Shortfall Silliness


    Publisher's note: The author of this post is Mitch Kokai, who is an associate editor for the Carolina Journal, John Hood Publisher.

    Things have been looking good for your family's finances over the past couple of years. Your main source of income - the one which provides roughly 60 percent of your family's funds - has been going up consistently each year for the past few years.

    And another 30 percent of your household income comes from a source with new bosses who really like the work you do. They like your work so much so that they boosted your pay by 13 percent last year. They're not afraid to ask investors to spend more money to fund your pay hike.

    Knowing how much those bosses appreciate your work, and how closely their goals and priorities match with yours, you ask for another 9 percent raise for the year ahead. You've been planning how you would spend that money: a new coat of paint on the house, an extra week of camps for the kids, maybe a replacement for your aging car.

    While the bosses praise your work and tell you that you're doing a great job, they break the news that they're not going to be able to follow up that 13 percent raise with a 9 percent raise the next year. They can squeeze a little more money out of their investors, but you're going to have to live with a 6 percent increase.

    How do you react? You might say to yourself, "Well, 6 percent is a pretty substantial raise, especially given the sluggish state of the overall economy. Unlike our family, many families lost jobs in the Great Recession. They're just getting back on their feet and would love to see a source of income grow by 6 percent. We're doing relatively well in comparison.

    "We won't be able to accomplish everything we would have liked with a 9 percent raise, but we'll still be able to do quite a bit more with an extra 6 percent. Plus we need those investors to continue footing the bill."

    There's another potential reaction: You might complain about a "shortfall" in your family's finances. "We were counting on that extra 9 percent. Without it, we can't do all the great and wonderful things we were planning to do in the next year. We need that extra 9 percent - especially since our main source of money hasn't been going up as fast as we would like. Squeeze the investors for even more money so we can get our full 9 percent."

    If the second scenario sounds a bit far-fetched, you haven't met the members of the school board overseeing North Carolina's largest public school system. Transform our example of a family household into the budget picture for the Wake County Public School System, and you'll understand why the school board's recent complaints about a funding "shortfall" fall flat.

    The Wake County system operates with a $1.5 billion budget. Fifty-nine percent of that funding comes from state government. The state's contribution to Wake's budget has been growing consistently in recent years. Since 2013, the state's per-pupil initial allotment has grown by an inflation-adjusted 6 percent, including a nearly 2.4 percent increase for the new school year.

    Meanwhile, 29 percent of the school system's funding comes from Wake County taxpayers. The Wake County Board of Commissioners, made up exclusively of Democrats since 2015, has been inclined to spend as much money as possible on priorities set out by the predominantly Democratic (though officially nonpartisan) school board.

    During their first year in office in 2015, county commissioners boosted school funding by a record $44.6 million, roughly 13 percent. In the second year, the school board asked for an additional $35.7 million, a 9 percent increase. Instead, the county manager recommended - and county commissioners approved - an increase of $23.9 million, or 6 percent. The 2016-17 Wake County budget now devotes more than $409 million to public school operations.

    There's one notable difference between our family household scenario and the Wake County school system's fiscal reality. In our example, the "new bosses" were willing to ask "investors" to spend more money to pay for the boost in the family's household budget.

    In the Wake County schools example, there's no "request" for extra money. That extra funding comes from the imposition of higher tax rates. As Democratic commissioners boosted school funding by 13 percent during their first year in power, they raised the local property tax rate by 3.65 cents per $100 of property value. That was an extra $91.25 added to the property tax bill of a family owning a $250,000 home. An extra 91 bucks might not sound like much unless you consider that the overall tax rate of 61.45 cents yielded a tax bill of $1,536.25. That's a 6.3 percent tax hike.

    As commissioners boosted local school funding by 6 percent this year, they imposed another property tax hike equivalent to 1.35 cents per $100 of property value, or another $33.75 for the $250,000 homeowner's bill. That's a 2.3 percent tax hike.

    Rather than thank their state and local financiers as school funding continues to grow, at rates that have necessitated larger local tax bills, the school board expresses its "frustration" that it's being forced to live with a 6 percent local budget increase.

    One suspects that many Wake County families would love to face that kind of "frustration."





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