Education Association (TEA) noted:
There is already a problem with this year’s estimates. The State Funding Board, a panel of constitutional officers and the state finance director, recently approved a growth rate of between 2.7% and 3.1%, well below even the most pessimistic predictions by economists hired by the state.
It is the lowest rate since 2014, when the board predicted little to no growth. This led then-Gov. Haslam to eliminate a promised $50 million state teacher raise. Actual revenue grew 5% in 2014-2015, leading to a $552 million surplus while teachers got nothing.
The board also had to increase its growth estimate for 2019-2020, predicting a general fund surplus of $430 – $500 million. Even this upward revision may be far too low. First-quarter general fund growth was 8.1%, more than double the revised estimate, which could generate a surplus up to $900 million.
Getting it wrong by a point or two is expected. Being off in a single year by 2 or more points is an anomaly, but it could happen. But, when actual growth is double or more your estimate year after year for five years or more, there’s a deeper philosophical problem. Or, you just don’t know what you’re doing.
It seems more likely, though, that those behind the numbers know exactly what they are doing.