An Urgent Crisis, An Effective, Affordable Remedy

Florida Can Afford to Reduce Class Sizes

Reducing class sizes in Florida public schools will require a substantial but affordable investment in new classroom space and new teachers. Importantly, according to the terms of Amendment 9, the state Legislature, not local school districts, would be required to fund the needed investments. (See Appendix B for full text of Florida’s Amendment to Reduce Class Size). Scare tactics about burdens on local school districts or property taxes have no basis in fact. Amendment 9 would make smaller classes a statewide priority and responsibility.

Smaller Classes Are Cost-Effective Investments

When considering any proposal, elected officials and the public must weigh both the cost and the return. Alan Krueger of Princeton University has examined the positive, long-term effect that smaller classes have on earnings. Krueger wrote recently that each dollar invested in class-size reduction produced $2 in benefits.75 Additionally, the RAND Institute studied the various strategies that states had used to help improve student performance and identified reducing student-teacher ratios in the lower grades as one of the three “most cost-effective” reforms.76

One of the reasons smaller classes provide such a sound return on the dollars invested is because they help cut other, unnecessary costs. As the U.S. Department of Education has pointed out, the cost of class-size reduction “can be offset by the resulting decrease in within-grade retentions, reduced high school dropout rates, a diminished need for remedial instruction and long-term special education services, and increased teacher satisfaction and retention.”77

When the Florida Senate voted in April to support a class-size reduction amendment, the Senate put itself on record behind the view that “investments in smaller class sizes lead to high student achievement and higher lifetime income and earning power.”78

Making needed investments in infrastructure would also provide jobs and a boost to the state’s economy.

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Legislature Has Many Options for Funding Smaller Classes

Amendment 9 does not dictate a particular funding mechanism. Amendment 9 will instruct the Legislature to make education a priority and require legislators to determine responsible ways for funding smaller classes. While neither the Coalition to Reduce Class Size nor People For the American Way has endorsed a particular funding mechanism, there are a number of approaches that legislators could consider, in addition to seeking ways to eliminate waste and inefficiencies.

  • Reviewing Special Interest Sales Tax Exemptions
  • One option that the Legislature could explore: identifying special interest sales tax exemptions that do not provide a demonstrated benefit to the state and redirecting some funds from special interests to the public interest and class size reduction . Next year, Florida will raise about $17 billion in sales tax revenue. Yet, the state will lose about $23 billion in sales tax revenue due to existing exemptions.79 Redirecting even a small portion of that $23 billion could pay for smaller classes. Legislators could close special interest loopholes (such as exemptions for adult entertainment and escort services, skyboxes at sporting events, and ostrich feed) while maintaining exemptions that have a broad impact on individual Floridians, such as grocery purchases, veterans’ programs, prescription drugs, and other basic needs.

    Senate President John McKay is spearheading an effort to try to close many sales tax exemptions. “It’s wrong for special interests to get tax breaks when your constituents and my constituents pay 6 percent on a household item like a washing machine,” McKay said.80 McKay’s efforts have drawn bipartisan support, including that of Rhea Chiles, the state’s Republican comptroller Bob Milligan and former Majority Leader Jack Latvala, a Republican.81

  • Reconsideration of Corporate Tax Breaks
  • Another possible option for the Legislature to consider as a funding source would be repealing some or all of the corporate tax breaks that were enacted earlier this year. Over the next three fiscal years, these corporate tax breaks will cost the state nearly $430 million in revenue.82

    In addition to freeing up hundreds of millions of dollars in funding to reduce class sizes, repealing these corporate tax breaks might actually boost the economy. In a written opinion earlier this year, the chief economist for the state’s Office of Economic and Demographic Research wrote that Florida would lose both jobs and revenue as a result of the corporate tax breaks.83

  • Prioritizing Lottery Proceeds
  • As it explores funding options for Amendment 9, the Legislature should more closely examine how state lottery funds are being allocated and determine the lottery’s impact on other state funding for education. The lottery, created in 1986, was promoted to voters with the understanding that lottery revenues would be additional funding for public schools. In fact, the official title of the law creating the Florida lottery is the “Florida Public Education Lottery Act.”84 Several prominent groups and elected officials have raised legitimate concerns that lottery receipts have not gone to enhance spending but have simply replaced money that would normally have been allocated from general revenues. Legislators have a responsibility to use the lottery monies in the way they were originally intended.

  • The Impact of Long-term Financing
  • Building new classrooms will be required to meet Amendment 9’s class size targets, but not all of the funds needed for construction will have to come out of the state’s budget over the next eight years. Infrastructure projects, such as primary and secondary schools, highways, public transportation, and convention facilities, are regularly financed using pay-as-you-use plans of finance with bonds amortizing over 20-30 years. It is misleading to treat construction costs as if they would be paid in the short term, essentially on a pay-as-you-go basis, in the form of cash as a part of the annual budget. In fact, doing so could be considered financial malfeasance.

    An investment bank that regularly participates in the state’s bond issues estimates that the borrowing rate for AAA insured bonds would currently be around 5.15 percent. A rough estimate is that $1 billion financed over 20 years would require about $64 million in annual debt service; if financed over 30 years, the annual service on $1 billion would be about $76 million.

    Long-term financing of capital expenditures in fixed assets is routine because it has many advantages. It leverages available money to meet immediate needs; minimizes the effect on the annual budget by distributing construction costs over a period that matches the life of the facilities; and can avoid future increases in construction costs by allowing projects to be funded and built now.

    In fact, with interest rates at historic lows, now is the ideal time to finance the kind of construction projects that would make smaller classes a reality. Given the capital needs our schools face, it is baffling that the state has not taken advantage of the lowest interest rates in years to begin to address the classroom needs of our children.

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    The High Cost of Failing to Act

    In addition to the devastating consequences of overcrowded classrooms on the learning environment, student achievement and teacher retention and morale, there are real economic and other consequences if we fail to bring class sizes down to manageable levels.

    “The people of Florida are aware that there is a price tag associated with reducing class size,” said U.S. Senator Bob Graham, who supports the class-size initiative. “You talk about cost? What’s the cost to the state of a system that says less than half of ninth-graders are going to graduate in four years?”85 As Princeton’s Krueger recently explained, “Class size probably influences other outcomes with economic consequences, such as crime and welfare dependence …so the economic benefits (of smaller classes) could be understated.”86

    Consider the context. The state of Florida spends hundreds of millions of dollars on its juvenile justice system.87 In 1999-2000, judges committed 11,247 juvenile offenders in Florida to residential confinement.88 The state’s Department of Juvenile Justice reports, “Juvenile offenders in Florida whose crimes are serious enough to merit placement in residential programs typically come from single-parent households and are truants, dropouts, or are doing poorly in school.89

    Issues such as crime are obviously complex problems involving many factors, but education is clearly a powerful influence and small class size is one critical component.

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