This work is available here free, so that those who cannot afford it can still have access to it, and so that no one has to pay before they read something that might not be what they really are seeking.  But if you find it meaningful and helpful and would like to contribute whatever easily affordable amount you feel it is worth, please do do.  I will appreciate it. The button to the right will take you to PayPal where you can make any size donation (of 25 cents or more) you wish, using either your PayPal account or a credit card without a PayPal account.
A Proposal to Fund Education Better
Without Increasing Taxes or Having a Lottery
Rick Garlikov

The general principles involved below would apply to any government for any purpose, but this is written specifically about raising additional revenue for education in Alabama, so there are some particular comments in the following that will not be relevant for readers outside the state. The comments about the lottery are included because not too long ago a lottery proposal to fund education was defeated, and I want to make clear I am not trying to resurrect that kind of plan.

First, any such proposal must avoid the problems that government taxing incur, so I want to explain the problems associated with taxation and then propose a solution that I think avoids them.

The problem with taxes:

  • They are involuntary and often unwanted by many who have to pay them because taxation even with representation still does not always reflect the wishes of sizable numbers of people. While people may be content to pay taxes for things they individually want or approve, taxation for things they do not individually want or approve simply forces them to give up their money; and they often resent that; and reasonably so.
  • Taxes tend to be permanent, so that instead of being discontinued if their original purpose is no longer necessary, other, often less acceptable, uses are found for the money. This is difficult to end even through elections that "theoretically" give voters the right to elect legislators who will end it some time in the future. That does not work very well in practice. Everyone blames other districts' legislators and keeps re-electing their own. Even when new legislators are elected, they tend to get possessed by the idea there is no place to cut spending.
  • Some taxes, like property tax, are inflexible even if there is a decrease in income of those who have to pay it. Property taxes are in that way unfair when times get hard for individuals, families, or communities, even though they may bring in stable revenue to the government. It is not fair and not helpful when the government does not have to tighten its belt though the taxpayers do, in difficult economic times. People should not have to sell property because of excessive taxes. Nor should they have to pay burdensome taxes on things they have already paid for, including sales taxes on those things to begin with. Once your property is paid for in a way that gives you outright ownership of it, you should not have to keep paying for it -- especially if you lose the means to keep paying. People should be able to discontinue contributions to the system if their own needs require it. They cannot do that with taxes.  The rationale behind taxing property is that those who can afford property can afford to pay taxes, especially if they are generating revenue from their property, but the fact is that many people with property do not have income from it or excess additional money to be able to pay (ever-increasing) taxes on that property.  While property tax may be a stable tax, and a benefit to government, it is not necessarily, in its normal form, a fair tax on citizens.
  • Sales taxes are less stable, and they generally are regressive -- though they do not have to be -- and they do not apply to growing Internet commerce which, in some cases, replaces taxable local sales. But at least sales taxes reflect to some extent the amount of discretionary income people have to spend. And people have a choice not to purchase conveniences and luxuries if the taxes on them make them unaffordable. 
  • Hidden taxes are still taxes. Hidden taxes are those taxes which are passed on to others in terms of service or product costs. For example, when property taxes increase, it is not just the annual taxes on your homes that increase, it is almost everything you purchase that is produced or sold locally, because the increased tax on business properties gets passed on in the cost of production.
  • Tax money is often collected for things a given taxpayer does not want to support and/or does not benefit from directly.  Sometimes these really are things that seem to have no objective merit to deserve public funding.
  • Tax money is often squandered by being given to worthy institutions that happen to be poorly managed. For example, good schools and bad schools alike receive the same proportional share of any community's education revenue.  Laws that are set up to distribute tax revenues do not often distinguish recipients in the same categories who do work of vastly different quality.
  • Even when governments attempt to identify institutions that do better jobs than others, they tend to use criteria that seem objective but that are not.  For example, even if we assume that standardized tests demonstrate worthwhile learning (which is highly doubtful) one still cannot tell from standardized test scores whether a school in an affluent, culturally advantaged community is contributing more to its students' education than is a school in a poor, culturally disadvantaged community contributing to its students, because the students in the former bring with them to school so much of what allows them to score well on those kinds of tests, while the students of the latter districts need so much more from their schools just to be able to do decently on tests like that.  Governments tend to make judgments about quality using easily measured, supposedly objective, criteria rather than criteria that allows for more discerning judgment.  By trying to eliminate the bias and discrimination that individual judgment might involve through scientific means rather than through other rational means, they often eliminate the benefits of good judgment, and instead only allow mistaken, less easily  recognized and understood biases and prejudices to be institutionalized.
  • Budgets are planned around projected tax revenues, which are not generally accurate. When there are shortfalls, recipients then dearly need the money they have planned their operations around. Had they known of the shortfall from the beginning, they would not have made such expansive plans, and in many cases things never started are better than things begun but left unfinished. Just as it is better in some cases not to begin a journey than to become stranded far from home, it is better not to begin some projects than to have to harm them in the middle.
  • Government spending often comes with bureaucratic regulations that are counterproductive to the enterprise and that have great costs to comply with and to monitor and enforce.
  • For taxation to be effective as a means of collecting revenue, regardless of what other effects it has on the people and organizations from which it collects it, taxes have to be applied to where money is. It does no good to tax sources that have no money or that can yield none.  As technological and financial mechanisms change (often in order to avoid taxes) government has to spend time seeking new sources of money.  It is something of a waste of energy, and finding and exploiting or closing tax loopholes is an endless game of offense and defense trying to outwit each other.  Moreover, as any economy prospers or declines, or as new products and services become available, some businesses and individuals will benefit or suffer more than others.  Government has to then figure out where money is they could get their hands on, and what is a reasonable, and preferably (but not always) fair, way to get it.
  • It is difficult to raise taxes, especially under the current Alabama constitution.
Therefore any new educational revenue plans must avoid all these problems, and taxation cannot do that. So there must be a different means of collecting additional education revenues. But the lottery failed, and would probably fail again because Alabamians do not support that sort of gambling.

First Proposal

To have either the state government, State Dept. of Education, or one or more of the state's largest financial institutions establish a voluntary fund to which people who want to support education improvement in Alabama can contribute money that will then be dispersed to all school districts. Alternatively, each school district could set up its own fund. 

One signficant way of collecting the money would be to have a website where projects seeking funding are described, and where money could be securely donated online and a record kept that earmarks what the funds are contributed for.

This money is not meant to replace current education tax revenue, but to supplement it. It is conceivable that sufficient people will make enough voluntary, affordable contributions on a monthly basis that it will add up to a significant amount of money. (For example, the state of Alabama raised more than 8 million dollars last year in additional fees for "vanity" types of license plates -- including the "helping schools" plates and the environmental plates, etc., as well as the pure vanity tags. A program like the one described here may also need to give out some sort of decal or ornament to designate contributors in a similar fashion.)  It does not take much per household to raise hundreds of millions of dollars. Contributing the cost of one fast food outing, or delivery, a month might substantially elevate Alabama's educational system.

There are a number of potential ways to operate the fund. The following are my initial preferences for guiding principles unless others have better ideas:

1) Money should go only for building and repairing school buildings (basically classrooms), maintenance, and for hiring teachers for legitimate subjects and allowing them sufficient classroom allowances to buy necessary teaching materials for the rooms. My inclination at this point is it should be used for hiring more teachers, not for increasing the salaries of teachers. There is a different plan, given in number 10, below, for essentially increasing the earning power of teachers by a substantial amount without increasing tax revenues.

2) Money should be given to local school boards because they ought to best know their districts' needs. My current inclination is to distribute the money state-wide on a strictly equal per pupil basis, but it may be better to have the distribution be weighted toward those districts with greater needs if they are substantially financially poorer districts through no particular fault of their own.

3) If feasible, contributions would be allowed to be earmarked for specific subject matters, such as art or music courses, that might otherwise not be funded at all, or for specific (poorer) districts.

4) Substantive evidence of misuse of funds or abuse of power based on the money by recipients should result in loss of funding without an effective and timely rebuttal showing the allegations are not true, after notice of potential withdrawal of funding, and the reasons for it, are given. 

This is voluntarily contributed and dispersed money and should not be subject to legal technicalities or loopholes involving compliance or non-compliance. Reasonable judgment by reasonable administrators should be sufficient. Money that demonstrably helps educate students in a reasonable environment should be given; money that demonstrably does not help educate students in a reasonable environment should not. The spirit of the gift should be as important as the letter of any technical regulations that could be devised. Legalisms should not be allowed to circumvent the spirit and intent of the fund.

The State or local boards of education will not be the judge of whether students are receiving value for the money that is being contributed.  Those who manage an operation cannot reasonably be allowed to be the official judges of their own success.  To do so would be tantamount to taking the word of foxes about the quality of hen house security they were allowed to provide.  Employers, college teachers, parents, and the community at large should form mechanisms or forums that judge the quality of education, because education is meant to turn out students who will do well at work or at college and who will make positive contributions to the life and social fabric of the community.  None of this has necessarily anything to do with scores on standardized tests.

5) If a district wants to use money in a way that may be questionable under (4) above, they should first receive permission from fund administrators or a fund advisory panel. The process for explaining the proposed usage should be as simple and straightforward as possible, not a morass of technical requirements or tedious forms.

6) If any government or educational organization successfully tries to control or take unfair advantage of this fund and this process, it should be in part or whole shut down and the collected money returned to the donors. The fund is not intended to be a slush fund for government, union, or other officials. Nor is it intended to replace tax revenues so that tax revenues can become a slush fund for government, union, or other officials. This is a gift of the people of Alabama to further the education of the people of Alabama. Any other use of this money, or of education tax revenues that it might "free up", is not what is intended and will not be continued or tolerated.

7) My current inclination is that money collected during any one fiscal year may not be paid out until the following school year so that all money promised to, and then budgeted by, school districts will be in hand, and not merely a projected, expected, or hoped for amount. The point is to avoid having to cancel projects midstream.

8) Because tenure laws will apply to teachers hired under even this voluntary funding plan, the renewed hiring of bad teachers who then automatically become tenured, presents a serious problem. Without some sort of creative legal strategy that is likely to be expensive and time-consuming to enforce, simply removing the funding of such teachers will not result in their dismissal but will merely allow them to displace a non-tenured teacher rather than costing the bad teachers their jobs. Local administrators and parents need to be particularly vigilant about the potential tenuring of bad teachers paid for by money from this funding. Hard earned money that people contribute to this fund is not intended to be wasted on people that have no business being in a classroom. And it certainly is not intended to be responsible for creating bad tenured teachers who take up the space that good untenured teachers ought to have.

9) Reasonable operational costs of the fund should come from interest or dividends it accrues if possible, and the balance of the dividends or interest earned by the fund should be added to the principal.

10) To effectively increase teachers' earnings or buying power without having to collect additional taxes to increase their salaries, business owners should be encouraged to give pre-sales tax discounts to teachers wherever possible. Each percent of discount actually is the equivalent of nearly 1.5% raise for teachers because income taxes do not need to be paid on a discount that do need to be paid on a raise, and because a discount of 1% allows a teacher to buy an item or service at his/her current salary that it would take a 1.11% raise to pay for at its regular price, or in other words, a 10% discount allows one to buy 11.1% more things for what would have been the original price. A 5% discount average discount on all the things a teacher buys would be nearly equivalent to a 7.5% raise. A 10% average discount would be tantamount to almost a 15% raise. Every dollar a business owner can save a teacher is basically equivalent to giving that teacher $1.50. As long as the merchant is only reducing his profit by the discount and not having to cut into his costs to do it, the potential unit losses stand to be made up by increased volume of sales.

11) A web site should be set up to show current amounts collected and amounts still sought. The news media should be asked and encouraged to report about the fund as they might report on any government revenues and expenditures.

12) The point of this plan is to give people the opportunity to contribute voluntarily to schools in a way that collectively can make a big difference, while not having to fund anything they disapprove and without having to contribute to the fund when it would be a hardship for them to do so. Increasing taxes cannot do that. This is a fairer way to increase school funding, if it will generate sufficient revenue to be effective.  If it generates any significant amount of money at all, it will save that much from any perceived necessary tax increase.

13) Of course, in this plan some people who benefit from any additional improvements in education in the state may not contribute their fare share toward providing that improvement.  In any voluntary plan, there will always be "free riders."  But there are free riders even in a taxed society in the sense that many people receive more education than their family's share of tax revenue pays for.  And in a taxed society, people with no children or few children may not receive nearly as much in return for their tax money as do larger families.  Generally we tend to accept that inequities of this sort will be virtually inevitable no matter what the system.  I personally believe it is better to let people who are willing to do so, pay more than their share than to force people who don't want to to pay more than their share.  Or to put it in the other way, I think it is better to let some people pay less than their fare share than to force people to pay more than their fare share.  But since this fund is not eliminating the current education tax revenues, it does not give anyone a totally free ride anyway.

14) The fund may not raise much money.  The idea may not work.  Trying to increases taxes throughout Alabama has not worked yet though.  This cannot do any worse.  If a respectable financial institution is willing to establish and operate the fund even with the risk of failure, no one but them will be out anything.  And the favorable publicity they receive from the attempt may outweigh any costs they incur.

15) Unlike tax revenues from long-term tax laws, lenders may not be willing to lend money based on any current accumulations.  Bond issues may not be able to be floated to build buildings.  If not, they will have to be built after sufficient money is accumulated.  I do not think that is necessarily a bad thing.  While loans and credit have beneficial value, they also sometimes cause problems and losses.  Potential lenders will just have to judge whether a tax base is somehow less likely to dry up before a loan or bond is repaid than is a voluntary community funding structure.  I don't know whether there is sufficient experimentation in this area to judge that reliably and objectively or not.  Given recent stock market losses, investing in building schools may be a more worthwhile risk than some others available anyway.

16) It might be that people would pay more money to operate school programs if they knew where that money was going specifically then they are willing to pay in taxes, the spending of which and the good of which they have no control over.  If so, it might be practical and beneficial to offer tax reductions for amounts people donate.  The reductions could be in the form of a credit of some percentage or of deductions.  (I tend to favor credits, because they are more easily understood and calculated, and are more straightforward.) It might be that for every dollar someone contributes, it reduces their taxes  by twenty or thirty or fifty cents or more.

Finally, this plan is predicated on the idea that government does not need to be the only secular civil institution whose purpose is the general public good.  Financial institutions can serve such a general purpose, just as the Red Cross, Scouts, the United Way, and thousands of private foundations do for particular causes.  By thinking of the government as the only possible institution to promote the common, general, civic good, we limit potential contributions to society and social improvement, and we make government as much an embattled and resented crutch of dependency as it is a respected collective tool of accomplishment.

Second Proposal
(Can Be In Conjunction With the First, or Alone)

Education has unfortunately become synonymous with schooling or with schools.  But the point of education is to turn out people who are good, knowledgeable citizens, who are reasonably productive, contributing workers, and who are reasonably able to develop the talents and abilities they hold most dear, and who are able to secure as much as possible as reasonable a lifestyle as they can and as they ought to deserve.

School is not the only place where students can learn.  School is not always even the most effective place where students can learn.  School is certainly not always the best place, or even a good place, to learn work skills or a work ethic.

1) Companies that offer apprenticeships or other sort of training, or that simply hire more people, should receive some sort of tax reduction.  They are creating jobs and they are providing on the job education.

2) Companies or individuals which help educate children or adults in basic or higher level skills should receive tax reductions.

3) Students should be allowed to receive some sort of educational certificate that should mean as much as a high school diploma if they show successful work and citizenship skills and understanding in the work place.  They should also be expected to have a certain reading comprehension level, and at least practical math skills.

4) Programs could be established either in conjunction with schools or in lieu of schools.

5) Everyone should be encouraged to continue their academic and other education throughout their lives, but not necessarily in some degree program.  There is no reason that people who want to take college courses should have to be in a degree program.  And there is no reason (except in regard to some professions, perhaps) to make high school or college be about employment, as opposed to being about learning as much as one can in subjects for which one has an interest and an aptitude.

The point of this second proposal is to help children and adults become better educated and to have more (and better) job opportunities, in as direct a way as possible.  School has become an indirect form of education, and in many cases it fails to provide students either with the basic skills to build more knowledge or with skills that make them more employable.  There are many situations where it is likely that funding schools better will still not provide more knowledgeable and more capable citizens and employees.  Where individuals and companies have the resources to help or to do better, a mechanism should be established that makes that possible and feasible.

This work is available here free, so that those who cannot afford it can still have access to it, and so that no one has to pay before they read something that might not be what they really are seeking.  But if you find it meaningful and helpful and would like to contribute whatever easily affordable amount you feel it is worth, please do do.  I will appreciate it. The button to the right will take you to PayPal where you can make any size donation (of 25 cents or more) you wish, using either your PayPal account or a credit card without a PayPal account.