William Baumol, professor emeritus of economics at Princeton University, is the author of The Cost Disease, a book that all policy-makers should study. Building on forty years of research, Professor Baumol argues that the cost of social services, health care, and education is “condemned” to increase faster than inflation because the number of people providing and using the services cannot be reduced easily. Unfortunately, they can be expanded easily.
In public services, administrators are normally expected to spend all the money they receive, and then try to get more money for an unlimited list of projects that will supposedly enhance the quality of citizens’ lives.
The table presents evidence for Manitoba public schools from 1999 to 2010. Over this 11 year period, public school enrollment in Manitoba fell by almost 10% from 197,067 to 177,679 students, but the number of educators increased by 10% from 13,114 to 14,433. Nevertheless, the cost of educating students in these schools increased by a whopping 60% from $1.41 billion to $2.26 billion when the Consumer Price Index (CPI) increased by a modest 25%. The increase in cost per student is even more dramatic, increasing by almost 78% from $7,154.92 to $12,703.81, three times the increase in CPI.
The cost disease has seen increasingly more resources flow into half-empty schools, fewer students in classrooms, expanded bureaucracies, and higher salaries for administrators and teachers. If the cost of educating students had been held to the increase in CPI, there would be a savings of over $661 million in 2010-11 alone, which is much more than all the school taxes paid by provincial property owners.
School division administrators claim students have benefited from lower student-teacher ratios, better facilities, more divisional administrators, and teachers with higher salaries. But, they have not provided evidence to support their claim.
Rethinking the way education is funded (and administered) in Manitoba is overdue. There is a pressing need to lower taxes and improve students’ educational achievement so that Manitoba can compete successfully with Saskatchewan and Alberta.
For starters, Manitoba should stop using municipal taxes to fund public schools. Most provinces have already stopped raising money from property taxes.
After that, Manitoba should tie spending directly to demand by using vouchers so parents could send their children to any public or independent school. Higher enrollments would automatically mean larger budgets for schools, and lower enrollments would mean smaller budgets.
These two policies would constrain spending in the face of declining enrollments. They would also eliminate the unfair double burden placed on the increasing number of parents who are sending their children to alternative schools. At present, these parents effectively pay twice—first, when they pay private school fees and then when they pay both provincial and municipal taxes supporting public schools that do not meet their children’s needs.
Consumer-controlled funding would also eliminate a large swath of public school bureaucracy that has absorbed considerable resources. They would turn schools away from maximizing spending on peripherals and force them to focus on objective, measurable, outputs, those that are essential for creating informed, enlightened, and employable citizens.
As a result, we would get a much slimmer provincial education department and more cost-efficient school boards that focused on teaching and learning. Of course, students would be tested and the results would be published so that excellent schools attract more students and low-performing schools wither and close. Schools would be free to experiment with different teaching strategies, but they would need to deal with the consequences, positive or negative.
These changes would save considerable money, making schools much more responsible to the needs of students, parents, and taxpayers. Manitoba’s cost disease in public education cannot continue.