State Budget Surpluses?

For years now, we have been hearing how state and local budgets were struggling.  States were banking their stimulus dollars (particularly their K-12 education funds) in anticipation of a far rainier day.  Education budgets frozen.  Teachers jobs eliminated.  Purchases of textbooks or technology frozen.  All because of growing budget deficits and the looming absence of stimulus funds to prop up the states.

Eduflack even opined on it back in the summer of 2009, when then-new NCSL data showed massive budget gaps in those states originally teed up to be potential Race to the Top winners.

The “sky is falling” mentality has only grown more acute over the last year, as states and localities have been wringing their hands over two issues.  The first is the long-term cost of budget items, essentially the “pensionability” of actions such as giving teachers raises.  The second, and far more serious, concern is the overhaul coming to state Medicaid requirements, and the astronomical related costs coming to a state near you in 2014.
So we’ve become accustomed to the “end of days” rhetoric that has dogged state politics, and by extension state education policy, the past two or so years.  Then something comes along that causes us to re-center our thinking on the whole matter.
Under the headline, “Many states celebrate surpluses as Congress struggles with debt,” the Washington Times notes that “a dozen states ended fiscal 2011 with surpluses.”  Those states include Indiana (which just gave non-pensionable bonuses to state employees), Idaho, Maine, Iowa, Ohio, Arkansas, and South Carolina.
But as NCSL revealed in 2009, many of these states were already the “low-hanging fruit” when it came to states with reversible budget problems.  Even Ohio, which once faced an $8 billion deficit faced a gap less than 5 percent of the total fund.  In fact, when we look again at the states singled out by the Washington Times, and then look at what Eduflack wrote in July of 2009:
On the flip side, there are some interesting states that appear to be in the best financial shape, where their budget gaps are less than 5 percent of the general fund, meaning (in theory) that public education will face a scalpel, and not an axe.  So there may be opportunities in states like Arkansas, Missouri, Indiana, and Ohio to quickly put real reforms in place and document the impact it is having on student learning.

Without a crystal ball, we predicted that states like Arkansas, Indiana, and Ohio would have the opportunity to address those projected budget gaps in a way that would not cause grave physical harm to public education in those states.  In Indiana, for example, Gov. Mitch Daniels seems to have done that, enacting real school reforms (though the impact of changes to public employees in general obviously has real impact on the teachers leading our classrooms).  In Ohio, we still need to wait to see the long-term impact, as Gov. John Kasich has addressed the overall budget, but did so as Ohio schools were already suffering from cuts and freezes enacted by his predecessor.  Like it or not, that scalpel has led to real education reform policies, including those focused on teacher quality and LIFO. 
So it begs some important questions.  In these dozen states that have done the impossible, and turned budget gaps into surpluses, how does education spending today, at the end of FY2011, measure up to K-12 education spending in FY2008?  What changes, if any, have been made to ensure that school improvement efforts are adequately funded, and that reduced school spending isn’t simply going to fund that which isn’t working?  And perhaps most importantly, how are these surpluses being designated, particularly as we think about the miles to go on real school improvement in these states?

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