The Financial Cost of Public Schools

As part of the ongoing debate over public schools there has been much discussion lately in the local paper to what it cost to educate a student in our public schools. The apologists who are always prepared to avoid facts have trumpeted their over-used and trite phrases of “quality education”, “bargain education”, and other catch phrases. All the while, never answering the underlying questions as compared to what or in whose viewpoint and logic? Arnie Fett has proclaimed that the district spends around $8900 per student which makes the district one of the cheapest in the state. This answer is fatally flawed in several aspects. First as pointed out by Mr. Patrick a couple weeks ago, school districts or for that matter governments do not spend in the traditional sense since in order to spend one must sacrifice the fruits of one’s labor and opportunity. Government derives its sources of funds through coercion which only involves the sacrifice of the taxpayer. Since government creates no wealth then its outlays are no more analogous to expenses then its funds in the treasury are to income. In subsequent ‘letters to the editor’ Mr. Frase and Mr. Hermsen correctly identified that taxes collected is the true measure of cost. At which it was pointed out that current spending by taxpayers [taxes collected] per student is about $11,000.

This brings up a second flaw in cost analysis and that is the use of average cost in determining the current price of an item. As an illustration let us look at the scenario of a man who fills his car with gas every Monday. In two successive Mondays gas was $2.00 and $2.10 per gallon giving an average price for gas over the two Mondays at $2.05 per gallon. On the third Monday the man uses the average of $2.05 per gallon as his basis for filling up his car. If the price of gas is different than the average he will either have a tank which is not full or have gas over flowing on the pavement. Average pricing for the consumer is merely a historical reference point. Its only value is the determination of break even when assets are accumulated over time when for instance shares of a specific stock are bought at different prices. Average costs, in this case allows an individual to determine at what price the whole bundle can be sold for a profit. In either case, the average price may have little relationship to the price that needs to be paid for the next unit. Thus it is fallacy to use average cost per student as a basis for what it cost to educate a child.

What is relevant is to compare the total cost of education to the taxpayer versus the total cost of alternatives. The total cost of public schools is determined by taxes paid, which is a factor of income and property values, and the number of years paying into the system. I have in previous discussions shown that the average family in Hudson who lives here for thirty years will pay a minimum of $150,000 for public schools. The total cost of private education is the tuition multiplied by the number of children multiplied by twelve years. Again for the average family in Hudson the total cost would be between $40,000 and $50,000 dollars a child.

An even more revealing picture of cost comes when the cost of education is examined at the margin. Again there has been much discussion on the concept of marginality on this blog, so I will not digress in to a discussion of basic economics. It is suffice to point out that the price of an item[in purely financial terms] is the dollars required to purchase the next unit. In private schools the cost of additional unit [student] of education is the tuition paid. For public schools it is the additional taxes incurred for each additional student. At the average private school an additional unit of education can be purchased from $3,000 to $5,000. Last year in the Hudson School District, taxes increased approximately 5 million dollars while an additional 200 students were enrolled. Therefore the actual cost of education in the Hudson School District stands at $25,000 dollars a student! So you still think Arnie Fett numbers are right. Try working the problem in reverse. If the true cost per student was $8900 then the additional 200 students would have only cost the taxpayers 1.78 million dollars instead of the 5 million dollars.

Only an apologist could ever consider this scenario a value or a bargain. It has been said often but is worth repeating, end the monopoly now!

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