Facebook
Fark
Digg
Reddit
Stumble
Sunday, June 7, 2009 | 2 a.m.
Recently the state budget was finally passed over Gov. Jim Gibbons’ veto. We should all breathe a sigh of relief. The governor said that increasing taxes is a bad idea, but cutting state expenditures to the extent he proposed, especially in higher education, was an even worse choice.
It is indisputable that Nevada’s general fund has long been the smallest in the nation, relative to the size of our economy, and only half the national average. This share has been on a downward trend for decades.
Because our tax base is heavily dependent on merchandise sales and casino revenue, two sectors that have been disproportionately affected by this recession, our state’s general fund revenue has fallen from about 3 percent of state GDP to about 2 percent. Our revenues thus declined by a third, the most of any state. But as a share of our GDP this was only a drop of 1 percent, and other states have bigger relative budget gaps. It is also important to understand that our state revenues declined much, much more that our economy as a whole.
Should we have increased taxes? Most taxes are inefficient, economists argue, because they have incentive effects that discourage people from potentially productive activities. However, this is more than offset when the government is able to provide socially valuable goods that the private sector can’t provide in sufficient amounts. Public education is one of those goods.
Taxes are also less inefficient if they are broadly applied and rates are not too high. Although the taxes our Legislature imposed are only second-best solutions, they are not likely to be very burdensome to the economy given our already-low overall rate of taxation.
A tax increase reduces disposable income, and thus reduces private spending. The governor is right that this is a bad idea in a recession. But cutting government spending is an even worse idea in a recession, unless you believe the state provides absolutely nothing of value.
You lose the same amount of private spending as with a tax increase, plus you lose what government bought or provided in the first place. Consider that public employees and private contractors are Nevadans, too, and they are working for you.
Most people don’t realize that state and local governments, in aggregate, spend more on consumption and investment than the federal government, and this was even more true during the Great Depression. At a time when the federal government is trying to stimulate the economy, the states are unintentionally making it worse because they are generally constrained to balance their budgets. Economist and New York Times columnist Paul Krugman has called this problem “50 Herbert Hoovers.”
Unemployment in Nevada, which usually hovers at or below the national average, has risen dramatically in the past two years to 10.6 percent of the labor force in April, compared to a national rate of 8.9 percent that same month (now 9.4 percent for May, which is not as bad as many expected).
Personal income in Nevada, which grew by 5.5 percent in 2007 and 3.1 percent in 2008, was projected by the Economic Forum in December to rise by 1 percent in 2009. That was probably too optimistic, but I have seen no sane economist project average income declines of more than 5 percent in 2009, and incomes should improve in 2010.
Of course, this is only the average, and although many are doing OK (other than watching their 401(k)s wither away and their homes go underwater), others are disproportionately hurt. Much of the construction sector, for example, has seen its business completely dry up.
Are state budgets, and state employees, sharing this pain? The governor asked state workers to take a 6 percent pay cut, which the Legislature reduced to 4 percent with an unpaid furlough of one day per month for most workers. The Governor’s budget called for a cut of a third in the total higher education operating budget, which the Legislature reduced to about 11 percent. Certainly we are not hurting as much as the construction or tourist sectors, but cuts to higher education are certainly more than the “average” Nevadan is expected to bear.
Some think higher education spending is out of control. In Nevada it has only kept pace with the rest of the economy. Not coincidentally, our state’s proportion of the population with a college education has remained stagnant, while in other states it has increased significantly.
The total operating budget for the Nevada System of Higher Education, including the state’s general fund contribution and the tuition and fees paid by students, was about 0.6 percent of our GDP in 1985, the year I entered graduate school. After having peaked at about 0.7 percent in 2003, it was back down to the same 0.6 percent ratio this past fiscal year. It will be lower next year as a result of these cuts.
Are the cuts real? Thankfully, our universities and community colleges have been preparing for this for a year, and we are working to make our institutions more efficient. Over the past year these institutions have closed centers, increased teaching loads, encouraged early retirements, eliminated many valuable student services, and terminated hundreds of productive people.
Those who have left are not being replaced. Meanwhile, most institutions have more students to teach than before, not fewer, which is very different from the experience of the private sector in a downturn.
We are now making more cuts. But it could have been so much worse had the executive budget been approved. We would be closing whole colleges, not just programs, and turning away students by the hundreds.
But it is not so much about cuts, or how many jobs have been saved, as it is about Nevada’s future. Many of us have chosen this profession over usually more lucrative private sector jobs because we believe in the value of a public education, and at UNR and UNLV we are trying as hard as we can to create universities that Nevada can be proud of, universities that will attract our best students and keep them in our state after they graduate.
This matters because education is very important to our economy. One study cited recently in The Wall Street Journal noted that our country lags behind a number of other countries in education, and estimated that our country’s educational gap costs us as much as $2.3 trillion per year, about 16 percent of our GDP. Nevada has the biggest educational gap in the country, and it makes it hard for us to attract and keep new business in the state.
Many — though certainly not all — of those who argue that we should have cut spending more than 11 percent do so because they oppose public education and public services on principle, and think this was a good opportunity to make our government even smaller. For the rest of us, we should be grateful the Legislature was able to override the governor’s veto.
Elliott Parker is chairman of the Faculty Senate and professor of economics at the University of Nevada, Reno.
"Some think higher education spending is out of control. In Nevada it has only kept pace with the rest of the economy. "
Since about 2001 it has grown significantly faster than inflation.
"Not coincidentally, our state's proportion of the population with a college education has remained stagnant, while in other states it has increased significantly."
Very few jobs actually require a college degree (less than a third I believe). Furthermore, Nevada has one of the highest per capita incomes and lowest poverty rates in the country despite having low college graduation rates. This is a testament to our economy rather than a traditional liberal arts college education.
Personally, I think we as an American culture have developed an elitist attitude about education that emphasizes kids getting a liberal arts education that will provide many with no marketable real world skills - leaving those kids with nothing but debt and disappointment.
(A traditional college education is good for some, but not everyone, some people need an education that teaches them skills that can help them acquire gainful employment. Other kids have the personality, booksmarts, or connections that allow them to get a good career with a liberal arts degree, but to suggest that everyone can dooms kids to poverty).
Dr. Parker, yes the US K-12 education system is inferior to many OECD countries and that is costing us economic growth. But the problem is we spend more per pupil than all but 1 other OECD country. Estonia spends about 1/3rd what we do (PPP) and they beat American students on the PISA exam (an international test).
How much our government spends matters a lot less than how effectively we spend the money.
Also note: if you spend more per pupil on K-12 education while producing an inferior product you also slow economic growth (costing our economy billions.
In 04 the US weighted per pupil average was about $8,200 according to the US Census Bureau. There were about 47.9 million students.
Estonia spent about $2,800 (ppp) per pupil in 04. Estonian students also beat American students on science and math in the PISA exam.
If the US ran its K-12 education system that efficiently we would save over $250 billion a year in taxes on top of having all the economic benefit of lower taxes AND a better quality education system.
Can the US run its education system on $3k per student. Maybe, maybe not, I cannot say. But spending more with the same ineffective system in place isn't likely to produce results - especially since we outspend and under perform most other OECD countries.
Patrick, please leave the economics to Dr. Parker--he is an actual educated economist. If I remember correctly, your education is in politics.
Its important for people interested in a subject to educate themselves in it. Lest you be hoodwinked by someone more knowledgeable than you.
I also recommend coming back with a legitimate counter argument.
"Very few jobs actually require a college degree (less than a third I believe)."
I am puzzled by Mr. Gibbons' posts in this fine newspaper. I can't imagine there is anyone in the United States that doesn't think a college education is good for anyone that receives one. We live in a much more complex society than Americans did in the past. Jobs such as some of those in manufacturing and logistics that used to only require an elementary school education in the 1920s or 1930s have a greater knowledge requirement now because of the changes in how these processes are organized. You cannot satisfy the knowledge requirements in all of these positions with a high school equivalent technical degree or community college skills only.
Additionally, part of the role of our two universities in Nevada is not just knowledge dissemination. Instead, it is also knowledge creation. We expect our faculty to be a research resource that adds value to our state. Knowledge creation (R&D) costs money.
The world understands that the best higher education system in the world is in the United States. Many of those kids in Estonia that Mr. Gibbons refers to are studying hard in high school hoping to be accepted to an American University because of the value of an american education. The content that is taught at American universities is often years ahead of the knowledge of much of the world. American universities are not only good at teaching, they are also great at creating knowledge. Unfortunately, our K-12 system may not be the best in the world.
We need to have the best universities we can afford in the state of Nevada. The key to real economic growth in Nevada is likely to come from knowledge-based innovation. It is difficult for us to match the low labor cost structure of countries such as China or Mexico. Many unskilled labor jobs have moved outside the US over the last 20 years. The jobs of the future here are going to require a smarter, flexible work force that is well-educated and good at problem-solving.
I am sure Mr. Gibbons means well. But he is clearly naive and his opinions are deceptive and dangerous. It is stupid -and I mean stupid - to suggest that we have more higher education than we need in the state of Nevada. it is just crazy.
Professor Parker is correct. Our state dodged a bullet here.
Doc Rogers,
This is not a naive comment - it is very real and it requires some thought to understand. Think honestly for a moment and ask yourself what value a sociology/political science degree will offer a new job applicant as they look for work at a bank?
What does the degree mean to the employer? Does it confirm that the individual possesses some talents or special skills? Not at all unless it is a mathematics or engineering degree or something similar. All a bachelor degree explains is that the student has some modest degree of intelligence and can complete for 4-6 years of schooling - nothing more.
This is a 16th century mode of education. It may be good for some students. Students of wealthy parents, or students of great intellect or personal ability will have no trouble finding jobs no matter what degree they earn. But kids who are not booksmart or have no skills to offer will not be served by 4 years of studying the classics.
College is thus overproducing graduates with few, if any marketable skills. Sure they are well rounded but being well rounded doesn't put food on the table. This is an elitist attitude sung by people with more than enough food on the table trying to convince other people to mortgage their futures to be just like them.
We are essentially leading kids to debt and disappointment. And in all honesty we are robbing the poor to pay the PhD...I find this to be criminal.
Also to suggest that colleges lead knowledge based innovation is absurd. The vast majority of research in the world is not conducted at universities but in private labs. Although I find no problem with private universities having labs - students attending private schools should have the option of subsidizing research but state universities should not be subsidizing such research. It should be self funding.
Patrick,
"Think honestly for a moment and ask yourself what value a sociology/political science degree will offer a new job applicant"
Your degree is in political science, isn't it? So are you saying your academic credentials are in fact worthless?
Patrick says "Its important for people interested in a subject to educate themselves in it. Lest you be hoodwinked by someone more knowledgeable than you."
Remember that when you read his "facts" and "information." He's busy trying to hoodwink everyone into believing that we can get more without paying for it. He finds the facts and studies that support his narrow views and rejects anything that might show him wrong, like telling you not to pay attention to Dr. Parker, who has the knowledge and skills to refute his thinly disguised dribble. Ask yourself who is trying to hoodwink who?
Patrick,
I don't want to attack you. I don't know you or anything about you, and you seem to be a pretty good writer. However, your arguments are weak and naive.
If you are saying that the universities in Nevada offer majors that do not easily lead to jobs in those fields of study, and that majors you do not believe are relevant have too many students, that is a different argument than saying the university needs to be starved of resources. Like you, I wish we had more american kids choosing technical majors, but we do not. Our university systems across the United States allow students, for the most part, to make an independent choice about their areas of specialization. Their choices are not always based on market demand.
Realistically, neither you or I will get decide what 18-year-olds should study in college. It would be wise if they selected a major for which there is market demand, but the freedom we have here means they can select Sociology or Political Science (the majors you wrote about) or even something like Theater for which the jobs are few and far between.
Arguing that we should limit capacity for the majors you do not believe are of value, or putting in place programs that would limit student choice, is much different than arguing that the University should be starved or is not doing much worthwhile because it offers programs of study you do not value.
There is precedent for what I believe your real argument is and not the tortured logic presented above. Many years ago, Senator Justin Morrill thought that education should be more applied and less liberal arts/theoretical and set up the land grant system. UNR is one of those land grant schools and tries very hard, I believe, to be applied and practical. It is not trapped in 16th century thinking. I believe both UNR and UNLV are assets to both the local and global communities because of their applied research and graduation of students that have skills that are rare in the marketplace. To argue that that the whole place should be stripped of resources because there are a few majors or courses you don't like is shortsighted and silly. You cannot argue intelligently that the universities are irrelevant based on anecdotal examples of specific courses or faculty that are doing research neither you or I believe is important.
Comment part 2 (too many characters to put in one comment)
Universities do important research and are certainly the stepping stone to successful private labs. As I mentioned above, I don't know anything about you, but to suggest that universities in Nevada are not doing important research is dangerously wrong propaganda. If you ask the folks that run the private labs that are producing the innovations you mention, they would all say that we need more research at universities - not less.
It sounds to me from your note above that you believe you should get to select what courses of study and research that universities in Nevada perform. You can argue (foolishly, I believe) that Nevada universities should be downsized and limited in what they are allowed to offer as programs of study, but that is not how the system works here. I do not know what your credentials are so I cannot determine if you would be a good judge of what programs and majors should be at UNR and UNLV, but I doubt that replacing the current system with a jury of one guy with fringe opinions would be better that what we have now.
Propaganda. THAT is the essence of the NPRI/PATRICK R. GIBBONS experience.
Caveat Emptor.
Patrick's response to a previous question,
" "Some think higher education spending is out of control. In Nevada it has only kept pace with the rest of the economy. "
Since about 2001 it has grown significantly faster than inflation.",
In a growing state, would it not be logical for spending to increase faster than inflation?
Do you disagree with the numbers in:
http://www.business.unr.edu/faculty/park...
that from 1985 to 2007 both the state funded budget and NSHE have both grown by 9%/year?
Now, you can argue that the university should not be growing at that rate, but...... your attempt at refuting the given argument is a non sequiter at best and outright misleading and disingenuous at worst.
Professor Parker replies:
Thank you, everybody, for a discussion that was intelligent and mostly civil in nature, focusing on facts and reason over personal attacks. Unlike many blog discussions I have seen, it was a pleasure to read this.
Mr. Gibbons points out correctly that state funding for the Nevada System of Higher Education grew faster than inflation since 2001. What he does not mention is that our enrollments rose dramatically during this time, what with Governor Guinn's Millennium Scholarship program combined with the fastest population growth of any state. Universities also compete on a national marketplace, so we also had to pay more over time -- in real terms -- to attract and retain good faculty. Of course. I would hope that Mr. Gibbons has also seen his salary rise over time in real terms, since he is an intelligent man with a college education, and I presume he does work that pleases his employer.
Mr. Gibbons points out that our K-12 educational system could be much better. Absolutely, and though it is not my specialty I personally welcome all practical innovations that offer solutions to this problem. Does throwing money at a problem fix it? Of course not. It is equally reckless to think you can solve a problem by taking most of the money away.
But the Governor's budget focused on dramatically cutting higher education, not K-12, and that is what the bulk of my column concerned.
Mr. Gibbons uses the word "elitist" to describe public education, and this makes no sense to me. Mr. Gibbons is paid by his employer, the Nevada Policy Research Institute, to advocate against public funding of education, and their so-called "Freedom Budget, 2009-2011" contained a proposal to privatize higher education. What is possibly more elitist than that, to say that only the wealthy should have access to college, and the rest of us don't really need more than high school?
But what do I know? I am a product of public universities, and I am eternally grateful for the chance they gave me to get a good education and make a better life. I am now trying to give that back to my students, and my state.
Doc Rogers,
Patrick Gibbons's comments are not naive. They are just plain stupid. No need for euphemisms here.
It's really scary to realize that there are people out there, like Patrick Gibbons, that do not believe in offering our youth the best public education we could provide them.
Education is only for those who can afford it. Education is a privilege, not a right. You come through loud & clear, Patrick.
Just like other fascists in recent history - much easier to keep the sheeple in line if they are uneducated and don't know any better.
"Fascist educators emphasized character building over intellectual growth, devalued the transmission of information, inculcated blind obedience to authority, and discouraged critical and independent thinking that challenged fascist ideology". - Herman Klaus
wow, Patrick. Seems karma might be sneakin' up on ya.
Unbelievable - its simple, cut spending. These government programs are nice to have and education is important but money doesnt buy knowledge. Look at CA - they have one of the highest tax rates and spend the most per student, yet they continue to underperform on the testing side. Wake up - no more taxes - government cannot make better decisions with my money than I can. I fully support Gov Gibbons!
Well, it strikes me that Patrick may very well be related to our Governor and its rather obvious that someone has released mass amounts of urine in that gene pool.
Personally, it would be nice if we had a Governor in office that was interested in doing his job. I think Jim Gibbons is a worthless womanizing scumbag who should be impeached and then tarred and feathered. But that is just MY opinion.
The vast majority of research in the world is not conducted at universities but in private labs.
-----------------
Can you please provide the information source that verifies this?