Libby Mitchell’s fuzzy math

Libby Mitchell’s fuzzy math

October 5, 2010 Posted by Steve Bowen - 2 Comments

Libby Mitchell's fuzzy math on education spendingLibby Mitchell’s school reform plan has a lot of different elements, and if they have one thing in common, it is that they involve a great deal of spending.

According to Mitchell’s website, she wants to do the following:

  • Expand pre-kindergarten services to every school district so that children enter kindergarten ready to learn;
  • Guarantee a grant for every qualified high school graduate to attend the University System, one of the Community Colleges or Maine Maritime Academy;
  • Cut the dropout rate in half by expanding the Jobs for Maine’s Graduates program to every high school in the state;
  • Raise public school standards by establishing benchmarks, maximizing time spent in the classroom, narrowing the focus of the Department of Education to better serve students, and including innovation and entrepreneurship in curriculums.

It is hard to even know what she means by the fourth bullet (“entrepreneurship in curriculums”?) but the first three are extraordinarily costly.

Expanding Pre-K programming to every school means hiring hundreds of new teachers and increasing spending on all the supplies and support services schools and students need. Some good digging by Derek Viger found that a pre-K program for Massachusetts was estimated to have costs in the $3,000 per-pupil range, though that seems low to me. Maine’s average per-pupil spending, remember, is over $11,000 per year.

According to the Maine Department of Education, there are 13,600 Kindergarteners in Maine, so assuming that is the number of Pre-K students we would be bringing into the public schools under the Mitchell plan, total spending for the Pre-K group would be over $40 million statewide at $3,000 per-pupil. There are already about 3,600 Pre-K students being taught in Maine’s public schools today, according to Maine DOE, so we can shave $10 million off the $40 million if we use the $3,000 per-pupil number.

So in total, we’re talking somewhere in the neighborhood of $30 million in additional spending for this one program, and that is almost certainly underestimating its total cost.

On higher education, Mitchell says she wants to create “a public/private partnership for a matching grant program to guarantee tuition for the first year at the university system, community colleges, or Maine Maritime Academy.”  This plan could use a great deal of fleshing out, as who even knows what she is talking about with regard to a “public/private partnership.” Providing a year of college tuition to every student who wants it, though, will costs millions.

According to the University of Maine system, they had just over 4,000 first-time, first-year students enroll in the fall of 2009, and that was across the entire UMS system. Tuition and fees for these students, assuming they attend full time, will be in the neighborhood of $5,000 (at least at Orono), and that does not include room and board.  Paying for a year of tuition for these students, then, would cost about $20 million. The Maine Community College system says it had 2,280 students enroll right out of high school last year, and says the “average cost to attend full-time is $3,300 a year.” The cost of a year of tuition for these students would be $7.5 million.

Even if we assume the aid amount will be limited and that some funding will come from other sources, we have to be talking somewhere in the neighborhood of $12 – $15 million a year for this initiative.

Mitchell is a big supporter of the highly successful Job’s for Maine’s Graduates program, and wants to expand the program to every high school in Maine. Today, the program, which is indeed an excellent one, serves more than 3,200 students in 64 programs, 39 of which are located in high schools.

According to Maine DOE, there are 216 high schools in Maine. Expanding JMG to all of these schools would mean quintupling the size of the program, which would, it stands to reason, cost five times as much as the program spends today. JMG gets a great deal of private support and grant funding, but also gets a state appropriation of about $1.7 million, which would have to increase to over $8 million if it is to expand as Mitchell suggests.  Even if we assume that JMG can do more with less, which it has proven adept at doing, we’re still talking $5 million or so in additional annual spending to put the program in all of the state’s high schools.

So $30 million for Pre-K, $15 million for higher ed, and $5 million for JMG, which leaves us with annuals costs of $50 million for these three initiatives alone, and that is being very, very conservative.

How will she pay for it?

According to her website, Mitchell plans to pay for all of this “by renegotiating the terms of the state liquor contract,” which she says will provide “hundreds of millions of dollars over the next decade to help educate our children.”

Really?

Let’s look, for a moment, at what Mitchell is talking about.

In Governor Baldacci’s first term, the state sold off its liquor business to raise some one-time funds to close a budget gap. The state was receiving $26 million a year in revenue from the liquor business, but gave up ten years of that revenue for a one-time payout of about $150 million. In other words, Maine gave up $260 million in revenue in exchange for $150 million up front, losing out on $110 million in revenue in the process.

Setting aside for a moment whether this was a good idea, which is doubtful, what is it that Mitchell hopes to do? The liquor contract runs until 2014, so the state can’t re-open the contract to other bidders. That means this is a one-on-one negotiation over extending the existing contract, a negotiation in which, Mitchell seems to believe, the state can convince the current contract holder to pay far more for the liquor business than they are paying today.

Why they would do this is anyone’s guess, especially since there will be no competition for the contract. Let’s assume, though, that they do, and that Mitchell is able to get some kind of deal on par with what Baldacci got. The state, in other words, will be giving up future revenue for a one-time payout, and let’s assume, given the growing value of the business, that the state walks away with a payout of around $200 million.

What do we do with the money?

$200 million will cover exactly 4 years of what Mitchell has in mind, and that is only including the three initiatives discussed here.  (We still have, remember, ongoing state budget shortfalls that have meant declining state spending on schools. The state was supposed to be at a 55 percent state share for K-12 education last year, but is really at only a 46% percent state share and is headed toward a 42 percent share for FY 2012.)

Does Mitchell plan to put the money in some kind of endowment and live off the proceeds? Let’s assume she does that, investing the money in much the same way the state’s retirement system does. According the retirement system, the state’s pension fund has earned an average annual return over the last ten years of 2.4 percent.  2.4 percent of $200 million is $4.8 million, which might cover the cost of the JMG expansion, but that is all.

How does any of this add up, especially when a recent report suggested that if the state were to take over the liquor business at the end of the current contract in 2014, it would bring in $40 million in revenue every year? Remember, once the $200 million one-time payout is gone, it is gone.

Mitchell isn’t saying anything about the math. She hasn’t put any numbers to any of her proposals, and refuses to discuss how she thinks a renegotiation of the liquor contract might go.

The press, of course, refuses to push her for more details, and is content to let her prattle on about how renegotiating the liquor contract will free up “hundreds of millions of dollars” for Maine’s schools.

But how, exactly, will it do that?