“Surplus” Just Means They Haven’t Spent It, Yet

Gary Trott tries to apply too much common sense to public-sector budgeting:

What should a Rhode Island city or town do if it suddenly finds itself with a surplus of unspent funds amounting to nearly $6 million? You’d think that it would do the responsible thing and not spend those funds in order to ease up a little bit on the taxpayer.
Well, that’s not what the School Committee in Warwick did during the final days of December when it voted unanimously to take the $6 million surplus from the previous year and spend it by giving raises to teachers and also by cutting the 20 percent contribution that the teachers were to pay toward their health care benefits (ProJo 7 to 7 News Blog, Dec. 29).

The problem is that this isn’t just spending for spending’s sake, as Trott takes it. Rather, all of the incentives push government bodies in the direction of spending everything and, in particular, spending as much as possible on raises and benefits for employees.
Obviously, the electoral threat implicit in public-sector unionization is one incentive. So is the likelihood that unspent dollars won’t just be considered a windfall to be kept, but will be targeted (rightly, in my view) both for a direct return to taxpayers and for a reduction in subsequent years’ budgets. When the money isn’t given freely as an economic exchange, but is taken under threat of law as taxation, the emphasis shifts from claiming as much money as a consumer can be convinced that the service is worth to providing cover for the claim that so much, and more, is needed, or even required by law. The process becomes one of budget tricks.
In Tiverton, for example, the school department claims that the town is required to make up for any difference in the amount of state aid that is estimated at the financial town meeting. (Naturally, extra aid is never reduced from the local appropriation.) So, say the local appropriation is $20 million and the FTM estimates that the schools will get $5 million in state/fed aid. If the aid comes in at $4 million, then the schools take another $1 million from the town’s property tax pool.
Here’s the best part: for the purposes of calculating the state-imposed cap on how much additional money it can request, the school department considers the $21 million to be part of its new baseline. It then begins the performance of declarations about what it will have to cut, close, and eliminate if the town doesn’t bust the cap.
The process doesn’t begin, in short, with the question of what the payer will bear, but with what the payee can take. The only way to change the incentives and the outcome would be to organize enough voters to place better candidates on the boards, councils, and committees and counterbalance the corrupt symbiosis between elected officials and labor.

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Patrick
Patrick
10 years ago

The part that I don’t understand is whether the Warwick School Committee was contractually obligated to those raises and cuts in health care contribution. Or were they just being “nice”? If it’s the former, then there’s not much you can do and I’m not sure why that $6M would be considered “surplus”, but if it’s the latter, then I have to ask why the SC isn’t following the contract to the letter, as the workers do. They’re contractually obligated to pay 20%, make them pay 20%. It says in the contract what their pay rate is for the the year, pay that to them, no more no less.
Anything else should be grounds for malpractice by the SC and should be recalled immediately.

Scott Bill HIrst
Scott Bill HIrst
10 years ago

Hi!
While West Warwick is essentially a Democratic community, the GOP does have enough support to have an impact and can win elections. They are not completely “shut out” for decades like communities like North Providence.
I think West Warwick should consider the advisibility of an “outside management” study of school spending. Also it should be asked to what extent does the school committee move line items in the budget from one purpose to another AFTER the budget is ADOPTED..
Reards,
Scott

Marc
10 years ago

Patrick, A little conflation is going on. Originally, based on budget figures at the time, the Warwick SC argued they had no other option but to cut scheduled teacher pay raises and increased healthcare co-shares. Once the surplus came in, that argument went away and they correctly surmised they wouldn’t have a leg to stand on in court. The $6 million surplus went to more than just pay/benefit reinstatement, though that comprised the majority of it.

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