Budget

Happy New Year – a personal announcement

Published by Anonymous (not verified) on Sat, 18/01/2020 - 2:29am in

Happy New Year!

This blog has now been running for nearly nine years. In recent months, the output has slowed and I see that I haven’t done anything since September.

In the main, this is because work elsewhere is keeping from writing. I think that is likely to continue in the near future: I will mainly be producing private commissioned reports for UCU branches following the publication of the latest round of annual reports.

I will probably fire up this blog again for the budget in March for the budget and later that month, when I should be able to say more about a couple of new initiatives.

In the meantime, here is the latest odd development in the ongoing saga of Reading’s  National Institute for Research in Dairying Trust. The headline captures it: “Dead Radioactive Goats Experimented on Decades Ago Could be Buried in Berkshire”. More precisely, in Shinfield.

Proceeds from that sale of Shinfield land was subsequently passed on by the trust to the university. Reading’s latest accounts tell us that the matter of this multimillion pound loan from the trust to the university is still not resolved:

“”During the year, the University and one of its connected trusts, the National Institute for Research in Dairying Trust (NIRD), have been in discussions to resolve some legacy governance issues that were self-reported to OfS and the Charity Commission. These discussions are progressing well and are still ongoing. To date, they have not raised any issues that would have a material impact on the University. The University is the sole Trustee of NIRD, and NIRD is accounted for as part of the University group.”

 

At the national level, the announced change to the government’s fiscal rules makes it more likely that the programme of student loan sales will come to an end. The ONS announced that the two sales so far completed have lost £2.7billion and that this will now count as capital expenditure in the national accounts. 

Now that the government has decided to stop targeting Public Sector Net Debt as part of its fiscal mandate, the main aim of the loan sale loses much of its point. As explained here (and elsewhere) over the years, the fiscal illusion embedded in the composition of PSND (not changed by the ONS’s recent accounting overhaul) means that student loans are not counted as an asset in that headline figure. Any sale thereby improves PSND as the cash raised does count: PSND is reduced whatever loss is registered on the loans. What has changed is that the loss now scores as expenditure.

PSND is now sidelined and the losses on sales count as expenditure against the new secondary target of Public Sector Net Investment (3% of GDP per year). That would seem to mean that the sale programme performs badly against what are effectively the government’s chosen performance targets.

That PSNI target already has to accommodate the c. £10bn pa needed to fund estimated write-offs on new loans. For more detail on those impacts, seethe Office for Budget Responsibility’s restated March 2019 forecasts(from which the table below is taken).

impact writeoffs PSNI

Unlike in 2017 and 2018, there was no sale in December. The Budget would be the normal occasion on which the Chancellor would confirm whether or not they are still going ahead.

Now that the accounting more accurately reflects the impact of the decision to sell or not, you would expect reason to prevail and the scheme to be halted.

 

Sajid Javid’s contempt for the required due process of government in Scotland

Published by Anonymous (not verified) on Tue, 07/01/2020 - 10:14pm in

Tags 

Budget, scotland

I reproduce this from a press release issued by the Chartered Institute of Tax in Scotland this morning:

Commenting on the tax implications for Scotland of an 11 March UK Budget date, Alexander Garden, chair of the Chartered Institute of Taxation’s Scottish Technical Committee, said:

“A UK Budget on 11 March leaves MSPs with just a few days to react to changes made at Westminster and to agree what the rates and bands of Scottish Income Tax will be ahead of the start of the new tax year in April.

“This matters because if MSPs fail to reach agreement – a scenario that could be seen as highly plausible in a parliament of minorities – Scotland would revert to the UK rates and bands of tax set by Westminster, effectively foregoing its ability to set its own income tax rates.

“There remains the chance that Derek Mackay could choose to go it alone and outline his plans before 11 March, but in this situation, he would be constrained by not knowing the true extent of Scotland’s fiscal picture.

“None of these scenarios are appealing and mean we are facing a Scottish budget process that will be conducted at breakneck speed, with little room for manoeuvre”.

Scotland has its own tax rates, but they are set as variation from UK rates.

What Sajid Javid is revealing is his contempt for the required due process of government in Scotland, as if he is indifferent to it.

No wonder support for independence is growing.

Sajid Javid is planning to set out to fail the country

Published by Anonymous (not verified) on Tue, 07/01/2020 - 7:39pm in

Tags 

Budget, Economics

According to the FT Sajid Javid is announcing that today that the Budget will be on March 11. As they note, a focus will be on delivering on the promise to the North:

The Financial Times understands Treasury officials have been instructed to view all Budget measures through the lens of improving economic performance in parts of the UK far from the more prosperous south-east of England.

The Tories seized seats off Labour at the election in the north, the Midlands and Wales, many in so-called left-behind areas.

To achieve this they note:

The Budget money stems from the Conservatives’ pledge to raise net capital spending from about 2 per cent of gross domestic product to 3 per cent, giving the chancellor some £100bn for investment over five years.

Of this war chest, the chancellor has about £80bn to allocate to projects over the next few years.

So, the Tories are going to deliver maybe £20 billion a year for investment when the expected minimum requirement for a Green New Deal is £100 bn a year for a decade. In other words, they are planning to fail to deliver the green transformation this country requires.

And worryingly, the FT notes:

But outside of infrastructure spending, most of the money needed to boost underperforming regions will need to be raised from additional tax revenues because Mr Javid faces tight public finances.

Having already announced a loosening of his fiscal rules to take advantage of low interest rates for more investment, the Conservatives’ manifesto promised to balance the current budget — so that tax revenues exceed day-to-day public spending — within three years.

In other words, a wholly inadequate infrastructure programme that is unlikely to be that green apart, the Tories are planning to continue with austerity, whatever the consequences for well being.

And given that no serious commentator thinks that there will be any significant growth at all in the UK in the coming year, and that Brexit harms any prospect of it, imposing such a constraint now means that any chance of a fiscal stimulus - of exactly the sort that even the FT is now calling for - is now extremely small indeed.

In other words, Sajid Javid is planning to set out to fail the country.

The time has come to talk of many things; of taxing and spending and an economic system that needs mending. 

Protest placard with a picture of the Earth in space and the slogan "One World"Photo by Markus Spiske on Unsplash

In the news, the Prime Minister tells millions of  WASPI women affected by the changes to the state pension age that he couldn’t promise to magic up the money for them despite having found lots in the magic money pot for Tory manifesto pledges; the Home Secretary, Priti Patel, whilst visiting a food bank, claims that the Tory government was not to blame for poverty in the UK and, shifting the blame onto local councils, forgets to mention that central government funding has been cut by nearly 50% since 2010/11.

After 9 years of austerity, the consequences couldn’t be starker for our public and local government services, however, it is UK citizens, families and their children who have borne the distressing costs of cuts to social security benefits, both on their health and financial well-being. It cannot be clearer that the steep cuts to tax credits, child and disability benefits, ESA and Incapacity benefit and housing along with the introduction of Universal Credit have been behind the increases in child malnutrition, food bank use, homelessness and suicide.

The IPPR this week published its report ‘Divided and Connected’ which reveals that the UK is more regionally divided than any comparable advanced economy.

In the same week, the Resolution Foundation published its report ‘The Shifting Shape of Social Security’ It notes in its analysis of the manifestos of the main parties that child poverty is set to continue rising under the Conservative Party’s social security plans, whilst Labour’s £9bn of extra spending would mean 550,000 fewer children in poverty, it would not reverse the effects of the £5bn benefits freeze and could still see more children living in poverty in 2023 than do today. It noted that major policy changes have reduced support for working-age households since 2010 resulting in overall spending in 2023-24 being around £34bn a year lower on current plans than if the 2010 benefit system had remained in place, and that the cuts in support had fallen almost entirely on low-to-middle income working age families. It also noted that the Conservatives’ 2019 manifesto makes no changes to existing policy and as a result child poverty risks reaching a 60-year high of 34%.

Although the conservatives are promising more spending on health and education, it seems clear that they intend to carry along the same policy paths they have followed since they came to power in 2010 which have involved cuts to benefits, conditionality, sanctions and welfare to work. Clearly, they have no intention either of reversing the already implemented cuts or reforms which have done so much damage and left a trail of devastation in many people’s lives. Priti Patel’s remark about who is to blame for poverty is indicative of Tory neoliberal credentials of denying governmental responsibility and passing the buck along to others, whether local government who have been firefighting for lack of funds or indeed shifting the blame onto citizens themselves. Her position has not changed much since 2015 when she said, ‘There is no robust evidence that directly links sanctions and food bank use.”

In the light of the very real consequences on people’s lives of government spending decisions and policies, it is all the more depressing to read the two analyses of the party manifestos by the Resolution Foundation and the IFS which instead of looking at the real effects of government spending policies on the lives of real people, examine them in purely financial terms and arbitrary fiscal rules which as we may now be realising bear no relationship with how money really works.

Hunkered down in household budget explanations, the IFS, rather than considering the spending promises of all three parties from the perspective of potential outcomes for the economy and its citizens, examines them in relation to the prospect of raising taxes or borrowing and the likely impact on the deficit and national debt.  As usual, the question, if not asked directly, is how will the parties pay for their spending plans? When, instead, they should be acknowledging that the real question is how will a future government manage existing resources to meet government goals? This will be the real constraint that any future government will face, however progressive that government may be. The resource balancing act will be key to maintaining spending within the productive capacity of the nation to deliver public purpose.

The Resolution Foundation summed it up depressingly in its conclusion in saying that:

‘The priority that both main parties have placed on credible fiscal frameworks in this campaign is laudable. Such rules are hugely important for the government’s overall economic priorities. In setting out new fiscal rules, it is vital that they provide a clear framework for sustainable public finances, constraining the temptation for policy makers to promise unfunded giveaways.’

Such institutions unsurprisingly have focused on the notion that it is the role of government to balance its budget rather than serving citizens and improving their economic and social well-being. It is regrettable that a recent poll has suggested that many people doubt whether such spending plans are affordable and yet given the reality of the consequences of not spending adequately how could we possibly afford not to?

The nation is now paying the price for politicians pedalling the lie of the last forty years that money is scarce, that there is no such thing as public money and that good government is about fiscal discipline. Even if changing that notion in the public consciousness will take time, in the light of the urgency of the challenges to address climate change and social inequality we need an urgent step change in economic thought on a planetary scale since it is our survival on this planet which is at stake.

This is not, however, a time to make compromises with an economic system which has already done such huge damage. The seeds of an alternative model are already being hijacked by companies cynically promoting their green credentials with one aim in mind: to create more growth to keep the profits rolling. Reducing our plastic use and buying electric cars will scarcely make a dent in the scale of the changes we need to implement. We may have a broad vision, but that now needs to be developed into concrete realities. It may be still a work in progress, but it is a vital one we must not ignore.

This is a time to reimagine the world. A fairer and more sustainable approach to replace the one of endless growth which currently defines our capitalist economic system and puts profit before people and the planet.

Progressives on the left are beginning to initiate a much-needed conversation about what we need to do to reverse the decades of social injustice and challenge the idea that we can maintain the engine of growth on a finite planet.

However, and most regrettably, politicians on the left are still trying to have that conversation stuck in old economic paradigms of how money works. When they are asked how they will pay for these vital programmes the response is always one of tax and spend or borrowing to invest. Raising corporation tax, bringing back the magic money tree from the Cayman Islands, taxing the rich until the pips squeak or borrowing on the markets because interest rates are low. Instead of talking about taxing the wealthy to redistribute wealth by removing their colossal purchasing power and ability to influence politicians, they talk about funding our public services with the proceeds.

Again, on the left some politicians are suggesting that the government is akin to a business and that renationalising transport, our utilities, mail and the NHS will allow the government to plough back the profits back into public services. Yes, we need to end the rip-off of privatisation which has not benefited citizens and has allowed public money to flow into private pockets for profit motives, but let’s not buy into the idea that the government resembles a large corporation with a profit and loss sheet. It doesn’t.

The government is the currency issuer and neither needs to tax nor borrow in order to spend and nor does it need the profits of renationalised industries for us to have public services.  It just needs the political will to deliver them.

The role of government is to create the framework for markets to exist and dictate through legislation how they will function and in whose benefit. It taxes the populace, not to fund its spending but to manage its economic policies, from the redistribution of wealth to expressing public policy and is one of the key tools it can use to manage inflationary or deflationary pressures.

Government not only has the power of the public purse to improve the lives of its citizens it also has the power to legislate to drive its political agenda. All a question of choices which are not dependent on the state of the public accounts. Indeed, not only does it have the power to spend for the public purpose, it has the power to change the rules of the game. For example, it might regulate the financial sector to ensure that when people’s savings of whatever kind are put to work it is done to shift our negative and damaging behaviours towards creating a positive impact on society and our environment instead.

Outcomes are the measure of any government’s success. With the political will it could:

  • create the framework for good quality universal public services provide a social security system which is both not punitive in its functioning but also ensures a decent standard of living for those unable to work through disability, sickness or old age,
  • pay for a just Green transition,
  • offer a Job Guarantee as standard to create price stability and act as an automatic stabiliser for the economy to give people the dignity of proper, well-paid employment when needed.

All of these things are fundamental to the good functioning of society.

What are we so afraid of? A better future for our children? A more sustainable and fairer economy for all? Indeed, a planet for us to live and breathe on? What is not to like? So, when you hear interviewers berating left-wing politicians (who have not quite made the leap into monetary realities) about how they will pay for their progressive agenda ignore those questions and remember instead that a government’s economic record will be defined by how it serves the nation’s economy as a whole, improves the lives of its citizens and how it uses the resources it has at its disposal to achieve its agenda – not whether it balanced the budget.

 

For more in-depth information about how money really works, you can find all you need on our GIMMS website.

https://gimms.org.uk/

 

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The post The time has come to talk of many things; of taxing and spending and an economic system that needs mending.  appeared first on The Gower Initiative for Modern Money Studies.

It’s not balanced budgets that will save us. It’s the power of the public purse and our human values.

Person at a demonstration holding a placard with slogan "What lessens one of us lessens all of us"Photo by Micheile Henderson on Unsplash

Charles Dickens began his novel ‘Hard Times’ thus:

“NOW, what I want is, Facts. […]. Facts alone are wanted in life. Plant nothing else and root out everything else. You can only form the minds of reasoning animals upon Facts: nothing else will ever be of any service to them. [….] Stick to Facts, sir!”

Whilst one might dispute Dicken’s character Gradgrind with his miserable vision of human existence, facts can be very useful. They can trace the human misery caused by 9 years of austerity and the last forty years of a pernicious market-oriented ideology which has led to vast disparities in wealth distribution and caused huge damage to society by encouraging the pursuit of self-interest.  And yet it has to be said as the election campaign gears up, that in terms of monetary reality, of facts there seem to be very few to be had.

As political and economic commentators, not to mention politicians on all sides, emphasise daily their claims that the government finances are like a household budget, the public has largely remained stuck in the quagmire which is presented as monetary reality and distrustful of a political system which has failed them.

Looking at newspaper front pages this week you could be forgiven for thinking that we are headed for bankruptcy if Labour were to win the election or that their spending plans would cost UK households £43,000 each. A ‘reckless spendathon’ is in the offing according to a government spokesperson in a recent BBC television interview.

Aside from such narratives being a fallacy, they are designed to put the frighteners on people who are already suffering financial hardship caused by years of austerity and ideologically driven government policies. Those with a political agenda shore up those false beliefs that borrowing too much will lead to government insolvency. They cynically and callously terrify people that they will be asked to pay for those spending programmes when they will not. This is an establishment that is running scared that their reign of power is coming to an end. The means justify the ends!

It cannot be denied that if we are to escape the worst effects of a coming global downturn, an incoming government of whatever variety will need to implement adequate spending programmes and increasingly fiscal policy is becoming the ‘mot du jour’. However, the message is reinforced daily by all sides of the political spectrum that there are still financial limits to that spending.

Last week Ed Davey, deputy leader of the LibDems said of Labour and the Tories spending plans that they are ‘writing promises on cheques that will bounce’. The very same party that joined in with Tory austerity during the Coalition and voted for public spending cuts and welfare reforms.

In the same week, the Greens promised welcome public investment of £1trillion over 10 years to fight climate change, the money for which it said would come from ‘borrowing’ and ‘tax’ changes.

Then the Chancellor of the Exchequer in a ‘give with one hand take back with another’ message promised to increase borrowing to fund billions of pounds to pay for new infrastructure but then announced three new fiscal rules to ‘control borrowing, to control debt and to control debt interest’.

Stuck in household budget la-la land he said without a hint of jest:

‘like anyone who budgets whether it’s a household, or small business or large business, I know that we must keep track of what we are spending and what we bring in…. We can’t run an overdraft forever on day to day spending, so I can confirm that our first rule will be to have a balanced current budget. What we spend cannot exceed what we bring in.

Never mind that you can build as many hospitals as you like as part of an infrastructure spending programme but if you make up foolish rules about day to day spending those hospitals will remain empty of nurses and doctors and other health professionals to staff them.  And let’s not forget the bailing out of the banks or successive wars funded without a taxpayer in sight.

The same tired old tropes abound about taking advantage of ‘historically low borrowing rates’ and ‘living within our means’ remain the context for Conservative spending plans and figure in one way or another in the language narrative of other parties too.

In a similar vein this week, the shadow chancellor reinforced that same story when he tweeted:

‘The Tories can’t invest in the public services we need because unlike Labour they won’t raise taxes on the super-rich and take on the international tax dodgers’.

The implication being here that he will bring back the magic money tree from the Cayman Islands to pay for our public and social infrastructure.

Even the Leader of the Opposition has suggested that if they don’t tax the very rich, then Labour won’t be able to pay for public services.

As Professor Bill Mitchell commented in a blog in response:

‘The British government does not need to tax the rich to pay for first-class public services. It can do that at any time it can muster the real resources to accomplish that aspiration. It issues its own currency.

It might want to tax the rich because they have too much power but that is quite separate from justifying such an action because the government needs their ‘money’.

Although without doubt the proposals on the progressive left to tackle social inequality, rebuild public infrastructure and address climate change are laudable and indeed vital, it is to be regretted that the arguments for public spending programmes are being reduced to household budget frameworks of monetary affordability, where the money will come from and economic credibility. We have become fixated by the single idea that the country’s economic ‘health’ hangs on whether or not we run a deficit.

GIMMS will say it again. In reality, the only analysis that really counts when deciding which way to vote in any election is not a judgement based on a government’s financial record or whether it balanced the public accounts but what its economic record was.

We as citizens should be examining where the money was spent and who benefited. Did that spending ensure that its citizens were in secure employment and fairly paid, had decent housing and sufficient food in their bellies? Did it create a healthy and more equitable economy in which wealth was more fairly distributed? Did it ensure that the vital public and social infrastructure such as the NHS, social care, education and local government were adequately funded to serve the public purpose and not fill the coffers of private profit? Or was that public money sucked up by the private sector in a big free for all in which the state serves the interests of the corporations rather than the interests of its citizens?

And what about government policies on health, education, welfare spending and the environment? Did they create stable lives by improving the material, financial, physical and mental health of citizens? Did they ensure adequate investment to ensure that the nation can be as productive as possible through good education and training both for present and future generations? And finally, the environment – what actions did they take to address the climate crisis?

In other words, we should be examining what the real economic outcomes were.

After nine years of telling the public that there was no alternative to austerity and cuts to public spending because the coffers were bare, it’s amazing what the prospect of an election can do to turn the spending taps on. And yet the smoke and mirrors, lies and deception about how government spends just carries on relentlessly.

But now it’s all OK (for the moment) the Conservatives have found the magic money tree, cutting the deficit has apparently given them some savings and the fiscal ‘headroom’ to spend. For those that know, this narrative is a fairy tale of epic proportions. For those that don’t, it should be enough to arouse a cynical response by a public which has been at the sharp end of those tax and spend myths which have formed the basis for its policies.

Indeed, only this week the following headlines should serve as the wakeup call for the public about Conservative economic credibility.

‘UK suffers biggest fall in jobs in four years’

‘UK avoids recession but annual growth slowest in almost a decade.’

‘Wage growth slows’

We can blame it in part on the uncertainty caused by Brexit, but the reality is that behind the faceless employment figures published by the Office of National Statistics are the lives of real people who have been affected by the government’s policies and spending decisions over the last 9 years.

To put it in basic economic terms, when a government spends it creates income for the private sector which is then spent into the economy. When it imposes spending cuts it is removing money from people’s pockets leaving them with only three options: Use their savings if they have any, take out credit or go without.

All spending, whether from government or the private sector, equals income for someone. What happens when you take that away? That’s people who lost their jobs in the public sector as local government, the NHS and schools were forced to pare down their budgets as a consequence of public spending cuts. That’s people constrained by public sector pay caps and pay cuts. That’s people who ended up working two or three jobs on low pay to keep a roof over their head and food on the table. That’s people working in precarious employment in the zero-hours or gig economy with no guaranteed decent income or sick or holiday pay. That’s people affected by the reforms to welfare and the introduction of Universal Credit, from those who are unemployed left with insufficient financial resources to make ends meet and those in work but not earning enough to keep their heads above the water to those left struggling to cope because of chronic sickness or terminal illness.

In seeking the nirvana of balanced budgets by cutting spending the Conservative government has not created a healthy economy it has done the very opposite. The statistics are the proof.  Without adequate spending, the economy suffers, and people pay the price.

And yet as political parties present their spending plans and worry about how they will demonstrate their economic credibility the elephant in the room is crashing about trying to make itself noticed. On one note it is pathetic to see the Conservative party take issue with the opposition’s spending plans calling them reckless and unaffordable whilst promoting its own as being fiscally responsible. On another, in their rush to spend, neither party seems to have considered the real resource factor and how that will be managed.

The IFS for all its neoliberal sins ‘gets’ the elephant in the room and recognises that whoever wins on December 12th their spending plans will be dependent on whether they have the right resources at their disposal to deliver.

After 9 years of insufficient spending into the economy to prepare for the future, will there be sufficient people with the right skills to meet the government’s needs? Whether that’s engineers and construction workers to design and build the proposed infrastructure or homegrown nurses and doctors already trained up to service the planned spending on the NHS? Or in these days of climate crisis we might also be talking about the resources needed to deliver the Green New Deal and ensure a just transition not just for those in the rich west but those in the global south whose countries have already been plundered of raw materials and impoverished so that we can maintain our standard of living.

For progressive parties like Labour and the Green Party who wish to deliver a left-wing agenda what they have to do is decide their key priorities, consider the availability of resources and how they could be freed up to deliver a future government’s objectives efficiently and effectively. A case in point this week is Labour’s plan for free broadband which has much to recommend it in terms of bringing communities together in an inclusive and connected society. Journalists and others predictably have asked the question where will the money come from? They have missed the point entirely and should be asking instead how many workers would we need to deliver it?

Ultimately, all sovereign currency-issuing governments don’t need to match their plans to tax revenue or determine whether the markets can lend them the money. The role of government in this respect is not to balance the budget but to balance the economy.

The public needs to understand that it isn’t the government’s ability to tax the rich but its power to run a deficit which determines the health of an economy. As the sovereign currency issuer, the UK government has the power of the public purse to fund the public works necessary to tackle social and wealth inequalities, deal with the current global economic uncertainty, and fund the Green New Deal, should it choose to do so.

However, at home, our public and social infrastructure is in a shocking state of decay caused by 9 years of cuts to public spending and lack of planning. Reversing that decline is not something that just promising to spend can solve in the short term.  There are important issues to consider for the long term which may not fit the short-termism of the political five-year framework and many politicians who have become used to serving other interests.  That is the scale of the challenges we face.

When all is said and done even though the Labour party persists with the household budget myths John McDonnell has it right in terms of what is required not just to reverse the social injustices heaped upon global populations because of pernicious ‘free’ market ideology or the threat to the human species at our own hand. As he said not only must the scale of investment match the scale of the crises we face both in ecological and social terms, but also if we don’t make these investments our future generations will never forgive us.

Let’s leave the final words to Professor Bill Mitchell who wrote a while back:

“My ideological disposition tells me that the pursuit of human values is the only sustainable way of organising and running a world. The neoliberal era has severely undermined that pursuit.

That’s what we must change and urgently if we want half a chance to save ourselves and our children’s children from disaster.

 

Note: GIMMS has a very good resource section on our website which takes you through how money works. From FAQS to resources sheets and external websites, videos and academic papers for those who want to take it further. For an introduction to how money really works follow the link here.

 

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After the Successful Pursuit of Private Revenue Streams, are UC Campuses Destined for Deficits?

Published by Anonymous (not verified) on Wed, 13/11/2019 - 3:42am in

The short answer seems to be yes.  At least one large campus is in and out of negative, two other big ones are heading towards it, and the state of the rest is unknown.   All of these have been prize pupils of revenue diversification--going into every kind of private alternative to state funding they can find.  How is this working out for them?  This is a question the UC Regents should consider when they meet this week, as they ponder the main budget request that UCOP has put together, and its apparently large 7.5 percent increase from the state.

UC Berkeley had struggled for years with reorganizations and other deals that didn't pan out as expected (e.g. Operation Excellence and its aftermath). In late 2013, then-VC for Administration and Finance John Wilton announced that Berkeley's "current path is financially unsustainable" (page 2), and said that only prudent preparation (aka building reserves) had prevented the campus from already being in deficit.  In early 2016, that deficit officially surfaced, prompting layoffs and other measures to get rid of it, as well as a one-time campus earmark of $25 million from the legislature for 2018-19.

Berkeley appeared to have stopped losing money on operations in FY 2018. In September 2019, the chancellor claimed the deficit was gone, crediting alternative revenue streams.  But current information suggests the campus has gone right back into deficit again. It projects a $43 million deficit for 2019-20, or a swing of $128 million from last year's surplus (slide 7).

Onward: here's UCLA's Budget Discussion for 2018-19.  Slide 7 contrasts the revenues the campus controls (yellow range) with those it doesn't (blue), comparing years at the beginning and the end of the period.


Ten years on from the last pre-cuts year of 2007-08, UCLA is still down $200 million in state funding.  It made up a lot of that with triple tuition from non-resident students (this is a gross, not a net).  It grew other tuition funds by taking more students.  (This is a more expensive way to grow revenues than charging the same student body more, since you also raise your costs.) UCLA expanded Self-Supporting Degree Programs (SSDPs) aggressively, and the revenues reflect another triple-tuition strategy in which you charge three times as much for what you hope are programs already in the can on the state side so you don't have to invent new things and staff up.  And UCLA is also investing various kinds of unspent funds.

It's worth noting a few visible weaknesses: tuition loses 1/3rd off the top for financial aid, which state funding does not. (Non-resident tuition now has a 10 percent contribution for return-to-aid.)  So $526 million gross tuition (excluding SSDPs) is actually $351 million net. Were SSDPs bringing in free money (more on that later), they would add about 6% of new funding to the core budget after 10 years of growth.   The reasonable idea is that you put together a lot of smaller private revenue solutions and they add up to enough to make up for lost public funds.

UCLA has worked its buns off, and  Slide 9 shows the reward.
The reward is to run an operating deficit of 21 percent of core funds by 2023.

Note that UCLA proposes to cut this projected deficit in half by positing no pension increases and expanding teaching revenues with no new staff of any kind.  Neither of these assumptions hold up.  Even if they did, UCLA would still run an 11 percent deficit on its core.

There's also UCSD-- a poster child of corporate-friendly non-state revenue growth.  But after years of hustle, it too faces an operating deficit, though smaller, growing to 4 percent of its $1.5 billion core budget ($58.3 million) in 2022-23.  This slide is courtesy of Mohamed al Elew in his thorough Triton treatment of the issue.

These three are best-case UC campuses in different ways.  All the system's campuses have distinct mixtures of resources and liabilities.  For example, UCOP has been insisting that UC Riverside mostly self-fund its start-up medical school, creating hardships for other academic programs that it now acknowledges (page 13).  Whatever their local situation, all of the campuses have been scrambling to find non-public revenues, and they have been enthusiastic and generally done well.  So why these deficit troubles?  And will next year's overall system budget, even if passed, really help?

Not so much, because of structural issues.  Turning now to systemwide materials prepared for the Board of Regents meetings this week, we can see that 4 big problems are not being addressed.

1. First is instructional revenues.  UCOP calculates that per-student funds available for instruction are about 20 percent below their 2000-01 level and still under their 2005-06 level (reduced by a second round of cuts--see Display 5).  We're jaded about the cuts in state funding (still down 24 percent at UCLA below their 2007-08 level, for example [slide 8]).  But these overall shortfalls should shock people because the figures include gross tuition and tuition paid by Cal Grants.  Tuition  revenues were supposed to have rescued our budgets: I assume state leaders, including the one now chairing the Board of Regents, still believe it.  But tuition hasn't rescued overall revenues.

2. There are also research costs. Research is essential and also expensive, and costs the host university money out of pocket to perform.  In FY 2015, Berkeley spent $174 million, UCLA spent $213 million, and UCSD spent $186 million of institutional funds to support it.  UCOP is still unable to talk about these major costs that governments and corporations ignore, or explain to the state that research is (a) the most important core function of the University of California and (b) a cost rather than a profit center. Campuses will continue to need to cover a share of research expenditures (22 percent at UC Berkeley, 21 percent at UCLA, 17 percent at UCSD).  The state and other research sponsors are going to have to fund these eventually, or we'll risk permanent deficits.

3. Pension contributions.  Ten years ago, neither employees nor UC paid into the pension fund.  Now both do.  UCOP estimates that $400 million a year of operating funds go toward these costs across the system. Total resources have to be discounted by that amount.

4. Facilities and maintenance.  While it was cutting back on everything else, the state also stopped floating bonds to pay for new construction or paying to cover deferred maintenance.  Both have degraded teaching and research conditions all over the system. The state's response to complaints was to pass legislation (AB 94, 2013) to allow UC to use operating money on capital projects. This made  the shortage of operating funds even worse.

UCOP is now proposing a major new construction program, as well as one-time deferred maintenance funding.   More remarkable images ensued.


UC has a capital need of $52 billion. Half of that has no funding source.  Display 2 shows that most of the unfunded capital need is on the campuses.  Educational activities can't fund their buildings and maintenance, while the businesses can--which is a fact of life that policymakers should face.

If we use the category loosely to include seismic and life safety issues, UC has a $14 billion deferred maintenance issue.  In recent years, campuses have had nearly nothing to spend on it.  I learned from one campus that it covers such a small fraction of its actual maintenance backlog each year that it would have to double its expenditures to catch up with its 2019 maintenance backlog by the year 2119.

There are plenty of related charts to enjoy, but you see the drift.  UC will never recover, not ever, unless it can get the state to fund solutions that match the scale of the problem.  There are no alternative revenue streams that can do this.

To stick with the last two problems I've noted: the state should provide the $2 billion it saved during the pension contribution holiday to UCRP,  in a multi-year funding plan it works out withe UCOP.  And the campuses maintenance problem needs a $14 billion general obligation bond issue.   The "alternative revenue streams' model has dug quite a hole. Let's admit how deep it is so we can eventually climb out of it.

If Medicare-for-All Were a War, No One Would Ask: How Do We Pay It?

Published by Anonymous (not verified) on Mon, 11/11/2019 - 6:52pm in

Whenever someone wants to start a war, nobody ever asks how we are going to pay for it. But when there is a proposal to help people with basic human needs, suddenly the budget becomes a top consideration.

We asked 13 economists how to fix things. All back the RBA governor over the treasurer

Published by Anonymous (not verified) on Mon, 04/11/2019 - 3:27pm in

Tags 

Budget

Thirteen leading economists have declared their hands in the stand off between the government and the Governor of the Reserve Bank over the best way to boost the economy.

All 13 back Reserve Bank Governor Philip Lowe.

They say that, by itself, the Reserve Bank cannot be expected to do everything extra that will be needed to boost the economy.

All think that extra stimulus will be needed, and all think it’ll have to come from Treasurer Josh Frydenberg, as well as the bank.

All but two say the treasurer should be prepared to sacrifice his goal of an immediate budget surplus in order to provide it.

The 13 are members of the 20-person economic forecasting panel assembled by The Conversation at the start of this year.

All but one have been surprised by the extent of the economic slowdown.

Read more: No surplus, no share market growth, no lift in wage growth. Economic survey points to bleaker times post-election

The 13 represent ten universities in five states.

Among them are macroeconomists, economic modellers, former Treasury, IMF, OECD and Reserve Bank officials and a former government minister.

The Bank needs help

At issue is the government’s contention, spelled out by Frydenberg’s treasury secretary Steven Kennedy in evidence to the Senate last month, that there is usually little role for government spending and tax (“fiscal”) measures in stimulating the economy in the event of a downturn.

Absent a crisis, economic weakness was “best responded to by monetary policy”.

Monetary policy – the adjustment of interest rates by the Reserve Bank – is nearing the end of its effectiveness in its present form. The bank has already cut its cash rate to close to zero (0.75%) and will consider another cut on Tuesday.

It is preparing to consider so-called “unconventional” measures, including buying bonds in order to force longer-term interest rates down toward zero.

Read more: If you want to boost the economy, big infrastructure projects won't cut it: new Treasury boss

Governor Lowe has made the case for “fiscal support, including through spending on infrastructure” saying there are limits to what monetary policy can achieve.

The 13 economists unanimously back the Governor.

Seven of the 13 say what is needed most is fiscal stimulus (including extra government spending on infrastructure), three say both fiscal and monetary measures are needed, and three want government “structural reform”, including measures to help the economy deal with climate change and remove red tape.

None say the Reserve Bank should be left to fight the downturn by itself without further help from the government.

There is plenty of room for fiscal stimulus, particularly infrastructure spending – Mark Crosby, Monash University

I agree with the emerging consensus that monetary policy is no longer effective when interest rates are so low – Ross Guest, Griffith University

It is time for coordinated monetary and fiscal policies to boost domestic demand – Guay Lim, Melbourne Institute

The surplus can wait

Eleven of the 13 believe the government should abandon its determination to deliver a budget surplus in 2019-20.

Economic modeller Renee Fry-McKibbin says the government should “ease its position of a surplus at all costs”.

Former Commonwealth Treasury and ANZ economist Warren Hogan says achieving a surplus in the current environment would have “zero value”.

Former OECD director Adrian Blundell-Wignall says that rather than aiming for an overall budget surplus, the government should aim instead for an “net operating balance”, a proposal that was put forward by Scott Morrison as treasurer in 2017.

The approach would move worthwhile infrastructure spending and borrowing onto a separate balance sheet that would not need to balance.

Political debate would focus instead on whether the annual operating budget was balanced or in deficit.

Former treasury and IMF economist Tony Makin is one of only two economists surveyed who backs the government’s continued pursuit of a surplus, saying annual interest payments on government debt have reached A$14 billion, “four times the foreign aid budget and almost twice as much as federal spending on higher education”.

Further deterioration of the balance via “facile fiscal stimulus” would risk Australia’s creditworthiness.

However Makin doesn’t think the government should leave everything to the Reserve Bank.

He has put forward a program of extra spending on infrastructure projects that meet rigorous criteria, along with company tax cuts or investment allowances paid for by government spending cuts.

Former trade minister Craig Emerson also wants an investment allowance, suggesting businesses should be able to immediately deduct 20% of eligible spending.

It’s an idea put forward by Labor during the 2019 election campaign. Treasurer Josh Frydenberg has indicated something like it is being considered for the 2020 budget.

Emerson says it should be possible to deliver both the investment allowance and a budget surplus.

Quantitative easing would be a worry

Five of the 13 economists are concerned about the Reserve Bank adopting so-called “unconvential” measures such as buying government and private sector bonds in order to push long-term interest rates down toward zero, a practice known as quantitative easing.

Jeffrey Sheen and Renee Fry-McKibbin say it should be kept in reserve for emergencies.

Adrian Blundell-Wignall and Mark Crosby say it hasn’t worked in the countries that have tried it.

A quantitative easing avalanche policy by the European central bank larger than the entire UK economy has left inflation below target and growth fading. Quantitative easing destroys the interbank market, under-prices risk, and encourages leverage and asset speculation – Adrian Blundell-Wignall

Steve Keen says in both Europe and the United States quantitative easing enriched banks and drove up asset prices but did little to boost consumer spending, “because the rich don’t consume much of the wealth”.

The treasurer should step up

Taken together, the responses of the 13 economists suggest it is ultimately the government’s responsibility to ensure the economy doesn’t weaken any further, and that it would be especially unwise to palm it off on to the Reserve Bank at a time when the bank’s cash rate is close to zero and the effectiveness of the unconventional measures it might adopt is in doubt.

Measures the government could adopt include increasing the rate of the Newstart unemployment benefit, boosting funding for schools and skills training, borrowing for well-chosen infrastructure projects with a social rate of return greater than the cost of borrowing, further tax cuts that double as tax reform (including further tax breaks for business investment) and spending more on programs aimed at avoiding the worst of climate change and adapting to it.

The economists are backing the governor in his plea for help. They think he needs it.

The 13 economists surveyed

Read more: Buckle up. 2019-20 survey finds the economy weak and heading down, and that's ahead of surprises The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Peter Martin is economics correspondent for The Age and the Sydney Morning Herald.

He blogs at petermartin.com.au and tweets at @1petermartin.

Staffing Humanities Research: A University of California Case

Published by Anonymous (not verified) on Thu, 31/10/2019 - 3:54am in

Tags 

Budget

Each of the fifty states supports a public research university of some kind, and yet many legislators act as though they don't know what research is or that the state needs to help pay for it.  Or so UC officials are saying again about California's legislature. We are supposedly a world leading knowledge economy and yet, UC leaders claim, the legislature doesn't want to hear about funding UC research.  "Most of them graduated from Cal State," it is explained, though of course Cal State faculty also do research.  I first heard this statement from UC's longtime VP for Budget Larry Hershman, a Sacramento veteran if we ever had one.  That was 2002.  We seem to have made little progress in the intervening 17 years.

Research is a joint product of faculty, staff, and (mostly doctoral) students.  But for various reasons, it has to be designed and led, and in non-STEM fields, largely performed by, tenure-track (TT) faculty.  Contingent faculty teach too many courses, don't have research facilities or funding, and don't get paid enough to do more than the most basic self-funding of scholarship.  Research universities need high shares of TT faculty or they can't conduct research.

In its 2018 Accountability Report, UCOP reported that 76 percent of faculty are tenure-track, which is a proportion that academia overall hasn't seen since the 1970s (Indicator 5.1.1).  That's a good thing.

Another is that most of the campus's non-tenure track (NTT) faculty are Lecturers, and a share of those have Security of Employment (SOE).  Lecturers without SOE are represented employees at UC, and have contracts along with a complement of health and retirement benefits.  They have high teaching loads (around 8 quarter-courses per year in fields where  TT (what UC calls "ladder") faculty teach 4-5 per year). They are not expected to conduct research (though in my experience most do).  (There are issues with UC personnel counts that may hide many adjuncts in the lecturer figures, and represented lecturers are in protracted negotiations with the University--please write if I have missed a leaden lining in this partially sunlit cloud.)

You can see that UC did pretty well at limiting adjunct hiring through the 2002-05 budget cuts.  That's partly because it can use graduate students as contingent instructors (another feature of the research university). Also, with 5 going on 6 medical centers, it has many other series of NTT faculty. The chart below was last seen in the 2010 Accountability Report.

That turquoise band of adjunct faculty grows, and yet stays fairly small, particularly in comparison with lecturers.

Here's another expression of the same trends, from 2014

Again, I don't swear by UCOP's definition of "Ladder Rank and Equivalent," but even taken with a large grain of salt it's a relatively good number.

Arts and Humanities faculty numbers have also held up fairly well.  There's a reason for this. While the number of majors has declined (see Ben Schmidt's gory details), the number of enrollments (or Student Credit Hours) has been stable.  (STEM field enrollments have grown, however, so the humanities enrollment share has also declined).   This chart, also from 2014, covers two multi-year cuts cycles (2002-05 and 2008-2012).  The main change across these 15 years seems to be that some Arts and Humanities faculty shifted into Social Sciences and Psychology.

Why, then, is the humanities job market so terrible?  Why do we have an entire "death of the humanities" genre like Eva Cherniavsky's valuable "Brave New STEM University?"

The first and most important reason is that the University of California, in spite of significant labor problems, is a kind of best-case scenario for low percentages of contingent faculty. It is completely atypical. 

Another issue becomes visible when UCOP started to express Faculty by Discipline somewhat differently in 2017.

Ignore the middle pair of bars, which are mostly med center employees, and also the jarring change of color scheme.  The right-hand pair are shares of Lecturers by field (I assume, very crudely, true adjuncts are excluded here).  Not only has Arts and Humanities Lecturer hiring held up during this decade of cuts and only partial recovery: these fields dominate Lecturer hiring (1404 of 3683 total positions).

But here's a final chart, this from 2019.  It shows Arts and Humanities to be unlike any other set of UC disciplines.
Adjunct numbers are still small.  But Arts and Humanities is the only set of UC non-medical disciplines that is about half non-ladder faculty.   In other words, though UC is a kind of best-case public university in terms of its high share of faculty that are on the tenure track, it has a two-tier faculty in Arts and Humanities.  It has had these two tiers for a long time.

The Accountability Report states that this is because these fields do so much teaching in small groups, by which they must mean writing, acting, music, and studio art courses.  That is indeed the historical rationale, and also one that continues to circulate.  Given their budgets, administrators at public universities don't see any other way of staffing small scale courses in anything, including arts, language, music, or writing classes. Also, there are coherent uses of expert "professors of the practice," like an experienced theater director or insurance actuary who teaches a course or two on campus to bring practical experience into the classroom.  Novelists and poets are often hired in this way, and many want to teach only part time.

At the same time, private universities are always boasting of the high share of senior tenured faculty in small courses. Small courses support active learning and are generally more intense intellectually. They are good at speeding up the academic development of all students.  Any small course, whether fourth-year Persian or advanced flute or programming for artists, would benefit from being taught as a "research learning" course, by someone who is an active researcher in the field.  I see budgetary rationales to use NTT faculty in small courses, but not educational ones. 

I'm concerned in this post with how Arts and Humanities' unusually high share of non-ladder faculty  affects research.  US academic research funding is hurting, and its Arts and Humanities fields get about 1 percent of national research funding.  This on its face assigns third-class status to history, philosophy, the various studies of human expression, and most of the study of race, ethnicity, gender, sexuality, and other determinant aspects of socio-cultural life.  However, research universities use salaries to support research, so that a 4-5 course teaching rotation leaves a third of the working week for their research.  (This assumes a 60+ hour workweek, but I leave that aside.)  Here's the problem: if half of UC's Arts and Humanities faculty are actually lecturers, then this major research university is not paying half this faculty to do any research at all.

This employment structure obviously reinforces the job market crisis.  Leaving aside the parallel crisis in STEM, the employment of Arts and Humanities research faculty cannot recover if only half are hired to do research at one of the country's leading and largest research university systems.  I'll briefly extrapolate from Jonathan Kramnick's useful analysis in the Chronicle of Higher Education not long ago. Kramnick compared 1995-1998 to 2015-18, and found that tenure-track jobs have fallen from 2/3rds to just under 1/2 of those advertised.   (Still less overall literature and language hiring TT, since so much NTT hiring is local and thus not in the MLA's national job list.)  Nearly half of the list's hiring is in writing (composition and creative writing came to 44% of 2015-18 jobs).   This means that nearly half of the nationally advertised hiring in literature and languages occurs in the areas that our best-case public university assigns largely to lecturers, who are paid to teach rather than to do research.

UC has largely avoided the worst of the adjuncting crisis.  But it has done this by making its numerically largest faculty only 1/2 research-intensive.  This certainly could be fixed, but not without a funding model that supports lower student:faculty ratios and more research faculty.  The current model created a two-tier Arts and Humanities teaching force, which suppresses research output while encouraging rampant adjuncting in less prosperous and less unionized institutions.  If we want to expand research in the Arts and Humanities, senior managers, arts and humanities deans, directors of humanities centers, and above all numbers of TT faculty will need to push, as we never have before, for a budget model that fully funds research.

University of Saint Francis Plans to Cut Philosophy Major

Published by Anonymous (not verified) on Wed, 30/10/2019 - 12:34am in

Tags 

Budget, philosophy

The Board of Trustees of the University of Saint Francis, a Catholic liberal arts college in Fort Wayne, Indiana, has approved plans that would discontinue several of its academic programs, including its philosophy major.


Saint Francis University, a Catholic liberal arts college, plans to eliminate its philosophy major.

The minor in philosophy would be retained, but the minor in “Politics, Philosophy, and Economics” will be eliminated.

The full list of planned program cuts is here.

According to local news WANE, the president of the university said the changes were necessary “to thrive in this competitive environment.”

The cuts are scheduled to take effect beginning in Fall 2020.

(via Inside Higher Ed)

The post University of Saint Francis Plans to Cut Philosophy Major appeared first on Daily Nous.

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