INTRODUCTION AND PURPOSE
This is one of two appendices designed to turn the unappealing category of "other
programs" (those competing with higher education for state funds) into the appealing
realities seen by state elected officials. This appendix deals with proposals to
increase spending on other programs above the baseline levels defined in the text
of the report. Appendix B focuses on the difficulties of
cutting baseline spending in the other programs. Reading these two appendices is
not necessary for those who believe that, for political or substantive reasons or
both, higher education will have a difficult time competing for funds with other
Those who believe that proposals to increase baseline spending in higher education
can, or should, compete successfully with similar proposals in other fields should
consider the details of the proposals in other fields found in this appendix. Those
who believe that proposals to maintain baseline spending in higher education without
tax increases is simply a matter of making easy cuts in other programs should read
The basic approach of this appendix is to canvass each major area of state spending
that competes with higher education for state general funds. Within each area, readers
will find a brief description of major proposals for new initiatives. Given the baseline
budget projections for each state, there will be no funding for any of these initiatives
in all but a few states. In fact, there would have to be cuts in current service
spending in those programs just to avoid tax increases.
In order to maintain current services in most states, higher education must hope
that state officials turn down every one of these new initiatives or fund them only
by increases in taxes. To expand from their current services base, higher education
interests will have to develop proposed uses for additional funds that can compete
successfully with the programs described in this appendix.
EDUCATION FROM BIRTH THROUGH GRADE 12
The education situation implied by current services funding of K–12 education is
seriously out of synch with expectations for and likely policies concerning public
Regular School Programs
The level of dissatisfaction with public K–12 education is extremely high. While
many citizens express satisfaction with the public education being provided to their
own children, they share the attitudes of the general public about public schools.
At an absolute minimum, this includes the view that American education is performing
poorly relative to education in many other countries, a view fortified by comparative
international test scores.
Popular across-the-board remedies include smaller class sizes, better teacher
qualifications, longer school days, and longer school years. Among elected officials,
there is widespread interest in increasing the technology applied in the classroom,
such as wiring all schools to the Internet. In parts of the country where teacher
salaries are well below the national average, the view is widely accepted that salaries
should be increased.
There are extra concerns associated with the schooling provided to disad-vantaged
segments of the population, particularly inner-city children. There is widespread
recognition of the basic concept that more intensive (and thus expensive) efforts
are required to deal with these children than current budgets provide, though little
agreement on exactly what should be done.
New Emphasis on Early Childhood
Of even more financial significance is the increasing conviction, particularly among
the nation's governors, that education between birth and age 3 or 4 is much more
important than had been previously understood. This point is financially significant
as there is little state and local funding of any public programs for this age group.
The prevailing view among elected officials is that much more can and should be done
in this age group (including permitting heavy outlays) so that schooling in later
years can be reasonably productive.
Options include moving down the age of entry in public schools to include universal
kindergarten for full days and part-day schooling at even earlier ages. In addition,
there are many equivalents to the extremely popular Head Start program extending
its concepts to earlier ages and more children. For those who are reluctant to see
the public education model brought to earlier ages at the potential expense of family-provided
training of young children, there are many attractive alternatives, including training
parents in better parenting techniques.
A substantial and, according to opinion surveys, growing segment of the public believes
that educational choices should be expanded, particularly in situations such as central
cities, where a strong case can be made that the public schools are failing. This
has produced support in every legislature for voucher plans, though the concept now
affects fewer than 10,000 children through public funding, plus at least an equal
number through the increasingly popular programs funded by donations.
This interest in choice is linked with the long-felt unfairness associated with
support of low- and middle-income children in parochial schools. Many people accept
the view that if those schools meet or exceed the targets for education applied to
the public schools, parents who send children to such schools are deserving of some
level of support, even if not exactly the amount saved by governments by not having
to educate their children in public school systems.
The combination of these two factors is encouraging states to consider expanding
voucher plans and tax credits for school expenses, such as those already found in
Iowa and Minnesota. These plans are inherently expensive because they entail spending
public funds for the over 10% of K–12 pupils now receiving education at no public
The compromise between advocates of choice and those oriented to basic reliance
on traditional school models is charter schools. Although in theory these publicly
chartered institutions should not cost more money, in practice, budgets for existing
public schools are not decreasing enough to offset spending for adding the charter
Special Problems In Some States
On top of these substantial arguments for going beyond current services in the funding
of public elementary and secondary education, two closely related expenditures of
state governments will likely increase over the next decade, with some states much
more affected than others.
Equalization of School Funding. The first issue is known as school finance
equalization. With local property taxes being the primary source of support for education
in many states, differences in the per-student tax bases of individual districts
create: (1) much more spending per pupil in rich districts, given equal tax efforts,
or (2) huge differentials in local taxes, as much as five times in some situations,
as poor districts seek to match the spending levels (and thus class sizes, teacher
salaries, equipment, etc.) of the more affluent ones, or (3) often, combinations
of higher taxes and lower spending in the poorer districts. In about half the states,
advocates of the poor districts have obtained state supreme court decisions to the
effect that state constitutions require some form of equality among districts, so
that roughly equal tax rates produce roughly equal education spending per pupil.
In all the states, there is sympathy with the argument that state policy should move
toward more equality in financial support.
As a practical matter, equalization does not mean leveling, which could
be accomplished at no state cost by taking from the rich and giving to the poor,
thereby forcing the rich districts to reduce their level of spending. Instead, it
means equalizing up: raising the spending levels of the poorer districts by
providing additional state aid.
School Construction and Renovation. Many states face extraordinary challenges
in capital outlays for schools. In rapidly growing states, this is a challenge of
accommodating rising enrollment. In the Northeast and older areas elsewhere, it means
replacing or substantially modernizing existing schools. Everywhere, it means dealing
with huge mismatches of school facilities and students. Young couples with school-age
children typically turn to newer housing, often remote from central cities and inner
suburbs, leaving a shortage of classrooms in the remote areas. At the same time,
the population of central cities and inner suburbs is aging, leading to reduced enrollment
in schools in those areas, and the closing of many adequate school buildings that
are no longer needed.
States are often heavily involved financially in meeting construction needs because
the arguments for school finance equalization applied to operating costs can appropriately
be applied to costs of school construction as well. Also, state support of local
school construction has the same perceived benefit in tax policy as support of operating
costs -- reducing burdens on the local property tax.
PROBLEMS OF THE AGED
Growth of Aged Population
As is well known, an increasing percentage of the population is over age 65, and
over age 85, each year. These numbers will begin to increase even more dramatically
as the baby boom (persons born shortly after the end of World War II in 1945) hits
age 65, which it will begin to do in 2010. The most widely understood impact of the
aging population is the effect on the Social Security system, not a matter of significant
state concern,10 and the burdens on mature adults
increasingly being faced with the time demands and costs associated with caring for
aging parents. The effects on state finances, while less well known, are also huge.
Providing Care for the Aged
Most Americans reach age 65 with few resources to deal with needs for intensive care
that cannot be defined as health care in the traditional sense. These individuals
may have mental problems, diseases such as Alzheimer's, and general declines in physical
capabilities such as the ability to bathe themselves, to shop, and to clean and maintain
their housing. Eventually, significant percentages of them go to nursing homes at
annual costs from $40,000 to $100,000 per year. No federal program covers these costs
of aging, even for the poorest of the poor. Social Security and income-tested Supplemental
Security Income (SSI) benefits cover cash requirements for ordinary living, but not
extraordinary costs such as nursing homes and homemaker services. Medicare does not
cover nursing home stays, with the minor exception of short stays associated with
specific treatments, such as recuperating from operations.
As a result, using a mix of federal and state funds (averaging 57% federal, 43%
state), state governments deal with these situations through Medicaid. Medicaid now
pays for well over 50% of all nursing home days in the United States. Besides covering
nursing home costs of Americans who qualify as low-income when they enter nursing
homes, it is common for middle-class Americans to exhaust their savings in a few
years of nursing home residence, so they, too, qualify.
States have sought to divert patients from costly nursing homes by offering in-home
services, but have not experienced significant savings by providing this service.
The reason is understandable. When services are offered, participation is widespread
by both the target group, those who would otherwise enter nursing homes, and a group
which would never enter such homes but cannot be distinguished from the first group.
Costs of health care are continuing to grow as a percentage of American purchasing
power, as measured either by personal income or Gross Domestic Product. The reasons
are well beyond the control of state governments.
One principal reason is reduction in mortality among persons with extremely high
health care costs. For example, advances in saving newborns mean that a larger number
of people are born with serious disabilities that require expensive, lifelong care.
Improving care and health practices are prolonging life of those over 55, many of
whom develop late-in-life chronic problems such as diabetes, prostate and breast
cancer, and circulatory and heart problems. Another reason is the availability of
new but expensive forms of treatment such as organ transplants and pharmacological
management of AIDS.
Costs Being Shifted to Government
Most households do not have the savings necessary to cover even short hospital stays,
so private health insurance is the mainstay of coverage for Americans below age 65.
But this insurance has become so expensive for employers that the percentage of Americans
who have employer-paid health care is declining. Even where employers provide coverage
for their employees, they often provide coverage for families only at prices that
cause many working Americans to decline this coverage. As a result, the percentage
of under-65 Americans without health care coverage has been rising, even in the past
seven years of sustained economic growth characterized by increased job holding.
The percentage of the population that is without health insurance is likely to soar
This situation is widely viewed as unacceptable when it affects pregnant women
and young children. As a result, Medicaid now finances over a third of births and
associated pre- and post-natal care. This percentage is growing as a result of new
state and federal initiatives.
Having no care available for adults who are presented with health emergencies
is also viewed as unacceptable. As local officials like to put it, it is intolerable
for a 911 emergency run to end with a patient in distress turned away at the emergency
room door. As a result, such care is provided on an emergency basis. To the extent
they can do so, health care providers and state and local governments cover the costs
of this care by establishing eligibility for such programs as Medicaid. Where coverage
cannot be established, the health care providers treat the patient at their own expense.
But because these charity cases are heavily concentrated in a few providers, such
as downtown hospitals, the costs are partially reimbursed by public programs.
Spending to Expand Coverage
Although proposals to approach universal coverage through a national health insurance
program were rejected by the U.S. Congress in the mid-1980s, the arguments for expanded
coverage are leading to ad hoc extensions of coverage. Besides the major expansion
of children's coverage mandated by congressional action in 1997, many states have
been experimenting with providing health insurance of last resort under a variety
Some of the impacts of rising public outlays for health care are reflected in the
baseline budget projections described in Chapter One. But
many are not. This is particularly true for improved health care for children that
is generally believed to be necessary as a part of the extension of public concerns
about education to ages zero to four, and filling gaps in providing acute care to
low- and middle-income adults.
LOW INCOMES AND THE SAFETY NET
Public officials mostly think that welfare reform has been working. It has, as measured
against an objective of cutting the number of households regularly receiving cash
assistance while not working. But it has not, as measured against an objective of
having Americans with families working at jobs that provide a standard of living
viewed by most Americans as adequate. So with little fanfare, the costs per case
being incurred after welfare reform are much greater than those before the system
was reformed. Those costs are being incurred by supplements to earned income, such
as federal and state earned income tax credits, and by providing benefits that supplement
wages and salaries. Those benefits include food stamps (mostly federal outlays),
Medicaid, daycare, and various forms of emergency assistance.
There are many reasons to argue that state and local outlays for income-tested
programs for the poor, particularly the working poor, should increase in impact and
thus cost. These programs likely will increase in costs automatically anytime the
economy slows and low-wage jobs are more difficult to find than they are now.
A persuasive case can also be made for further expansion. For example, many people
believe that improvements in the education of welfare-prone people can provide the
key to ending long-term dependency. Welfare reform has generally ended the practice
of having large numbers of people receiving cash assistance who also receive training
leading to job readiness.
Despite recent improvements in public safety as measured by crimes reported to police
and crimes reported by victims, crime remains a major concern of voters and public
officials. The primary outlays competing with higher education are those associated
with sentencing changes designed to keep repeat offenders off the streets. Those
changes are having a gradual but substantial impact on the number of inmates in correctional
institutions, leading to a continuing increase of about 5% a year in the census of
jails and state prisons. Many people argue that this increased incarceration is closely
associated with the reduced crime rates.