"Unavoidable Costs" Are Avoidable

Bruce Baker Twitter-points us to a great op-ed about the fiscal disaster taking place in Philadelphia's schools. Read the entire thing to understand that huge inequities are taking place right now in Pennsylvania (a situation Chris Christie aspires to bring to New Jersey).

I agree with nearly everything in the op-ed; however, there is one passage I take issue with:

Has the School District been spending more than it was given? No.

The District ran surpluses of about $30 million a year in 2009, 2010, and 2011.  In 2012, after massive spending cuts to make up for a 15 percent reduction in state and federal funding and unavoidable cost increases in areas like health care, pensions, utilities and charter schools, the District says its 2012 budget is close to balanced. So, the District is not living beyond its means. [second emphasis mine]

It's the use of the word "unavoidable." OK, I understand the term is used here to mean "unavoidable for the Philadelphia school district," but we need to continually remind ourselves that so many of our "unavoidable" education costs are completely avoidable.

Take health care. Our country spends more than twice as much as Britain, Sweden, and France, yet has worse health outcomes, and not everyone is insured. That is insane, and it directly affects costs for districts like Philadelphia. Maybe Obamacare will really cut costs, but it's obvious to me it won't cut them nearly as much as a single-payer system would have.

How about pensions? Well, let's look at Pennsylvania:

Despite their tepid returns, retirement systems that have bet big on alternatives are paying a hefty tab. While funds with little stakes in hedge funds and private equity pay an average of 17 cents on every $100 invested, funds with large stakes pay 77 cents.

The Pennsylvania state retirement system, which has about 46 percent of its money in alternatives, paid those managers 77 percent of the system’s total $195 million in fees last year. Last fall, the system replaced the two consulting firms that had emphasized those investments. Over the last five years, its annualized returns of 3.6 percent lagged behind its peers’.

In a series of e-mails, Pamela Hile, a spokeswoman for the Pennsylvania fund, said that the fund had made many new investments in alternatives from 2004 to 2007. Some of these entities, like venture-capital funds, often have negative returns in the early years as that money is invested, she said.

Noting that pension funds have time horizons that stretch into decades, Ms. Hile added that the retirement system had outperformed its 8 percent target over the last 25 years, with an 8.8 percent annualized return. [emphasis mine]

Wait - is that before or after the fees?

The sad truth is that Wall Street has been overselling itself for years as a justification for taking more and more off of the top. The promise of deferred compensation kept public employee salaries artificially low. But now that employees are demanding the promises made to them be fulfilled, politicians are breaking their word (see the top of this blog).

Was this "unavoidable"? Absolutely not. We've allowed Wall Street to write its own rules for years, and this is the price we're now paying. Taxing the "wealth" generated in financial markets would go a long way toward making pensions solvent. Hell, they're making money hand over fist by playing around with our funds; why do we allow them to pay reduced tax rates for the privilege?

Utilities? This country has never been serious about weaning ourselves off of fossil fuels; what if we were? How much would we have saved by now if we had implemented real energy conservation measures in our schools and all over our public infrastructure?

And charter schools? Well, don't even get me started...

Maybe not all of these cost increases were completely "avoidable," but they all could have been mitigated - they still can be. The problem is that a local school board does not have nearly the political clout needed to make these things happen. This has to be a nationwide effort.

We, as a country, as wasting a ton of money in health care costs, retirement costs, energy costs, and yes, on school "choice." If we chose to, we could cut all of those costs and still have good health insurance, decent retirements for teachers, plenty of energy, a cleaner planet, and money to affect real change in the lives of children in poverty.

It is not the fault of the education system, nor of educators, nor of their unions, nor of local districts, that we, as a nation, continue to make these poor decisions. Every one of them is "avoidable."

The only question left is whether we care enough about our children to put aside the interests of those who profit from these completely "avoidable" choices.