Public Policy Buckets and the Law of Unintended Consequences
You know, we spend too much time thinking about public policy in buckets. I live in the education bucket, while others live in the finance bucket or the energy bucket or the transportation bucket or… well, you get the point. But the world doesn’t really work that way, does it? Public policy in one area often deeply affects policy in another. Pull the wrong string over here and you may inadvertently spark a crisis over there.
To underscore that point, I’d like to call your attention to Exhibit A: South Routt School District (SOROCO to the locals) and the unintended consequences of the War on Coal on education in Colorado.
South Routt is a tiny school district of about 350 PK-12 students near Steamboat. I’ll forgive you if you haven’t heard of it before. Like many rural school districts in Colorado, SOROCO lives on a budgetary razor’s edge where any large swing is likely to be felt very keenly.
You can imagine the district’s panic, then, when Peabody Energy, the country’s largest coal-mining company, filed for Chapter 11 bankruptcy protection in April 2016. Why would a national coal company’s bankruptcy matter to South Routt? Because it turns out that bankrupt corporations aren’t great at paying their taxes.
Peabody maintains a relatively large presence in the district, and is therefore responsible for a large share (about 40 percent) of the district’s property tax base. Given that those tax revenues are used to fund part of SOROCO’s Total Program, or the amount of money calculated to fund education in Colorado school districts each year under the School Finance Act, losing access to them could be a real problem. A crisis, even. That’s exactly what happened in South Routt.
The failure of Peabody to pay its taxes will cost SOROCO an estimated nearly $1.4 million spread across fiscal years 2016 and 2017, with about $800,000 of the impact landing in FY 2017. Given that the district’s 2016-17 Total Program is only calculated to be about $3.5 million after the application of the negative factor, that shortfall obviously caused some serious consternation. Locked out of loans because of the revenue loss and facing catastrophe, the district turned to the only source of rescue it could: the state.
SOROCO filed a request with the Colorado State Board of Education to backfill the loss through the State Board’s contingency reserves. The State Board obliged unanimously last Thursday, voting to send the district $1 million from the State Board’s Contingency Reserve Fund. The fund was sitting at $1.08 million before that payment, which means it is now basically empty until the legislature decides to fill it up again—something that can’t happen until the 2017 legislative session begins next January. If some other emergency crops in the meantime… well, things are going to get hairy.
It’s always hard to predict how far the ripple effects will spread when you throw a rock into a lake, or how they’ll affect other, seemingly distant shorelines. But in the realm of public policy, we’d do well to remember that decisions made in seemingly disconnected policy arenas can and do have major impacts in others. Just ask SOROCO.