How We Gonna Pay?
The left wants programs for people that need them. For schools, we want better teacher pay, benefits, school infrastructure updates, community school initiatives, and myriad other things specific to your context.
The question “how you gonna pay for that?” looms. I don’t like this question. It stinks of the deficit myth that there’s only so much money going around and to pay for one thing we have to take from something else. While that’s not really true, nevertheless, programs need financing. We have to pay somehow and there are only so many ways to do that in capitalism.
When it comes to school funding there are two options: grants and loans.
A grant is money that you don’t have to pay back later. It may come with certain limitations and requirements, but it comes and that’s that. For school districts, taxes are grants. The district, county, state and/or federal government collects the taxes (typically from real estate, but not exclusively) and directs the funds to the budget.
If you’re a socialist it’s important to remember that tax collection is the state scooping money out of capitalist production so the whole show can go on. (To MMTers, it’s a slightly different story where money is a legal entity and taxation is about controlling inflation, but the end result is basically the same.)
When it comes to schooling, tax grants fund the continuity of exploitation. Schools help out with that continuity so the ruling class has an interest in funding them. Even Milton Friedman admitted education needs tax grant funding due to the complexity of this ‘good’. (Charter schools are just a fanatical style preference in this vein.)
But grants are often not enough to cover all expenses and they come in slowly. For schools, this slowness is especially problematic since school budgets are made yearly and on a schedule. Principals need to know what money they have to work with each school year, and districts have to communicate that by a certain time. The state entities can’t collect and distribute tax revenue that quickly.
For districts with low property values and high need student populations—both urban and rural—this gets very tricky.
Enter loans. Rather than a grant, borrowers get a line of credit that they have to pay back with interest over a certain period under certain conditions. For school districts, loans tend to come in the form of bond issuance. The district sells bonds to bondholders looking for ‘steady’ investment opportunities in the bond market. This bondholder class pays money up front and the district pays it back over time with interest. Banks underwrite the process and take fees, as do consultants.
There are some other kinds of revenue from investments, bond purchases, and pension funds. But, under non-revolutionary circumstances, if you’re paying for a program—when it comes to schools—then those payments are either grants in the form of taxes or loans in the form of bonds.
Where’s the money?
Again, we want programs for people who need them. The programs need funding. Where’s this funding going to come from? Let’s look at the current political and economic situation to see what our options are.
Ideally we want grants. Of course the money is scooped out of exploitation, but that’s dialectics for you. We don’t have to pay it back with interest. But who’s going to give us grants?
Grants comes from taxes and school funding is largely comes from property taxes. It’s a local affair. In Philly less than 10% of district funding comes from the federal government. Half comes from the city and the other half comes from the state. The city is run by centrists and progressives, who are sympathetic. But for the city to fund schools with grants it has to tax more, whether real estate or soda or whatever. There’s very little breathing room there—the population is largely poor and taxing is unpopular.
The state is run by conservatives who disdain the city in particular and government grants in general. They live in a libertarian fantasyland shot through with racism, backed by capitalists in the same lifeworld. The governor is centrist and sympathetic but doesn’t have a lot of wiggle room due to the conservatives controlling congress. Very few grants forthcoming there.
Of course, there’s always the federal government. Aside from its non-status in school funding, it’s being retaken by a neoliberal blob who seem sympathetic but are in the same libertarian thrall as conservatives. Biden Bucks aren’t the most reliable revenue stream given his ideology and how Congress is shaping up: a slim majority of centrists over conservatives with a small progressive block in the House and the Senate in a conservative death grip.
Unless you want to run a Hail Mary and try to get a billionaire to donate, or unless revolutionary conditions emerge and you can expropriate funding, there are no grants anywhere to be found for school funding.
In the current crisis, with big budget shortfalls, most people at the helms of apparatuses like school districts will do austerity cuts. They’re neoliberal technocrats. But they’ll still need revenue for capital projects and for filling gaps in operating costs. So for revenue, that leaves loans and other investments.
The districts will go to the bond market and sell bonds, get loans, and figure out how to pay them back with interest. This is usually just another capitalist merry-go-round, but the pandemic has inspired some novel options in monetary policy.
The Federal Reserve is offering to buy bonds from state and local governments through the Municipal Liquidity Facility. The terms are bad, but this is an opportunity. We can change the terms. There are people in government who want them to change. Plus, changing the terms doesn’t depend on a gridlocked Congress or neoliberal executive branch.
For socialists who think this whole structure stinks and still need to finance programs, I think the thing to do right now is demand better terms from the Fed. The MLF is backed by the Treasury, can support large sums needed for shortfalls and big projects, and it starves a key capitalist market of oxygen, threatening the bondholder class. I think the intervention is one socialists should get behind.
The Action Center for Race and the Economy is fighting for better MLF terms with their Cancel Wall Street Campaign, and the group I organize with, Lilac, is helping out with the Philly region. I’d encourage socialists and progressive to look at this campaign and get involved. There aren’t many options for financing our demands right now.