Allison Gerber

June 4, 2011
TEAC 831
Final Presentation

The Relationship of Public Education & National Debt

"The budget should be balanced; the treasury should be refilled; public debt should be reduced; and

the arrogance of public officials should be controlled." -Cicero. 106-43 B.C. (Hall 2008)

I. What is the American Recovery and Reinvestment Act (ARRA)?

A. “The American Recovery and Reinvestment Act of 2009 (ARRA) aka Obama's economic

stimulus package includes an extra $3 billion for School Improvement Grants to help reform

persistently low-performing schools. With the $500 million already provided specifically for

this purpose through Title I of the Elementary and Secondary Education Act (ESEA), which

serves low-achieving children in low-income areas, the ARRA appropriation brings the total

funding for school improvement to $3.5 billion, available for use through September 30,

2013.” (Scott 2010)

B. Intended to “stabilize State and local government budgets to avoid reductions in education

and other essential public services while driving education reform in four key areas: teacher

effectiveness and inequities in the distribution of highly qualified teachers; rigorous college-

and career-ready standards and assessments; targeted, intensive support and effective

interventions to turn around struggling schools; and pre-K-through-college-and-career data

systems.” (U.S. Department of Education (USDE), 2010)

C. What is the purpose of the funds?

i. “The education portion of the stimulus package is intended to stave off teacher layoffs,

stabilize declining state and local education budgets, and blunt other negative effects of

the economic downturn for schools. ARRA funds are also intended to spur states and

1
 school districts to undertake specific reforms aimed at improving student achievement.”

(Kober, Scott, Stark Rentner, McMurrer, & Dietz, 2010)

ii. “About 62% of the districts that received [State Fiscal Stabilization Funds] SFSF money

are spending at least some of these funds to save or create teaching jobs in core

academic subjects and/or other teaching areas.” (Kober, Scott, Stark Rentner, McMurrer,

& Dietz, 2010)

D. What must districts do to receive ARRA grants intended for low-performing schools?

i. To receive an ARRA grant the low-performing school's district must agree to one of the

four intervention models detailed by the U.S. Department of Education.

a) Turnaround, which includes replacing the school principal and no more than 50% of

the school staff and implementing a new or revised instructional program

b) Restart, which involves closing the school and restarting it under charter

management or under an educational management organization

c) Closure, which refers to closing the school and enrolling its students in higher-

performing schools in the same district

d) Transformation, which encompasses a variety of options, including increasing the

effectiveness of teachers and leaders and extending learning time. (Scott 2010)

ii. One of the reasons that I immediately have a problem with this type of funding is that

the districts are forced to adhere to the demands of the U.S. Department of Education

(USDE). In a way, the USDE is bribing the low-performing, and often low-income,

schools with funds and asking them to simply follow their regulations in return. Some

of the districts do not wish to adhere to the guidelines of the USDE even though they are

in need of aid. The ideas suggested in the intervention models are leading some districts

away from the powerful command of the USDE. The most problematic suggested

2
 intervention model is called turnaround, which is really a way of saying, let's clear out

as much of the staff as possible and come up with a brand new curriculum. I have major

qualms with this approach since I do not believe that uprooting a minimum of 50% of

the staff of any school can have a positive effect on students and employees. Imagine if

a corporation with 200 employees suddenly fired 125 people. The company would

cease to function with such a loss of skill and job knowledge all at once. I personally

find it silly to ask that a school that is already struggling be put in such a situation.

E. What funding has Nebraska received and what has it been used for?

i. See September 30, 2010 Section 1512 Quarterly Report for Nebraska (USDE, American

Recovery and Reinvestment Act 2010)

a) Nebraska has been pledged $286 million through ARRA funds.

b) As of 9/30/10, Nebraska has received $137.5 million in funds.

c) Total Jobs Sustained or Hired as a result of ARRA Funding since 2/18/09

Reported Jobs for Reported Jobs for Reported Jobs for Reported Jobs for 2009-10 School Reported Jobs for

2/18/09-9/30/09 10/1/09-12/31/09 1/1/10-3/31/10 4/1/10-6/30/10 Year Average 7/1/10-9/30/10

Reported Jobs
656 1143 1243 1363 1101 1211
II. What are the positive and negative experiences or outcomes of the intervention models

proposed in the ARRA? Statistics drawn from a survey conducted by the CEP August 2010

A. Of the districts employing the transformation intervention model, 91% indicated that they

had experienced positive results.

i. The most successful and well-liked intervention model is not the one that clears the

school of all existing leadership but rather seeks to transform the people there into better

and more effective teachers and administrators.

B. Districts employing the other three models (turnaround, restart, and closure) had “No

3
 statistically significant differences in the estimated percentages of districts that had positive

results and those that had unknown, mixed, or poor results.” (CEP August 2010)

i. These intervention models are radical and have quite literally not withstood the test of

time. I am personally unsure of why the USDE proposed intervention models that have

only been implemented by an extremely small portion of districts. I would think that

those in the district would have already considered changes to their system that would

produce positive results. Clearly, the options for change proposed by the ARRA are

nontraditional. I do not mean to say that new ideas that have not been used in the past

are always wrong but I what I question is where these new ideas are coming from. Does

a national branch of government really know how best to improve every single

education district in the country? Do these intervention models really provide a list of

all the possible ways a low-achieving school could improve? My personal answer to

both these questions is no. I am, of course, interested to see how these intervention

models will affect schools in the coming years and I think only then will we be able to

accurately measure and evaluate the results.

C. Outcome: Only a small percentage of districts have received state funding for implementing

the intervention models

i. Turnaround 11%, Restart and Closure 1%, Transformation 7% (CEP Aug 2010 p. 4)

ii. One reason why the percentage of district using the intervention models is so low is,

“because few districts have schools that meet their state’s definition of low-performing.”

D. Most districts in suburbs, towns, and rural areas are unfamiliar with the intervention models.

i. “Larger percentages of districts serving suburbs, towns, and rural areas were unfamiliar

with the four models than districts serving cities were. We speculate that city districts

have more low-performing schools and therefore may have more experience

4
 implementing the models.” (CEP August 2010)

ii. Even though this is a speculative statement, it does make sense. If schools have money

and academic success they will be more unlikely to have ever needed to implement an

intervention model. I might also suggest that the intervention model familiarity is low

because the methods proposed are so new. Schools have not considered gutting out the

faculty, turning it into a charter school, or busing the students to high-performing

schools in the past. Yes, there was busing when schools were encouraging segregation

but this is for entirely different reasons. The story of success or failure with these

required intervention models will really only be told with time. Hopefully, school

districts that do implement them will give honest and unbiased responses about the

results and effects they see in their schools.

III. A Look at Job Security and Financial Stability for 2010-12

A. The Education Department “has emphasized that ARRA dollars are “one-time” funds that

should be “spent in ways that protect and support children without carrying continuing

costs.” (Kober, Scott, Stark Rentner, McMurrer, & Dietz, 2010)

i. I find this USDE goal to be contradictory since the money is intended to retain and

create teaching jobs. Yearly salaries would certainly be considered a continuing cost.

Because of this element, it is possible that many districts have used the funding for non-

personnel costs such as improved equipment and technology. I think that the states who

are able to pay educators without the funds of the ARRA are wise to do so.

ii. Some districts were not able to avoid using the ARRA funds for the purpose of retaining

jobs. The CEP acknowledges that these districts are facing long-term risks with that

decision. One might be thinking that with all the stimulus money, things must be okay

for teachers across the country, however the districts receiving SFSF grants, which

5
 would include ARRA, still cut down their teaching staff by about 45% in 2009-10

(Kober, Scott, Stark Rentner, McMurrer, & Dietz, 2010). This statistic in particular is

worrisome to me because I once again am concerned at the number of districts that will

be required to cut down their teaching staff further when ARRA funds run out as they

are schedule to do. We could be seeing nearly 100% of the school districts across the

country experiencing significant layoffs in 2012.

B. Another question that may come up is, why aren't schools spreading out the funds over

several years so the influx of cash is not so great?

i. According to the CEP July 2010 survey, “As of spring 2010, about 60% of districts that

received SFSF grants had spent or expected to spend all of these funds by the end of

school year 2009-10.”

ii. If you had not noticed, we are in the school year of 2010-11. It is quite possible that the

depletion of ARRA funds for several districts will have an impact much sooner than

2012 because of their great financial need.

C. “Of the districts that have received or anticipate receiving SFSF money and that project a

budget decrease for the 2010-11 school year, an estimated 75% anticipate having to reduce

teaching jobs to compensate for the shortfall.”

i. Once again, we see that for some districts the stimulus package has done nothing to

stave off job losses but is simply delaying them by 1-2 years and putting the federal

government even deeper into debt.

D. “Nearly all (95%) of the nation’s school districts have received or have been promised

stabilization funding under ARRA. Most districts received these funds in time to help fill in

some of their budget shortfalls for 2009-10.”

i. We see that almost all of the nation's school districts were desperate for federal funding

6
 in hopes of stabilizing their economy and saving jobs.

ii. Some schools still had to cut back on non-personnel related costs in the 2009-10 school

year. Those included, “Reductions in purchases of instructional materials, technology,

and equipment (about 84%), reductions in staff development (about 57%) or facilities

maintenance (about 56%).” (Scott 2010)

IV. Perspectives on the ARRA

A. One huge problem I have with the ARRA and its approach to education and the welfare of

the economy is that the federal government cannot forever throw money at the states and

hope it sticks. The grants will run out within two years and unless the economy is stable,

there will be significant job losses nationwide. The money given to the state does not fix

any long-term economic problems. It does delay the issue and cause more strife at a

national level. The U.S. is currently in debt over 13.6 trillion dollars. In January, 2010 the

debt level was just over 12.2 trillion dollars. In a mere 10 months, the US had added almost

one trillion more dollars to the debt. In January of 2009 the debt was at 10.6 trillion. In

January of 2008 the total debt was at 9.2 trillion dollars. (U.S. Department of Treasury,

Bureau of Public Debt, 2010) Clearly, the American economy is still very much headed in

the wrong direction. I personally worry that with all of the borrowing and grant money

being passed out that in a short time, there will be no funds left, there might be expectations

of another bailout, and consequently trillions more added to the national debt figure.

B. Dr. Eric Thompson, Associate Professor and Director, Bureau of Business Research,

Department of Economics, University of NE-Lincoln. Research Interests: Regional

Economics Local & State Economic Development Forecasting

i. I was able to conduct an interview with Dr. Thompson and ask him specific questions

about his professional perspective on the ARRA and its impact on the Nebraska

7
Economy both now and in the future. (E. Thompson, personal communication,

November 28, 2010) http://www.xtranormal.com/watch/8074399 is the video link for

the electronic interview I created of my exchange with Dr. Thompson.

a) 1) In general, do you support the federal government's decision to distribute funds

through the ARRA? Why or why not?

• On balance, I do not. Though, I think it was a difficult decision. The argument in

favor is that during a recession private spending and investment slump and

stimulus spending can replace some of that demand and reduce the magnitude of

the recession. The argument against is that after a decade of excessive spending

we had significant deficits even before the recession. Under these

circumstances, stimulus spending will further undermine confidence in the

future, making business and households worried about future debt and taxes,

causing them to curtail spending and investment further. This reaction could

negate any short-term benefits from the recession.

• It is a tough call but in the unusual circumstances we found ourselves when the

recession started 2.5 years ago, on balance it may have made sense to forgo

ARRA spending.

b) 2) Do you think Nebraska has benefited the funding promised in the ARRA?

• I think my response for Nebraska would be the same as my general response

above.

c) 3) Do you think the state of Nebraska will sustain major job losses and experience

an economic downturn when the ARRA funds are gone in 2012 or earlier?

• No. The economy has been in recovery for a year and is most likely to continue

8
 to expand. The rate of growth, in fact, may accelerate over the next few years.

d) 4) How do you think the federal government will resolve the $13 trillion debt crisis?

• Federal spending has grown at nearly a 10% rate over the last decade. I expect

that spending will grow at 2% or 3%, or perhaps less, in the years that follow.

With spending growth slowing, and the economy recovering from recession. We

will return to small annual deficits, or perhaps, small surpluses in 5 or 6 years. If

we maintain this situation, our nation's $13 trillion will steadily become a

smaller share of our economy, and less detrimental.

e) 5) Do you think the solution to the economic crisis in America is to continue with

economic stimulus plans which put the federal government deeper into debt? Why or

why not?

• No. As I indicated in my answer to 1), I'm concerned that under current

circumstances it is not helping the economy even in the short run.

f) 6) In general, how would the nation's economy be affected if the federal government

were to balance their budget? In other words, would states directly benefit if the

federal government were to solve their debt crisis?

• I think states will benefit if the federal government works slowly and steadily to

reduce its debt. States will not be helped if the federal government fails to

reduce its deficit.

g) 7) If the funds from the ARRA will run out and economy has not recovered, do you

think the debt accumulated through the stimulus package was worth the short-term

investment?

• As I indicated in 1), I do not think it was worth it. However, I don't blame those

9
 who put the ARRA package in place. It was a difficult call to make.

• The real problem has been the excessive federal government spending over the

last decade. We went from a $300 million annual structural surplus (means

adjusting for business cycle) to a $300 to $500 million annual structural deficit.

It was like an ARRA program every year.

ii. What I gleaned from my interview with Dr. Thompson is that the economic struggle we

find ourselves in today has been a long time coming. However, we who live and plan to

work in Nebraska can be comforted that the economy here has been growing and Dr.

Thompson projects that it will continue to do so.

a) Nebraska State Debt: $12,253/citizen

(State of Nebraska Debt Clock 2010)

b) US National Debt: $44,365/citizen

(U.S. Debt Clock 2010)

iii. Ultimately, the budget crisis must be resolved at a national level so that all of the states

and education systems that are surrounded by failing economies will have a chance to

stabilize without going further into debt.

iv. Schools today are skimming the surface of economic depression. Nationwide education

systems seem to be getting along and some are thriving because of the millions of

dollars that are being borrowed by the government and given to the districts to sustain

and create jobs. This allocation of money is scheduled to run out by 2012 if not earlier.

As noted, a key factor is that unless the entire country is in an economic upswing come

2012, we'll find ourselves in a place where thousands of jobs are at risk and the

government cannot possibly continue adding to its $13+ trillion in debt.

v. Instead of developing programs designed to award this “free” money and complicated

10
systems of accountability to see if it is producing results in student performance, the

government should be fixing its own budget. I strongly believe that if the federal debt

was under control or at least headed in the right direction that it would positively

influence the economy of the entire country, thereby saving jobs and providing

stabilization as well as consumer confidence.

11
 References

Hall, E. (February 6, 2008). U.S. National Debt Clock FAQ. In U.S. National Debt Clock. Retrieved

November 29, 2010, from http://www.brillig.com/debt_clock/faq.html.

Kober, N, Scott, C, Stark Rentner, D, McMurrer, J, & Dietz, S. (July 2010). Teaching jobs saved in

2009-10 but teacher layoffs loom for next school year in school districts' perspectives on the

economic stimulus package. Washington, D.C.: Center on Education Policy.

N.A. (2010). US Debt Clock.org. In State of Nebraska Debt Clock. Retrieved November 29, 2010, from

http://www.usdebtclock.org/state-debt-clocks/state-of-nebraska-debt-clock.html.

N.A. (2010). US Debt Clock.org. In U.S. National Debt Clock: Real Time. Retrieved November 29,

2010, from http://www.usdebtclock.org/index.html.

Scott, C. (August 2010) School Improvement Grants-Present Uncertainty and Opportunity in School

Districts' Perspectives on the Economic Stimulus Package. Washington, D.C.: Center on

Education Policy).

U.S. Department of Education, American Recovery and Reinvestment Act. (2010). Section 1512

Quarterly Reporting Through September 30, 2010 By State. Washington, D.C.: Retrieved

November 28, 2010, from www2.ed.gov/policy/gen/leg/recovery/../arra-program-summary-5-

state.xls

U.S. Department of Education, (2010). Department of Education Recovery Plan Retrieved November

28, 2010, from http://www2.ed.gov/policy/gen/leg/recovery/recovery-plans-2010.pdf

U.S. Department of Treasury, Bureau of Public Debt. (November 3, 2010). Government - Monthly

Statement of Public Debt (MSPD) and Downloadable Files. In Treasury Direct. Retrieved

November 17, 2010, from http://www.treasurydirect.gov/govt/reports/pd/mspd/mspd.htm.

12