A Hollow Victory for Public Schools

By: - August 13, 2008 12:36 pm

If someone offers your favorite public service or program a dedicated revenue source take my advice and just say "no." For proof of this fact consider the hollow victory for public schools announced yesterday. A state court judge has ruled that North Carolina's public schools are due $749.7 million in past revenue from fines and forfeitures that should have turned over to them in compliance with the state constitution.

It should come as no surprise that House Speaker Joe Hackney has already announced that the state does not have the funds to pay back the schools. So what have the schools accomplished? They certainly made their point – the state constitution intends for them to have that money. But in reality they will have replaced their general fund dollars that are backed by the stability and long-term growth record of personal income tax revenues with revenues from fines and forfeitures, a source that grows only when fines are increased and as the population increases. Undoubtedly this revenue source will underperform relative to the needs of our public schools.

The lesson to be learned from this story is not to seek or accept a dedicated revenue source to support any program or public service you care about unless it meets two criteria. First, it should provide 100% of the revenue needed to support a particular program. Second, it should grow at the same pace as the anticipated costs of the program. Accepting dedicated revenue sources (fine and forfeiture funds and lottery proceeds being prime examples) will do your cause more harm than good.

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