(Ron Knecht) – In the last three years, Nevada’s private economy has lost 180,000 jobs, or 16% of the total. That is, nearly one of every six private-sector jobs has vanished in what looks to be truly a depression in our state.
Public-sector employment has held steady and State employment has even risen a few percent. (I use job numbers to reflect our economic condition because their current levels are available, while economic output numbers take much longer to report and thus are not current. Job numbers are representative of our overall economic condition.)
I’m not talking about losing “positions,” the term often used that includes job vacancies, as well as actual filled jobs in the public sector – but instead about real jobs held by real people working hard to earn money their families need. These job losses reflect real losses in incomes, output and human well-being, not the book-keeping entries involved when people bemoan government “budget cuts.” Very often, complaints about public-sector budget cuts mask the fact that actual spending and employment levels have increased or will increase, just not to the degree that was envisioned in some earlier version of a budget. A budget, after all, is just a plan to spend money, and thus budget cuts should not be confused with actual cuts in incomes, outputs or human well-being.
Beyond the awful three-year history in our state, the future looks just as grim. Very few, if any, well-informed economists believe we will see a recovery any time soon, and many of them are forecasting five to ten years of bumping along the bottom. These bleak circumstances are reflected in tax revenues that have dropped precipitously, opening massive gaps between state revenues and planned expenditures. And the prospects are for more of the same, with state budget gaps foreseen from $1.5-billion to $3.5-billion for the next biennium between current levels of state general-fund spending and tax revenues. Hence, we can expect significant spending cuts, tax increases or both.
Under these awful circumstances, the Governor and his budget office have prudently directed higher education and the other state agencies to submit budgets for the coming biennium with 10% cuts in general fund appropriations relative to current levels. Ten percent cuts will help but will not go even half way under the most optimistic scenarios to closing the budget gap.
For such prudent actions over the last two years, the Governor and others who oppose tax increases have been derided by some politicians, ideological pundits and self-interested tax-eaters. However, even both leading gubernatorial candidates have recently publicly stated they oppose tax increases in the coming biennium – a position endorsed by a large fraction of Nevada’s voters. Hence, a no-tax-increase position is entirely reasonably held, even if one disagrees with it, and the people deriding the current Governor and others who hold that view are simply wrong for doing so.
Moreover, criticizing opposition to tax increases when one has not stated forthrightly what taxes one proposes to increase and by how much and what cuts one is willing to make is hypocritical or worse. There is nothing wrong at this early point in the budget process with not having a complete and detailed list of cuts and increases to be adopted, and such lists are likely premature because we don’t have a full assessment of the facts that will unfold in coming months. But the disdain shown to people who take a reasonable different view is profoundly wrong unless one can say now what increases and cuts one proposes (and probably wrong even if one has a full list).
Instead of criticizing the views of others, I have been using this time to do my homework to ascertain what the facts are – because so much current debate is completely disconnected from the facts and often from any real numbers at all. A key point that emerges from doing one’s homework is the need to focus especially on actual spending and headcount figures though the fiscal year that ended eight weeks ago and dispense with the misleading budget and positions measures for historic periods. That is, budget data for the coming biennium should be compared to actual historic spending and employment, not to some old plan to spend that was based on wild-eyed optimism about recent and coming years. As an example, one would never guess in view of all the self-interested wailing about massive and multiple NSHE budget cuts that our general-fund plus ARRA funding from fiscal year 2007 to fiscal year 2010 fell by a mere 2% (from $594-million to $582-million). Moreover, our total spending – since state general fund a
nd ARRA contribute only 35% of the total, and the remaining categories rose – increased by about 9% over that three-year period (from $1,525-million to about $1,662-million).
Hence, a 10% cut in NSHE’s general-fund request for FY2012, as compared to FY2010 levels, would mean a 3.5% cut in our total FY2010 spending if non-general-fund sources do not increase as they consistently have done. If the other sources do increase, which they almost certainly will due in part to fee increases we have adopted, then it is likely that a 10% general-fund cut will not yield any net cut in our overall FY2012 spending from FY2010 levels, and maybe even a small increase. Considering the 9% overall spending growth from FY2007 to FY2010, a 10% cut in our general-fund budget for the next fiscal year would be a 5.5% increase in total NSHE spending from FY2007 to FY2012, even if all non-general-fund sources remain at FY2010 levels. Again, if the other sources continue to increase as they have done, then the increase in total spending from FY2007 to FY2012 would exceed 5.5%.
Pulling together the strands: 1) Overall NSHE spending has increased 9% while jobs in the private sector have decreased 16% over the last three years; 2) Even confining ourselves for a moment only to the general-fund budget, NSHE spending fell only 2% during a period in which businesses and families in Nevada’s private sector experienced that crushing 16% loss of jobs; 3) The Governor and budget office have directed all agencies to submit going-forward general-fund budgets with very modest 10% general-fund cuts that will not even make up half the expected gap between revenues and current spending levels; and 4) Even with the 10% general-fund cuts in our budget, total higher education spending for the next fiscal year will likely be at least 5.5% higher than it was for FY2007, while private-sector jobs can be expected to remain 16% below July 2007 levels. In sum, the real numbers and key facts are completely contrary to the self-interested narrative one hears from the tax-eaters, their political allies and th
eir echo chamber in the mainstream media (excluding the Las Vegas Review-Journal editorial page).
In view of the true picture, adopting the increases proposed today for our budget would be callous — even contemptuous — toward the vast majority of Nevadans struggling with the economic disaster caused mainly by government over-reach in taxing, spending and regulation at all levels. Our colleagues on the governing board for K-12 education did not show such cheek, but instead did their duty to the public interest and the people of Nevada by adopting the 10% cuts as requested. We have continuously enjoyed the privilege of being insulated by the political allocation of resources from the realities already rudely visited upon the vast majority of Nevadans, and expecting an increase at this point would be the height of self-absorption.
Some folks will try to justify the proposed increases with the rhetoric that public spending on education is an “investment” – as if, say, $100-million more spent on education this year will make our economy and tax revenues grow like magic next year (or even this year, according to some suggestions) to pull us out of the depression we’re in. It simply isn’t so, because such claims studiously overlook the other side of the coin: the ineluctable fact that every dollar taken in taxes is an act of destruction of human well-being because it immediately diminishes economic growth. Spending on education is, indeed, economically growth-inducing – in the very long run, such as 25 to 50 years out.
So, for that reason and others, we need to sustain reasonable education spending. But it is simply false and misleading to suggest that public education spending will in any way pull Nevada out of its current depression or any economic cyclical downturn. Ultimately, the issue is finding the balance point between our long-run needs and current dire circumstances, and the 10% cut directive does so while the budget proposed to us today does not. By the way, another version of this claim is that education can help us achieve economic diversification. That’s also true, but again only in the very long term, and current education spending is not a magic elixir that will transform regional economies in less than a decade.
We Regents need to bear in mind that, as elected public officials, our basic duty is to the people of Nevada – especially the voters and taxpayers – and to the broad public interest, not to promoting some narrow subset or private interest that can become predatory upon the broad public interest. Our duty is to be a governing board for Nevada’s people for higher education, not simply cheerleaders for more funding for higher education’s provider and consumer constituencies. Our duty in proposing a budget at this time requires that we recognize both sides of the coin in public education funding: The significant social and human damage absolutely inherent and immediate in each dollar taken by taxes, as well as the social benefits that we hope will accrue in the long term from the spending that taxes facilitate. Our duty is to not allow our love for education to blind us to the damage and fairness issues involved in making citizens – the vast majority of whom are not direct recipients of our educational service
s – pay for those services for the fortunate few.
Finally, there is always a temptation in politics and in human nature to resort to sophistry in order to pander to those who are present in the room when we deliberate and necessarily thereby to burden those who are not present because they have to be out earning a living or otherwise conducting their lives. Because taxpayers are many and have small individual stakes in the issues before us, they cannot afford the luxury of being here or otherwise spending significant time or other resources trying to influence our processes – while the provider and educational consumer constituencies, having much at stake individually, can spend a lot of time to dominate the process despite their modest numbers.
Consider, for example, what happens when someone resorts to the sophistry of saying that as a governing board, our duty is to promote higher education as well as be its governing board on behalf of the people and broad public interest. When one does so, one sets up oneself to slide down the slippery slope of becoming the agent of the provider and education consumer constituencies as they tend to become predatory upon the taxpayers and the broad public interest. We must avoid this dereliction in our duty by not trying both to be governing board finding the balance points that satisfy the public interest and advocate ostensibly for the cause of education, because being an advocate for education almost invariably degenerates to becoming the advocates for its providers and direct beneficiaries. For most folks, advocacy – especially for something as noble as higher education — generates the warmth and fuzzies one needs, but in so doing it also clouds the judgment required to do our duty as a governing board ac
ting in the broad public interest.
For all the foregoing reasons, I will vote against the budget proposed to us today, and I urge my colleagues to do so, too.
(Mr. Knecht is a member of the Nevada System of Higher Education’s Board of Regents)
UPDATE: Earlier today, the regents blew off Mr. Knecht’s entreaty and voted for an increased budget of 3.2 percent