Hawaii School Cuts Symbolize Coming Trouble for State, Municipal Budgets

CNN had a nice segment yesterday that puts a personal face on the coming crisis facing state and local budgets. NEWSWEEK reported on that issue last week: in a nutshell, state and local budgets get hit later than the rest of the economy, because income and property taxes don't show a dip for a while. Some analysts are worried that just as employment and economic growth begin to recover, cities and states are going to be facing massive shortfalls and very tough decisions. One of the facets of this case─unions and governments at loggerheads over how to deal with a crisis─is likely to be a major one as similar cases develop elsewhere.

In the CNN segment, Ed Henry presents the case of Hunter Gentry, a 10-year-old hearing-impaired student in Honolulu. Gentry typically gets special one-on-one attention from his teacher on the final day of the school week, but Hawaii is facing a projected $1.23 billion budget shortfall─making it one of the worst-hit states in the nation─and has introduced "Furlough Fridays," cutting 17 Friday school days. That gives Hawaii the shortest school year in the United States.

Perhaps most politically relevant is Education Secretary Arne Duncan's quote in the segment. Suffice it to say that Duncan─who's called for a longer school year─doesn't like the state's solution: "Everyone's having to make really tough choices, but if we desperately need more time, not less, [and] when Hawaii said their answer to this tough fiscal problem was to eliminate 17 days of school, 10 percent of the school year, no one has proposed that kind of answer. There has to be a better way." The alternative, if there is one, will probably come from the federal government, but not from Duncan. Instead, analysts like Ethan Pollack of the Economic Policy Institute expect that many state and perhaps even municipal governments may be in line for a bailout of their own.

One more wrinkle: Nicole Gelinas, an expert on municipal finance at the Manhattan Institute, told me she thinks that one key to fixing state and local budget problems is to reform the relationship between labor and governments. "[Public-employee] labor costs are not sustainable," she said. "Once these things are promised, they can't really be taken away. It's important to get them under control now, seeing the cost of not getting them under control now."

Agree or not, the Hawaii case shows where labor-government fault lines can cause friction. Hawaiian officials have been working to find a way to reduce the number of furlough days, but the two sides are at an impasse now, with Gov. Linda Lingle rejecting a proposal from teachers' unions to restore seven of the days, saying the proposal to tap a rainy-day fund wasn't sustainable or responsible. And things got stranger late last week, when─in the midst of the controversy─the state schools' superintendent resigned, although she insists it was for personal reasons.

As Hunter's mother points out, she and her husband are able to make up for some of the lost instruction time, but for other special-needs children, the loss could be graver. Moreover, parents everywhere in the state will have to find something to do with their children during school hours on Fridays─one of several problems with the plan. Sound disconcerting? This is likely a conversation that will happen again and again: Americans will have to decide what services, from garbage collection to firefighting to public education, are essential, and which ones they can afford─or are willing to pay higher taxes to get.

To read NEWSWEEK's full story on state and local budget worries, click here. You can watch the CNN segment here.