A Penny for Education

One of the bills making its way through our legislative system this session is one that would create a special fund for public education, and then funnel to that fund twenty-five percent of all the money that our General Excise Tax brings in.

“25% of the four percent tax is just a penny out of every dollar,” proponents of the bill may be saying.  “A penny for education.  Aren’t our keiki worth even that much?”

First, let’s figure out how much money we are really talking about here.

I went to the Senate Education Committee to testify on the bill.  “We’re talking about a LOT of money to earmark for public education,” I said.  “Between 800 million and a billion dollars.”

“Times four percent, right?” one senator asked.

“No,” I said.  “The GET brings in between 3 and 4 billion dollars a year.  This is after the four percent tax rate is applied.  You need to remember that this tax brings in nearly half of all general fund collections every year.”

“Those aren’t the numbers I have,” the senator said.

The committee chair was expressionless.  She knew exactly how much was at stake, as did the teachers’ union.  “We want to make sure that this in addition to the funds that are appropriated for public education now,” the union had said.

So how much is $800 million?  If we had that amount of money in pennies for education, those pennies would weigh roughly 3 grams per penny times 800 million times 100 pennies in a dollar, or 240 million kilograms.  That’s 260,000 U.S. tons, which is quite a bit more than the weight of the Sears Tower in Chicago (222,400 tons).

That’s a lot of money.  We’d want to make sure there were proper controls and oversight before plopping all of that cash in our Department of Education’s lap.

Second, isn’t this something we tried before?  For a very long time — for more than twenty years, in fact — our legislature earmarked a large amount of money from the GET every year.  For most of that period, $90 million a year went to the state educational facilities special fund.  In theory, that money was supposed to fund repairs and capital improvements to our schools between 1989, when the earmark was enacted, to 2013, when it was repealed.  In 2013, our Department of Budget and Finance said:

“Over the years, capital improvement projects appropriated for education facilities have generally been authorized and funded with [special funds], which are then 100% capitalized through the issuance of general obligation bonds. We recognize the need to address the maintenance and upgrades of educational facilities; however, given the economic condition of the State and concerns on national funding support levels, we must address our school funding requirements within available funding resources.

“Thus, capital improvement project requests by departments should be reviewed on a statewide basis and allocated to programs based on statewide priorities.”

During the last 25 or so years, did our educational facilities get better as a result of having the state educational facilities special fund?  Was the lack of having a special fund proven to be a reason why, in the past few years, our kids were getting cooked in our sweltering classrooms?  Do the problems in our classrooms have anything to do with special funds at all?

A penny for your thoughts.

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Tom Yamachika is the President of the Tax Foundation of Hawaii, a private, nonprofit educational organization dedicated to informing the taxpaying public about the finances of our state and local governments in Hawaii. Tom is also a tax attorney in solo practice and has been since early 2013. Prior to 2013, he was with the accounting firm Accuity LLP, which was formed in 2006 from the Honolulu office of Coopers & Lybrand (which later became PricewaterhouseCoopers). Before that, he served as an Administrative Rules Specialist in the State of Hawaii Department of Taxation from 1994 to 1996, where he drafted rules, interpretive releases, and legislation on several different state taxes. Prior to that, he practiced litigation and tax law with Cades Schutte Fleming & Wright in Honolulu.