Tag Archives: budgets

Financial Literacy: Too Many Lacking

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It’s Financial Literacy Month. Hopefully it has arrived in time as far too many people are lacking in just that concept. Witness a new survey from the National Foundation for Credit Counseling and the Network Branded Prepaid Card Association.

Witness a few results from the survey:

  • More than half of U.S. adults admitted that they do not have a budget

  • One-third of survey respondents do not pay all of their bills on time

  • Thirty-nine percent of adults carry over credit card debt month to month

  • Twenty-five percent of those who do not currently have non-retirement savings indicated that, if they did begin to save, they would keep their savings at home in cash

“This year’s survey unveiled some disturbing trends, showing that a significant number of Americans are saving less, spending more and carrying credit card debt over from month to month, suggesting that the painful financial lessons of the past are quickly being forgotten,” said Susan C. Keating, president and CEO of the NFCC.

My reaction is a little more straightforward, 15 words in fact. "Really? Come on, people. Get in the game or you only have yourself to blame."

Third World Infrastructure?

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In general, according to a Governing magazine columnist, America’s infrastructure is lacking in overall quality compared to some other developed countries. Budgeting is cited as one reason, with maintenance funds falling victim to budget shortfalls.

A German graduate student once told me he was amazed at the poor roads, sidewalks and other features in Cambridge, Mass., where we were both living and studying at the time.

“It looks like a third-world country here,” he said. “Apparently, no one cares.”

I don’t think that is the case, but I do think we have become accustomed to a lower-quality public environment, one that would not be tolerated in France, Germany or Japan. It was already ironic that Cambridge, a rich, liberal city that lavishes praises on the public sector, put up with it. Regardless, the chronic maintenance cutbacks in this country result in shoddy-looking and poor-performing infrastructure systems, more accidents and a negative impact on economic capacity.

One explanation may be our budgeting process. States and cities generally pay for maintenance from annual operating budgets. You can’t borrow money to repair a pothole. That leaves the pots of money set aside as tempting targets.

“Maintenance budgets are one of the first places mayors and governors look for money to fill budget shortfalls,” says William Reinhardt, editor of Public Works Financing. “That’s because the effects of underfunding maintenance are not immediately obvious.”

In contrast, states and cities borrow money to build new roads, bridges and train lines. It can be tempting to use the money that would have gone for maintenance to pay the interest costs on bonds sold to build new stuff. Political pressures come to bear as well. Developers and real estate interests often clamor for new highways and other infrastructure, and fund politicians who support them. While citizens whine about potholes, they rarely vote on that basis.

Whatever the reason, peculiar budgeting practices occur. A transit manager at a major American city told me a revealing story during a tour:

“See those lights,” said the official, pointing to some bulbs within some rusting metal frames hanging over the platform. “It would only cost about $1,000 a year to maintain those well. We can’t get that. So instead, we will wait until they rust out and fail completely. Then we will replace them, at a cost of perhaps $100,000.” This is poor governance and poor economics, to say the least.

Colleges Look to Cut Costs

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Taking a close look at expenditures is something Indiana’s colleges and universities have been concentrating on in recent years. In Missouri, efforts are focusing on elimination of rarely used degree programs and increased collaboration between various academic institutions. Stateline reports:

Last August in Missouri, Governor Jay Nixon told state universities to look at making some hard choices they’re not accustomed to having to make. Nixon, a Democrat, wants to eliminate “low-producing” academic programs in order to save money. To that end, he asked universities to review any program that fails to award an average of ten bachelor’s degrees, five master’s degrees or three doctorates per year.

The results of this review aren’t due on the governor’s desk until February, but preliminary results offer an interesting look at what may lie ahead. Institutions have volunteered to terminate 61 of the 353 programs that fell below the threshold, including programs in French, engineering physics, public administration, antiquities, sociology and recreation. More courses are expected to be on the chopping block as the schools conduct follow-up and explore opportunities to consolidate or share programs. Instead of all of the state’s institutions of higher learning trying “to be everything to everybody,” Nixon says, “we have to take a good hard look at what we do well.”

This review is only the beginning of a major efficiency initiative that Nixon is pushing across Missouri’s 13 four-year universities and 21 two-year colleges. So far, these institutions have been spared the worst of the state’s budget crisis, thanks to an agreement they made with the governor two years ago to freeze tuition rates. Now, with that agreement set to expire soon — and Missouri facing a budget deficit of up to $700 million next year — higher ed is bracing for a funding reduction of as much as 20 percent next year.

While some of that gap may be filled with increases in tuition and fees, there’s a growing sense, both in Missouri and across the country, that state colleges and universities can’t go on simply charging students more. Increasingly, school leaders acknowledge that they need to cut their underlying cost structures, and that saving money on classroom instruction has to be part of the mix. As David Russell, Missouri’s commissioner of higher education, puts it, “The last real area of higher education that’s remained relatively untouched, the academic enterprise, the core of our reason for existence, is in danger of suffering some severe reductions."

Maybe Should’ve Sat This One Out

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Like those in public school districts throughout the nation, Indiana’s superintendents and educators often find themselves being frugal, attempting to get the most out of their budgets. And it’s an effort that Hoosier taxpayers certainly appreciate.

So if you’re one of these folks and are looking for tips toward school budget success, here’s a little hint on what not to do from the Show Me state: You might start by not sending 16 educators to a conference in Los Angeles, thereby costing local taxpayers over $30,000 — especially when it’s well-known you have minimal funds and other local districts only sent one or zero people to said conference.

Worse yet, you might want to be ready to explain some things when a local TV reporter presses you about it. Check out this tough-to-watch educational PR disaster in St. Louis. It’s a piece I like to call, "So You’re Saying A Group of Teachers Attended the Conference."

Hat tip to Ragan’s PR Junkie.