Patrick Panel Identifies Education Finance, Cost Savings Options (State House News Service)

By Gintautas Dumcius
STATE HOUSE NEWS SERVICE

STATE HOUSE, BOSTON, DEC. 31, 2008…..Additional funds will be necessary to maintain basic educational services and to pursue "vital" investments in public education, but any revenue-generating measures should be tied to restructuring and cost-saving reforms, according to the final report of Gov. Deval Patrick's Readiness Finance Commission released on Wednesday.

Commission members, who include lawmakers, corporate executives and education policymakers, are calling for the immediate commencement of cost savings proposals. Those proposals, including a number that would require legislative approval, could produce as much as $550 million in savings, according to the commission.

Citing the economic downturn, which is forcing sweeping state spending cuts, the commission concentrated largely on the cost savings "to maintain support for our education system in a time of inadequate resources."

But saying savings alone won't be enough, commission members found increasing the sales tax the "most viable" of the revenue-generating options discussed, with the other revenue sources eyed being the gas tax, the income tax, interest and dividend taxes, and the licensing of casinos.

"I'm not saying that at some point, that's not going to be part of the discussion," said Rep. Patricia Haddad, co-chair of the Joint Committee on Education and a member of commission, of raising revenues. "But I think in fairness to everybody out there, the first thing you have to do is you make sure you have exhausted every possibility of making changes to the current system before you go ahead and ask people for more money."

The report was released by the Patrick administration without fanfare during a New Year's Eve snowstorm.

In fiscal 2008, education spending for schools topped $10 billion, according to the Department of Elementary and Secondary Education.

According the report, the potential cost savings measures include moving municipalities into the Group Insurance Commission to reduce municipal employee health insurance costs ($200 million); reducing teacher retiree benefit costs by moving them into Medicare ($135 million); regionalizing schools' food services, transportation and building maintenance (almost $20 million); maximizing federal Medicaid reimbursements for special education (over $100 million); reducing energy costs through better purchasing, conservation campaigns and energy savings companies (over $100 million); and enacting procurement reform and coordinating the purchase of utilities, bookstore contracts, office supplies, vending contracts, (savings "range").

Haddad said she would push for regionalization, which some communities oppose because they want to keep handling matters on their own, as a top priority. "I think that hard times like this are the times that you can make big institutional changes and they make sense," she said. "You never make changes like this in good times."

The commission is also encouraging private fundraising "as a means for jumpstarting the Governor's education agenda." For instance, the Executive Office of Education is hoping to raise private money to support planning grants for Readiness Schools, which would include charter school-like aspects to encourage innovation, according to the report.

Michael Widmer, head of the business-backed Massachusetts Taxpayers Foundation and a member of the commission, said private fundraising to deal with ongoing costs is unrealistic. "If there's special projects, private fundraising may be an option," he said. "When we're talking about costs in the hundreds of millions, billions of dollars, I think it's an idea worth exploring but realistically it won't have much of an impact."

Widmer said the most important cost savings come from health care and giving municipalities the ability to adjust their own health plans without going through collective bargaining.

Chris Anderson, commission member and president of the Massachusetts High Technology Council, said the commission's proposed efficiencies will be "very helpful" to lawmakers and Patrick's education reform agenda.

"But that really just helps the communities manage what they have on their plate today," he said. "There's a disconnect where we ended up in terms of looking ahead and how to advance the agenda, mainly because of the deterioration of the state's finances."

Because of that, Anderson said he wasn't sure how any revenues raised, as the report says commission members discussed, are going to advance Patrick's reform effort, "even if the Legislature decided to raise the sales tax."

A 1-percent increase in the 5-percent sales tax would draw $720 million in new revenue, according to the report.

Citing an analysis reported to the commission by Augenblick, Palaich and Associates Inc. (APA), the commission "learned that the tax burden in Massachusetts is lower than that of most nearby states and about the same as a handful of states that are similarly situated in terms off population, wealth and student education needs."

The APA report said the overall tax burden in Massachusetts has decreased "significantly" since 1995 and tax reductions were "generally greater" than those enacted in other states over the same timeframe.

In its report, the commission said any increase in the gas tax would likely be devoted to transportation spending and said commission members view increases in taxes on income and interest and dividends as "less tenable approaches given the need to balance any new revenue measures with the state's ability to remain economically competitive."

The commission, in its conclusions, said the education sector "needs to be a top priority for the state, and represents a worthwhile, indeed critical, investment for the long-term growth and success of the Commonwealth."

An appendix to the report outlines a series of areas where Education Secretary Paul Reville intends to recommend "modest" funding increases for fiscal 2010, "unless there is a continuing and steep decline in revenue projections."

The items targeted for potential investment include home-based language and literacy; universal pre-kindergarten; extension of the school day; an increase in state aid, known as Chapter 70; financial aid; and free community college, which would be exclusively offered to teachers, potential early education teachers and low-income parents of public schoolchildren.

The "steep decline" in revenue projections appears to be in progress, with Gov. Patrick announcing another $1 billion in budget fixes appears necessary, on top of $1.4 billion in alterations put in place this fall.

In a statement, Reville said the report is a "significant contribution to our efforts to achieve maximum efficiency and educational effectiveness in these challenging times." Reville was not available for comment Wednesday.

Commission co-chairs John Fish, CEO of Suffolk Construction, and Gloria Larson, president of Bentley University, did not return phone calls seeking comment.

The full report is available at www.mass.gov/education.