LCB confirms: As NV's K-12 spending has increased, results have decreased

And the findings of the Legislative Counsel Bureau, which is the official research arm of the Legislature, show these spending increases were substantial.

In the past eight years (from the 2000-01 school year to 2008-09), inflation-adjusted, per-pupil education spending has increased from $7,219 to 8,597 in the Washoe County School District and from $6,768 to $8,381 in the Clark County School District.

That's a $1,378 or 19 percent increase per student in WCSD and a $1,613 or 23 percent increase per student in CCSD. On these charts, the "5 Function" figure includes capital costs, so the "Accountability" line is what's being compared here.

And as Nevada has dramatically increased funding, results have gotten worse. In the last eight years (2002-10), Nevada's estimated graduation rate has dropped 11 percent, from 68.3 percent to 57.1 percent.

And even that might be too generous. Education Week reports that Nevada's graduation rate dropped from 65.7 percent in 1997 to 41.8 percent in 2007 — a shocking 23.9 percent decrease. Also during this time period, Nevada's scores on the NAEP fourth-grade reading test have been stagnant.

These findings of the LCB confirm what NPRI has been seeing for years, but they're especially timely now. That's because if Monday's Economic Forum revenue projections come back higher, our elected officials are likely going to put those tax dollars into education.

While some may claim this is important, the above statistics from the LCB confirm that spending more on K-12 education hasn't improved student learning in Nevada. Instead of dumping more money into a failing system, Nevada needs to institute proven education reforms if it wants to increase student achievement.

Also with about $500 million of very objectionable gimmicks in the governor's budget (a $200 million loan and taking $300 million from school district debt service reserves), Gov. Sandoval and the Legislature would be better off using any extra money projected by the Economic Forum to eliminate these one-time revenue instruments.

The LCB didn't just decide to conduct and publish this research, either. Assemblyman Ira Hansen requested that the LCB find out this information about Nevada's education spending. He then sent it to all of the members of the Assembly and submitted it into the record during a recent Assembly Committee of the Whole meeting.

Let's hope taxpayers thank Assemblyman Hansen for his work obtaining and publicizing this information and that each and every member of the Legislature and the public considers these facts.

Democrats supported using money from schools’ capital funds for operating costs in 2010

I've been going through the Assembly Democrats’ information sheet on K-12 education funding, which uses brazen distortions to claim there's a $1.37 billion reduction to K-12 education spending in Gov. Brian Sandoval's budget, and came across this nugget.

The 2009 Legislature, during the 26th Special Session, approved the use of a total of $45 million of Clark County School District capital projects funds as local funds available for operating purposes during the 2009-11 biennium.

In his proposed budget, Sandoval wants to use about $300 million from school districts’ debt service account for operating funds.

During this session, Democrats have rightly pointed out that using this one-time money is a gimmick and a poor way to budget.

It's just ironic that the gimmick legislative Democrats are denouncing now is very similar to the one they used a year ago (money in the capital projects fund comes from selling bonds and money in the debt service account is used to pay those bonds off). This is a moment worthy of The Captain Louis Renault Award.



The real answer is to reduce spending, ideally down to pre-2005 levels, through performance-based budgeting.

Why pre-2005? Because in 2005, Nevada raised inflation-adjusted, per capita spending by 30 percent (pgs. 5-6).

That level of spending wasn't sustainable then and isn't sustainable now, as these gimmicks — from members of both parties — show.

Sandoval's total proposed reduction to state education spending is less than 6.1 percent

There's a lot of nuance when dealing with education spending in Nevada, so let's look at the findings first.

Under Gov. Brian Sandoval's proposed budget (as amended on March 28), Nevada's required state support of education would decrease by less than 6.1 percent, as measured by total and per-pupil spending and compared with the previous biennium.

Less than 6.1 percent. Think about that for a moment. At a time of 13 percent unemployment and when businesses have seen their revenue decline by up to two-thirds and business owners have taken 50 percent pay cuts (or more), the reductions we've been hearing leftists and union bosses complain about ad nauseum amount to less than 6.1 — 6.1! — percent.

Some Assembly Democrats are even trying to make the case that this 6.1 percent reduction is a $1.37 billion cut to education. This claim, once you've even taken a cursory look at the numbers (pages 9 and 10), is laughably false.

So let's take a look at the Assembly Committee of the Whole fact sheet on K-12 education spending. Pages 1-7 do a good job describing what's being proposed and the recent history of K-12 spending, but it's on page 9 where you can compare total spending amounts.

Education spending in Nevada is governed by the Nevada Plan, and the state's portion of education funding is directed through the Distributive School Account. The Legislature sets the total spending amount and funds whatever part of that amount is not made up by local taxes.

All that is to say, you can compare the total required state support (including the local dollars) for the 2009-11 biennium to what Gov. Sandoval is proposing for the 2011-13 biennium. This comparison shows how much the DSA (aka state education spending) has increased or decreased. And this is a very accurate way to measure, because it includes both the local and state portions of the DSA.

In the 2009-11 biennium (fiscal years 2010 and 2011), Nevada's Total Required State Support was $5.02 billion (p. 9). For the 2011-13 biennium (fiscal years 2012 and 2013), Sandoval has proposed Total Required State Support of $4.55 billion (p. 9) plus $161.6 million for school districts in Sandoval's block grant program (p. 5 and FY 13 only), for a total of $4.71 billion.

That's a difference of $305 million, or a less than 6.1 percent reduction in total spending and in spending per pupil. (The number of students in Nevada's schools is estimated to decrease between the 2009-11 biennium and the 2011-13 biennium).

This fact is important to remember for two reasons. First, it's necessary to refute ridiculous claims, like the one on page 10 of this same document, which claims to show that Sandoval's proposal contains $1.37 billion of reductions to K-12 education. As shown above, that's absurd.

Second, if, when the economic forum meets next week, it provides a higher revenue estimate than it did in December 2010, that money isn't needed to save education from devastating cuts. If the Legislature and the governor want to budget responsibly, that extra money should go to eliminating the two major gimmicks in Sandoval's budget, the $200 million loan and the $300 million the state wants to take from school district debt service accounts.

While overstating the cuts to K-12 education may be what union bosses want to hear, it's both dishonest and distracting from what Nevada's children really need — proven reforms like the ones Florida's children are benefitting from right now.

Notes for anyone wanting to follow my math on the Assembly Committee of the Whole fact sheet on K-12 education spending p. 9: To find the total spending for the 2009-11 biennium, I combined the spending from the second and fourth columns (2010 Actual and 2011 Estimate as of 12/21/10). To find the total proposed spending for the 2011-13 biennium, I combined the spending from the seventh and eighth columns. The seventh column is mislabeled and should read 2012, not 2013. Funding figures for the block grant in FY 2013 are on p. 5.

Edited (4/28/2011) to clarify where the DSA funding comes from.

New Keynes v. Hayek rap video released today!!!

The moment has finally come for all of you econ geeks who have been teeming with enthusiasm over the sequel to the celebrated "Fear the Boom and Bust" video featuring a battle rap between two iconic economists who became famous rivals - John Maynard Keynes and F.A. Hayek.

I've just watched "Fight of the Century: Keynes vs. Hayek Round 2" and the production quality is every bit as good as the first. In this version, they're not just debating theory, but the impact of government policies in the Great Recession.

Enjoy!!!

Mining to lose power of eminent domain abuse?

Senate Bill 86, which would strip the mining industry of its eminent domain powers, has passed both houses and appears headed for a gubernatorial signature. This bill would strengthen the rights of property owners, especially in rural areas by protecting them from a private party's ability to exercise eminent domain powers.

Such a policy change should be seen as a huge victory for those who understand the importance of private property rights. It's probably the most significant legislation along these lines since the PISTOL amendment - which prohibited Kelo-style "economic development" takings - was added to the Nevada Constitution.

ACLU misleads legislators, public on constitutionality of vouchers

I can't figure out if the Nevada ACLU is being dishonest here or is just ignorant of a recent Supreme Court ruling allowing vouchers to be used for religious schools. Either way, it's shameful and — assuming the ACLU has the necessary intellectual honesty — embarrassing for it to be misleading lawmakers and the public like this.

Here's what Allen Lichtenstein, general counsel with the Nevada ACLU, said about Sen. Michael Roberson's recent proposal to amend the Nevada Constitution and allow parents to use education vouchers at religious schools:

More pointedly, a longtime ACLU attorney said a voucher program that catered to faith-based schools would violate the First Amendment of the U.S. Constitution. ...

Allen Lichtenstein, lead attorney for the American Civil Liberties Union of Nevada, said the Establishment Clause in the First Amendment would be violated. The clause says "Congress shall make no law respecting an establishment of religion."

Now, this could be debatable, except that the Supreme Court has recently ruled on this issue — whether a voucher program that allows parents to send their child to a religious or secular private school is constitutional under the federal constitution. Here's what the U.S. Supreme Court said in its 2002 Zelman v. Simmons-Harris decision.

The State of Ohio has established a pilot program designed to provide educational choices to families with children who reside in the Cleveland City School District. The question presented is whether this program offends the Establishment Clause of the United States Constitution. We hold that it does not. ...

The Establishment Clause of the First Amendment, applied to the States through the Fourteenth Amendment, prevents a State from enacting laws that have the "purpose" or "effect" of advancing or inhibiting religion. Agostini v. Felton, 521 U. S. 203, 222-223 (1997) ("[W]e continue to ask whether the government acted with the purpose of advancing or inhibiting religion [and] whether the aid has the `effect' of advancing or inhibiting religion" (citations omitted)). There is no dispute that the program challenged here was enacted for the valid secular purpose of providing educational assistance to poor children in a demonstrably failing public school system. Thus, the question presented is whether the Ohio program nonetheless has the forbidden "effect" of advancing or inhibiting religion. ...

We believe that the program challenged here is a program of true private choice, consistent with Mueller, Witters, and Zobrest, and thus constitutional. As was true in those cases, the Ohio program is neutral in all respects toward religion. It is part of a general and multifaceted undertaking by the State of Ohio to provide educational opportunities to the children of a failed school district. It confers educational assistance directly to a broad class of individuals defined without reference to religion, i. e., any parent of a school-age child who resides in the Cleveland City School District. The program permits the participation of all schools within the district, religious or nonreligious. Adjacent public schools also may participate and have a financial incentive to do so. Program benefits are available to participating families on neutral terms, with no reference to religion. The only preference stated anywhere in the program is a preference for low-income families, who receive greater assistance and are given priority for admission at participating schools.

A summary of the decision is here.

The Supreme Court really couldn't have put it any more clearly. A voucher program that empowers parents to choose a school for their child (private, religious, online, etc. ...) is constitutional under the U.S. Constitution.

The ACLU is factually wrong on the constitutionality of vouchers and should — publicly and on the record — correct its misstatements.

I called the ACLU yesterday for comment, but no one there has returned my call. If I get a response, I'll post it here.

Redistricting likely to muddy the waters

On Thursday, the legislative majority plans to release proposed political redistricting maps that would outline new legislative jurisdictions for the next decade in Nevada.

To this point in the legislative session, there has been a deafening silence on the redistricting debate and, indeed, the timing of this event immediately calls into question the majority's motives. Speculation has been rampant that Democrats will infuse the redistricting debate into the budget debate - extracting support for tax increases by threatening to draw Republican lawmakers out of their districts. The timing of the majority's unveiling of their proposed redistricting maps would seem to validate these suspicions.

The majority's last strategy for breaking impasse on the budget debate - pulling budget bills out of the budget committees and hearing them before the press in Committee of the Whole meetings - appears to have backfired. The budget stalemate between Democratic and Republican lawmakers appears to have only intensified as both sides have further entrenched their positions. As such, legislative Democrats appear to be playing their last card in order to lure some Republicans into supporting major tax increases.

It's likely that legislative Democrats will become increasingly desperate for pro-tax Republican votes as the session wears on. These majority lawmakers will try to avoid a special session to resolve the budget, wherein the agenda would be controlled by the governor.

They are ready to play their trump card. We'll see where it goes.

The racial element of prevailing wage laws

In his recent study on Nevada's prevailing wage laws, Geoff Lawrence examines how the original backers of such laws were motivated by racial factors — specifically, their desire to price black laborers out of the market.

Geoff writes:

Congressional records make it clear that the intent of the Davis-Bacon Act was to undermine the competitive advantage enjoyed by a specific category of highly mobile construction workers: Southern blacks. Sen. James Davis of Pennsylvania and Rep. James Bacon of New York, among others, feared that contractors who used black labor would underbid contractors using white labor and win federal contracts.

Now, modern-day supporters of prevailing wage laws would no doubt argue that, even if the earliest supporters of such laws were motivated by a desire to discriminate on racial grounds, no such desire exists among supporters today. And they'd no doubt be correct. So is that particular angle irrelevant?

Not at all, and for two reasons:

First, history is important, plain and simple. Even if some particular facts seem to become less relevant over time, it's still good to recognize how we got to where we are today.

Second, and more crucial, is that even if the racial motives behind the laws' creation are less relevant now, the fact remains that the tactics used to accomplish the desired goal still tell us a lot.

After all, those who pushed for prevailing wage laws as a means to price black laborers out of the market did so because they understood keenly the distortive impact that such laws have on the market. And that remains as true today as it was back then. Which is why such laws were, and are, a bad idea.

Who prevails under prevailing wage?

Not taxpayers, that's for sure.

A new NPRI study, authored by the Institute's own Geoff Lawrence, exposes how Nevada's prevailing wage laws subsidize unionized labor while increasing the construction costs paid by taxpayers.

Check out the executive summary of the study here and download the full study here.

Oh, and by the way, Geoff will be on Heidi Harris' program on Monday, April 25 at 8:00 a.m. to discuss the study. Tune in to KDWN, AM 720.

Assembly Committee of the Whole, April 19

I'm sitting in the galley for the first Committee of the Whole meeting to debate the state budget. For those who are unaware, the legislative majority has decided that a prudent strategy in rallying support for increasng the tax burden on Nevada families would be to pull all appropriations bills out from the budget committees and debate them on the floor, and before the press, in Committee of the Whole meetings. These meetings are set in the evening to coincide with the evening news hour in order to maximize the strategy's effectiveness.

Tonight's is the first of these meetings and lawmakers will be discussing state appropriations for the Distributive School Account (DSA). The DSA is the general fund appropriation that is used to supplement some local school district revenues in order to reach the legislatively-defined "Basic Support per Student" amount of per-pupil K-12 financing. The "Basic Support per Pupil" amount (usually round $5,000) does not include all school district revenues. Total support (for operating costs only) usually is closer to $8,000. Including capital expenditures and debt repayment, Nevada school districts spend closer to $13,000 per student.

However, spending amounts are not reall what matters when it comes to K-12 education. What matters is student performance. And there is no meaningful correlation nationwide between per pupil expenditures and student performance. It matters more how the educational system is structured than how much is spent per pupil. Studies nationwide have shown that the degree of school reform within the states shows a much higher correlation with student achievement. Particular areas of reform that contribute to higher results include: school choice, open enrollment, alternative teacher certification, and grading the performance of individuals schools and teachers.

With regard to expanding school choice, NPRI has already designed a Public Education Tax Credit program that would save $1 billion over the first 10 years while dramatically improving educational choice and quality.

We'll see if the legislature takes note of this data and acts to give better educational opportunities to students or, once again, elects to simply carry water for teachers' unions...

Legislative town hall today

This afternoon I will be participating in a 20-plus person panel discussion at the legislative building in Carson City discussing policy alternatives for policymakers to follow in the current session. The discussion will follow a town hall format and allow audience members to ask questions toward the end. It is open to the public and begins at 3:00 pm in Carson City.

The event will be moderated by Assemblyman Pat Hickey and the other panelists include:

Dr. Ty Cobb
Caole Vilardo
Dr. Heath Morris
Neil Medina
Mary Lau
Dr. Elliot Parker
Chuck Muth
Bob Fulkerson
Tray Abney
Heidi Gansert
Dave Mumke
Assemblywoman Debbie Smith
Danny Thompson
Senator Michael Roberson
Clara Andriola
Jim Pfrommer
Norm Dianda
Assemblyman Ira Hansen
Assemblyman Cresent Hardy
Senator Robert Townsend

Crunch time

All bills must pass out of legislative committees by tomorrow and so committees are packing bills into a marathon session until that point.

Check out the calendar of meetings for today and tomorrow. The Assembly Judiciary Committee scheduled 15 - yes 15 - bills to be heard this morning. Senate Health and Human Services has 11 bills on the agenda for this afternoon.

Odds are that committees will meet very late into the night tomorrow as crunch time arrives. Any bill that does not make it through committee before midnight tomorrow dies without a hearing. There are exceptions granted to certain budget bills. However, as per legislative leadership's new strategy, those bills will go directly to the floor to be heard by a Committee of the Whole anyway.

School voucher amendment

Last night, testimony was heard by the Senate Committee on Legislative Operations and Elections on SJR10, a resolution that would amend the Nevada Constitution to allow for public education vouchers. The hearing drew a large crowd, particularly in Las Vegas where a roomful of students and parents showed up to support the resolution. The R-J's Doug McMurdo covered the hearing here.

SJR10 would not immediately institute a public school voucher program. However, it would allow the legislature to create one in the future by eliminating current constitutional barriers, as embodied in the so-called "Blaine Amendment." In addition to drawing the support of lawmakers, the resolution would need to draw majority support from the general electorate in two consecutive elections in order to change the constitution.

While this is an aggressive approach, a constitutional amendment is not necessary to increase school choice options. There are a plethora of alternatives to outright vouchers that would not be inhibited by the Blaine Amendment. One such alternative, a tuition tax credit program similar to Florida's Step Up for Students program, has been modeled by the Nevada Policy Research Institute. The program would save roughly $1 billion over its first 10 years while dramatically increasing school choice and, consequently, student achievement.

New this week at npri.org

If you haven't done so already, be sure to check out a couple of new pieces up at npri.org.

We've got a commentary by Victor Joecks on Gov. Sandoval's attempts to adopt many of the education reforms that have made Florida a stunning success story.

And we've got a news story from Kyle Gillis that exposes how stimulus-funded projects have been able to receive preferential regulatory treatment over private-sector projects.

Be sure to check them out.

Senate Legislative Operations and Elections Committee, April 12

Here is my testimony regarding SB 98, a bill that would change Nevada's collective bargaing statutes by granting more flexibility to local government administrators:

Mr. Chair and members of the committee, thank you for hearing my testimony today. My name, for the record, is Geoffrey Lawrence and I am deputy director of policy at the Nevada Policy Research Institute.

I’d like to speak briefly regarding the fiscal impact of unionization at the local government level in Nevada. Public employees in Nevada, by any measure, are highly paid – particularly at the local government level. We really have a caste system in Nevada wherein public employees maintain lifestyles far above the taxpayers who support them. On average, public-sector workers in the Silver State are paid 28.1 percent higher than private-sector workers in a similar job classification.

This disparity is most pronounced at the local government level where administrators are required to negotiated collectively with workers. NPRI has reviewed the most recent annual statistics on public employee pay published by the US Census Bureau. Those figures reveal that state workers in Nevada, on average, are paid 7 percent more than the national median for state workers while local government workers are paid 31 percent more than the national median. This is in spite of the fact that Nevada enjoys a relatively low cost of living. In fact, including benefits, public employees in Nevada are the third highest paid in the nation – behind those of CA and CT and ahead of states with remarkably higher costs of living.

This wage premium adds significantly to the labor costs faced by local governments and constrains their ability to respond in cases of extreme fiscal crisis. Based on the Census figures, NPRI has calculated that, if local government workers in Nevada were compensated merely at the national median, local governments would realize a savings of $2.3 billion over a two-year period. I refuse to believe that there is anything extreme to the notion that workers in Nevada should be compensated at a level approximating what comparable workers are paid in other states.

If Nevada lawmakers do not amend the Silver State’s collective bargaining statutes to give more leverage to local government administrators, this trend is likely to be exacerbated even further.

Majority playing hardball on budget

Leaders of the legislative majority announced yesterday that they are changing the rules regarding budget hearings mid-stream.

Their plan is to pull all budget bills out of the Senate Finance and Assembly Ways and Means Committees and move them into "Committee of the Whole" meetings where they will be debated by all lawmakers on the floor of each chamber. Apparently, the majority leadership is unsatisfied with the minority's resolve to support Governor Sandoval's budget proposals and is hoping that this move will exert additional public pressure on minority members to levy new taxes on Nevada families.

The majority's plan is to parade tax consumers to the floor where there will be additional media exposure to create sob stories for the press. Their hope appears to be that this will create sufficient pressure on minority members to induce them abandon support of Governor Sandoval's proposed budget. What they hope will go unnoticed are the stories of Nevada businesses that would close their doors as a result of any additional tax hike and the newly unemployed who would be unable to feed their children.

A very small sampling of those stories has been collected by the Nevada Policy Research Institute and published under the title "Nevada's Tax Debate: The Untold Stories." The human destruction that results from high taxes and burdensome regulation, although generally overlooked, is nothing less than overwhelming. (That reminds me...did I mention that ATLAS SHRUGGED DEBUTS IN THEATRES THIS WEEK!!!)

NPRI further looks forward to the opportunity to make the case for reining in state spending in a more public setting, particularly in light of the rampant increase in spending over the past decade. State liabilities today far outstrip available resources and, without substantial reform, runaway costs for Medicaid and other programs in coming years will only exacerbate this problem. The need for reform in every major area of state spending - from K-12, to higher education, to Medicaid, to Public Safety - has never been more clear.

In addition, NPRI will take advantage of the additional floor votes that will result from this new strategy by including them in our Legislative Report Card for 2011.

Testimony to Senate Finance Committee, April 11

Below is my testimony this morning regarding SB 272, which would eliminate the current statutory requirement for baseline budgeting:

My name, for the record, is Geoffrey Lawrence and I am deputy director of policy at the Nevada Policy Research Institute. I’m happy to speak to you today regarding the key policy concepts contained in Senate Bill 272. As you may be aware, NPRI is a 501(c)(3) organization and, as such, does not advocate for or against specific legislation. However, I believe the main policy idea embodied in Senate Bill 272 has merit.

The bill’s language does nothing more than to confer greater flexibility to the state budget director to adopt alternative methodologies for constructing the Executive Budget proposal. The budget director is currently compelled by statute to use the “baseline” budgeting method, which continuously carries over spending on all programs while adding in new spending to account for inflation, caseload adjustment and automatic, across-the-board, annual employee pay raises.

These so-called “roll-up” costs are substantial. For the 2011-2013 budget cycle, they would increase General Fund spending by $1.93 billion or 30.1 percent over the $6.42 billion spent in the 2009-2011 budget cycle. In fact, the terms “base” or “baseline” really are misnomers because the line is continually moving upward.

The statutory requirement for baseline budgeting hampers the administration’s ability to adapt its budget proposal to the changing needs and resources of the state.

Further, the base budget figure creates a perpetual justification for burdening Nevada families with new or higher taxes. Even when tax revenues are growing, the baseline budgeting process motivates lawmakers to impose new or higher taxes when the growth in revenues does not keep pace with agencies’ desired growth in spending. As I said, the base budget figure for the upcoming budget cycle represents a 30.1 percent increase over the current budget cycle. It is rarely the case that revenues grow at an equal rate and so, even if Nevada were in a period of sustained economic growth, it is likely that agencies’ base budget requests would still outpace citizens’ ability to finance that spending.

Perhaps the most glaring weakness of the baseline budgeting technique, however, is that it fails to impose meaningful accountability over the use of public funds. A baseline budget effectively means that all state programs receive a free ride into the next budget proposal, regardless of performance. In other words, the technique can be used to protect workers who are not doing their job.

While the administration and/or lawmakers can perform ad hoc reviews of the effectiveness of particular programs, a base budget does not systematically require state offices to justify their existence. Yet, every state office should constantly be reviewed to determine whether they are accomplishing the policy objectives outlined for them by lawmakers and, indeed, whether those objectives remain high priorities for the state and its people.

This is why the Nevada Policy Research Institute supports the concept of performance-based budgeting, known alternatively as “Results-Based Budgeting” and “Budgeting for Outcomes.” Performance-based budgeting imposes systematic accountability over the use of tax dollars by more closely aligning spending with results.

Many state offices do not have clearly articulated goals and, as such, it is impossible to measure performance toward those goals. Others have performance metrics ill-suited to measure progress toward the supposed policy objective. For instance, the performance indicators currently used to evaluate Nevada Check-Up include:

1. Average monthly enrollment.
2. Average eligibility processing time in days.
3. Customer service phone call abandonment rate.

These metrics do nothing more than trumpet how many people have signed up for the program; they say nothing about whether or not its participants have benefitted. More befitting metrics might detail how the program has impacted the health insurance coverage rates of children or, even more significantly, how the program has impacted health outcomes for children.

Research nationwide shows that the majority of new enrollees in State Children’s Health Insurance Programs, like Nevada Check-Up, held private health insurance policies prior to enrollment – indicating that most SCHIP programs have done a poor job at targeting families that really needed help. As such, it makes little sense to use performance metrics that trumpet high enrollment numbers and fail to measure progress toward the program’s more fundamental purpose.

I don’t mean to pick on Nevada Check-Up specifically. The performance indicators used for Nevada’s Medicaid programs also focus on the number of enrollees and say nothing regarding health outcomes. Likewise, the performance indicators used for most K-12 educational programs focus on enrollment and not test scores or graduation rates. If the focus were shifted to providing the greatest benefit to program beneficiaries, then tax dollars would likely be used much more effectively.

The performance-based budgeting technique allows policymakers to outline their highest-priority policy goals while ensuring that limited state resources are used for the cost-effective realization of those goals. Programs that are not justified within the framework of policymakers’ highest-priority goals – meaning those that have become irrelevant to the state’s needs – are systematically eliminated as every dollar spent must be justified in terms of how it helps to meet one or more of those goals.

In its highest form, performance-based budgeting means that lawmakers grant greater autonomy to agency directors regarding the means with which they accomplish the policy objectives outlined by lawmakers. The expertise of state personnel often extends far beyond lawmakers’ understanding of highly technical fields. As such, an efficient model of governance would see lawmakers establishing clear policy objectives and relying on the expertise of state personnel to determine how best to realize those objectives instead of debating highly specific budget line items. SAGE Commission Executive Director Frank Partlow has called this “the proper business of legislators.”

Of course, with greater autonomy should come greater accountability. In Iowa, where performance-based budgeting has been pursued aggressively, the governor signs performance contracts with agency directors who agree to deliver quantifiable progress toward lawmakers’ highest policy objectives. Failure to achieve the performance goals can result in disciplinary action, including dismissal. However, performance contracts are also structured to reward excellence. State agencies in Iowa that meet or exceed performance metrics and do so under budget are able to keep half of the savings, which can be used to provide bonuses to highly effective employees or to invest in capital equipment. The remaining half reverts to the state general fund, benefitting taxpayers.

Performance-based budgeting is simply about achieving the maximum return on tax dollars. As such, the approach has received bipartisan support in states where it has been instituted. In Nevada, former assembly speaker Barbara Buckley introduced a performance-based budgeting bill in 2009, which has been re-introduced by Assemblywoman Debbie Smith this session. Governor Sandoval has also indicated his support for a performance-based budgeting technique and has assembled a performance-based budget document.

NPRI has produced a blueprint for adopting performance-based budgeting in Nevada called “Better Budgeting for Better Results,” and I believe a copy has been supplied to every lawmaker. I can make additional copies available to anyone who is interested.

Senate Bill 272 would remove the most prominent obstacle to an effective performance-based budgeting approach by eliminating the requirement to adhere to the baseline approach. It should be noted, that Senate Bill 272 would not preclude the state budget director from creating a base budget, or from adopting any other budgeting methodology; it simply allows the budget director to choose whatever method is deemed most appropriate.

Interest groups trying to block Medicaid reform

Steve Tetreault reports today that interest groups in Washington, DC are bemoaning proposals for reform of state Medicaid programs on the basis that fewer people might receive free health benefits in the future.

Yet, one thing is remarkably clear: On its current course, Medicaid spending is completely unsustainable. Medicaid is the fastest-growing expenditure item in all state budgets and, in some states, Medicaid spending has already surpassed spending on all other programs to become the largest budget item. Without reform, Medicaid spending will eventually crowd out states' spending on all other programs, including K-12 education...and this is without considering the financial burden the Medicaid imposes on the federal government.

Medicaid programs are jointly funded by states and the federal government according to a formula that promises greater federal support to states with lower levels of median personal income. The federal government promises to pick up at least half the cost of Medicaid in every state, however. Once a state has opted into the Medicaid program, its benefits become an automatic entitlement for thoe who are eligible. Minimum eligibility requirements are also established at the federal level and, while states can go beyond the minimum, in general, they are obligated to provide coverage to the disabled, the indigent elderly and impoverished children.

State participation in Medicaid is further hamstrung by a cadre of inflexible procedural rules set by the federal Department of Health and Human Services. These rules govern how money within the program must be spent. Yet, many of these rules are cost-ineffective from the standpoint of health outcomes. In fact, there is substantial research to suggest that Medicaid beneficiaries would have better health outcomes if they were uninsured.

This has led many thinkers to consider how Medicaid could be reformed and restructured in order to provide greater health outcomes while also containing the program's runaway costs. Republicans in the US House of Representatives are considering changing federal contributions to Medicaid from a match rate into a block grant. As Charles Duarte, Nevada's Medicaid director says, "The idea of a block grant can be a good thing if the flexibility [from restrictive rules] is there and if the methodology for calculating the grant allocation is fair and reasonable."

In a recent NPRI policy study, "Better Budgeting for Better Results," I outlined ideas for Medicaid reform that lawmakers can pursue at the state level. There are a number of federal waivers for which Nevada can and should apply. In addition, Medicaid benefits could conceivably be restructured around a health savings account.

Whatever the case, it is clear that Medicaid is in dire need of reform or it will eventually bankrupt the states. Those who oppose Medicaid reform do so at their own peril.

UNR provost: College is not a job-training activity

And to think "experts" keep telling us that more money for higher education is the key to economic diversification. Maybe those "experts" should talk to the individuals running UNR.

Despite discomfort among students about the prospect of finding employment after graduation, UNR Provost Marc Johnson said alumni employment is not the university’s primary concern.

“I guess my attitude toward (the survey) is that college is not a job-training activity,” Johnson said. “The university can’t be held responsible to get people jobs.”

Johnson said the university strives to create well-rounded graduates.

Johnson also said the results of the alumni employment survey are meant to assist individual colleges and not to assess the university’s job creation for graduates. Because the university is not concerned with tracking graduate employment, the office of the Provost leaves restructuring in the hands of the deans of the different colleges on campus. [Emphasis added]

When proponents of limited government, like NPRI, talk about why government shouldn't choose the winners and losers in a society, this is a perfect example.

Some people think universities should be about the liberal arts and learning as its own end. Some think they should be a way to grow the economy. Others think a degree should be a person's ticket to a better future. Throw in the waste that inevitably comes from any government action with this multitude of cross purposes, and you've got a complete cluster. (Note: No one's "wrong" here. It's just a question of priorities and recognition that no institution can be all things to all people.)

Despite doubling Nevada's subsidy to higher education over the past 12 years and nearly doubling the amount it gives to UNR and UNLV, Nevada's economy lacks diversification and neither UNR nor UNLV graduates more than 55 percent of its students within eight years.

So is education at UNR a job-training activity? Let UNR, free of taxpayer handouts, decide that for itself.

NTU warns Nevada lawmakers

This morning, the National Taxpayers' Union sent a letter to Nevada lawmakers warning of the potential impact of proposed increases in Nevada's "sin taxes" on tobacco and alcohol. NPRI has also warned lawmakers against these highly regressive tax instruments in the past.

Here is what NTU had to say on the topic:

While proponents contend that these punitive tax hikes are a “win” for Nevada taxpayers, the reality is that these regressive schemes rarely, if ever, produce the promised revenue and are burdensome to small businesses and the poor.

Senate Bill 386, which will be heard in the Senate Revenue Committee tomorrow, would hike cigarette taxes to $2.00 per pack, an increase of 150 percent from the current rate of $0.80 per pack. The Assembly Taxation Committee will also be taking up Assembly Bill 333, which would raise cigarette taxes to $1.70 per pack and other tobacco products taxes from 30 percent to 55 percent of the wholesale price. AB 333 would also hike levies on beer, wine, and liquor. All told, this bill would constitute a tax increase on Nevada’s citizens and businesses of more than $250 million at a time when the state is still struggling to extricate itself from the recent housing and financial crisis.

Despite fanciful claims from their advocates, many tobacco tax hikes elsewhere have failed to yield the desired revenue. New Jersey reported a $52 million shortfall in tobacco tax revenues after it raised its cigarette tax by 17.5 cents. Subsequent to boosting its cigarette tax by 50 cents in 2009, the District of Columbia reported that it collected $15 million less than expected, and $7.6 million less than it collected prior to the tax hike. Other states, including Arkansas, Maryland, Mississippi, and Rhode Island, have also reported gaps in revenue collections following tobacco tax hikes.

While tobacco and alcohol products may seem like politically-convenient targets for tax increases, the reality is that they are a major source of business for convenience stores and other retail outlets. Raising taxes on cigarettes, beer, wine, and liquor would place Nevada businesses at a serious competitive disadvantage to those in neighboring states like Arizona, Utah, and California, which in some cases would levy significantly lower taxes if SB 386 or AB 333 were to pass. Moreover, since moderate income residents are more likely to partake in these products, they will disproportionately feel the impact of an increase in tobacco and alcohol taxes. Raising a tax that threatens to curtail commercial activity (thereby shrinking the revenue base) and heavily burdens the poor makes no economic sense.

NPRI testimony on AB 159

Yesterday, NPRI's Karen Gray, who has a vast amount of experience requesting public records, offered the following testimony on AB 159, which would revise provisions relating to public records and appears to succinctly eliminate the significant obstacles government entities often hurl at members of the public who request public records. Karen previously blogged on AB 159 here.

Good morning Madame Chairwoman and Members of the Committee,

My name is Karen Gray and I am an education researcher with the Nevada Policy Research Institute. I want to thank you for this opportunity to speak regarding Assembly Bill 159.

Assembly Bill 159, a bill in simple in form, could have tremendous impact on government transparency in Nevada. And, while NPRI remains neutral on AB 159, I would like to take a few minutes to share some of my experiences as a person who frequently makes public records' requests to state and local governments as well as smaller public bodies.

As a researcher, accessing public records can be a weekly, if not a near-daily activity. Nevada law requires public records not otherwise declared confidential by law to be open to inspection at all times during business hours. However, in practical application, it is rarely the case that one can simply walk into an agency, request inspection and then sift through a stack of records.

Sections I and III

While I personally have never had an agency require me to make my own copies of public records, as indicated in Section I of AB 159, I have been denied access to public records because the records contained confidential information or were maintained among other documents with confidential information. I have also been denied inspection of public records simply because the records were housed on a computer system.

However, the more typical response from an government agency is to charge a large fee to create a public viewing file.

Read more »

Nevada spends $12 million to 'create' five jobs

If you ever need the perfect example of why government shouldn't be involved in economic development, consider this amazing story from Sunday's Las Vegas Sun.

Some statistics about Copper Mountain Solar, a 775,000-panel array outside Boulder City that went online last year as the largest photovoltaic solar plant in the United States, might seem surprising.

And not in a good way. ...

Permanent jobs created: 5. That’s not a typo. State incentives developer Sempra Generation received: $12 million. That’s not a typo, either.

Gov. Brian Sandoval says the public money was well spent. “Every job is a great job,” Sandoval said when asked if the benefits of the project justify the incentives. “It’s the essence of what we are trying to accomplish here ... in terms of diversifying the economy and taking advantage of our renewable energy resources.”

Sempra Generation also received $42 million from the federal government.

This is the problem with government-directed economic-development efforts. Politicians get positive media coverage from "creating jobs" and are long gone by the time reality surfaces and the jobs are few and far between, but taxpayers are left subsidizing politically connected business owners.

Such giveaways also undermine the strong entrepreneurial spirit that Nevadans are showing. In 2010, Nevada and Georgia had the highest entrepreneurial activity rates in the country.

Individuals don't need special tax breaks to create businesses and jobs. They need the freedom that comes with an equal and low tax and regulatory burden. Unfortunately, entrepreneurs in Nevada face numerous tax and regulatory barriers.

If politicians want to create jobs and not photo-ops, they should work to lower taxes for all and reduce the red tape businessmen and women face. It's not as glamorous, but being a public servant, compared to politician, rarely is. It is, however, a whole lot more effective in the long term.

Roberson nails it: Spending growth caused current budget problems

There was a lot of great stuff in the papers this weekend, including Sen. Michael Roberson's letter to the editor in the Review-Journal that correctly identifies the cause of our current budget problems.

Back during the 2003-05 biennium, Nevada's general fund spending increased 36 percent thanks to a significant tax hike and an economic bubble. The combination of both events pumped considerable sums of money into the government's coffers. From there, Nevada's spending continued to grow faster than inflation right up until the economic bubble burst.

Even as thousands of Nevadans were laid off and hundreds of millions of dollars in wealth were lost, the Nevada Legislature proceeded to raise taxes again in order to keep the government spending bubble going despite a nationwide economic collapse.

With fewer people, fewer jobs, lower incomes and less wealth in the Silver State today than in the boom years, it should come as no surprise that tax revenues have dropped. We simply cannot afford boom-era government spending in the middle of a prolonged recession.

That kind of spending growth was always unsustainable, and now, lawmakers have to deal with the consequences of such reckless government growth.

The solution isn't higher taxes that enable more reckless spending after the economy picks up. The solution is returning spending levels to where they were previously.