Saturday, May 10, 2008

The cost of public education is more than publicly acknowledged

The cost to educate students in K-12 is high. In the United States the national average is over $9,000 a year. That is per student, each year, $9,000! I've joked once or twice that it would be cheaper to offshore our public education. We could fly our students to India and educate them there, saving thousands of dollars, per student.

Well Richard G. Neal says the reality is the costs are much higher. In Free Public Schools are Far from Free Actual Costs Greatly Exceed Published Costs he explains:

Unlike businesses in the private sector, public school budgets often exclude many significant costs when computing expenditures, thus giving misleading information to the public. The Oklahoma Council of Public Affairs (OCPA) found this to be the case in its comprehensive study, "Education in Oklahoma: The Real Costs." Based upon my hands-on experience with school budgets around the nation, the findings of this report are generally applicable to other states.
The report says that the state government's "official" per-pupil cost of education in Oklahoma in the 2003-04 school year (latest available figures) was $6,429. This amount was derived by the procedure commonly practiced in school districts nationally, that is, by dividing the (published) school district budget by the number of students in the district. However, when OCPA performed its thorough accounting according to the generally accepted accounting principles as promulgated by the Governmental Accounting Standards Board, it came up with a shocking real per-pupil cost of $11,250.
Why the difference? Unlike private-sector businesses, the government's school accounting systems exclude many significant and legitimate costs. If the CEO and finance division of any publicly held company attempted to influence public opinion with such misstated public financial data, they likely would be subject to criminal and civil prosecution. Remember Enron and WorldCom?


That is amazing. The true cost of public education may be twice as high as the published numbers.

Richard then goes on to explain some of the hidden costs:

Unbelievably, the "official" per-pupil cost did not include – according to OCPA accounting procedures – a number of significant expenditures. (1) Oklahoma taxpayers subsidize the retirement benefits of Oklahoma teachers by having part of taxpayers' individual income taxes, sales taxes, and use taxes sent directly to the Teachers Retirement System of Oklahoma, thus bypassing incorporation into local school district budgets. (2) The state's Department of Career and Technology pays for part of middle and high school business and industry programs. Again, not reported in the local district budget. (3) Yearly depreciation of school buildings is not included in district budgets. This unaccounted-for wear and tear amounted to about $2.2 billion in 2000. (4) The Teachers' Retirement System of Oklahoma defined benefit plan annually adds debt that will be paid for by future generations. In 2003, the total unfounded liability of the retirement system was $1.93 billion. This same problem exists in state retirement funds throughout the nation, where 45 states have gaps between assets and promised benefits.

Unfortunately there are even more hidden costs. Read Richard's column for more details.

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