Obamacare Decision Foreshadows More State Education Cuts

Published July 27, 2012

It will take several years to begin understanding how the Supreme Court’s decision unleashing the 2010 health care dragon will burn through state budgets and make health care more unreachable and unwieldy for sick Americans. One consequence among many will be a financial forest fire for public education.

Health care and education have in recent decades been states’ largest expenditures, by far. In 2011, just Medicaid – the federally required program to provide health care to poor people – surpassed education in state budgets, consuming about a quarter of state taxes on average. Increased health care costs not only gave impetus to Democrats who passed the 2,200-page Affordable Care Act monstrosity, but combined with the recession were the prime reason states began cutting education spending.

State spending on K-12 and higher education now consumes about a fifth of state budgets, and is likely to face more cuts because of health care costs, which the ACA will exacerbate. In the first seven years the ACA is implemented, states will have to come up with an additional $33 billion just to pay the Medicaid increase. (Though the Supreme Court made it optional, most states are likely to choose it.) States already wrestle Medicaid costs, which are also projected to increase.

Add to the mix states’ woeful and growing trillions of dollars in pension liabilities (most of which pay for teachers, who often can retire in their late fifties) that taxpayers are legally required to fill even as their own earnings decline and their health care becomes more unstable. The Government Accountability Office says states must immediately cut spending 13 percent or raise taxes by the same amount to begin closing these financial black holes. Education spending cannot fail to get slashed.

Philosophy students sometimes discuss which lifeboat passenger to discard in situations when too many people will sink the lifeboat. Now government is forced to decide whether a poor child should get her ADHD meds or be stuffed in a classroom with 60 other students.

It doesn’t have to be this way.

The Supreme Court decision, coupled with states’ budget situations, means not just the presidential but congressional and state elections are a referendum on America’s future. Much of it hinges on health care, and health care is just the ratchet squeezing nearly everything else, including the economy and education.

States can tax their citizens only so much, and hiking taxes to meet rising health care costs will be even more unpopular than usual because the folks being taxed have even less money to fork over to the state because of the recession. The Census Bureau recently reported median household wealth has declined 35 percent since 2005.

There are abundant alternatives both to the coming health care Mount Vesuvius and the near-tripling, in real dollars, of education spending over the past 60 years. Both involve a natural cost-killer and satisfaction-giver: putting individuals in charge of their own health care and education.

School choice, such as Indiana’s and Milwaukee’s voucher programs, saves states and cities millions. In the first year of the Indiana program, it sent $4 million back to public schools, because choice is cheaper than public education. That’s a way to offset budget pressures.

A similar approach has been proven to reduce health care costs while providing excellent care. Rather than forcing people and states into DMV-style, Third-World health care, we must elect representatives who support harnessing the power of personal freedom. Don’t give people a blank health care check signed by taxpayers. Let people keep their insurance when they switch jobs. Let people choose among many insurance and health care providers.

Slay the health care dragon, or it will slay us.

Joy Pullmann ([email protected]) is managing editor of School Reform News and an education research fellow at The Heartland Institute.