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At SIIA Event, Plenty for Bulls and Bears

In the space of an hour, Gov. Bob Wise gave investors in educational technology everything to hope for, while economist Richard Sims gave them everything to fear.

Sims, the chief economist for the National Education Association, the nation's largest teachers' union, started with a foreboding presentation titled "The Outlook for Education Funding in Three Charts."

In it he warned not to expect any significant increase in education funding until at least 2017, based on real estate tax revenues that are likely to decrease significantly as they follow the housing downturn on a three-year delay, policymakers that favor taxation policies with revenues lagging economic growth, and the loss of federal stimulus dollars.

"Nationally, the economy is really in what I think of as an Isaac Newton conundrum," Sims said. "Every something good that happens is offset by something bad that happens."

Wise, a former Democratic West Virginia governor and the co-founder of the Digital Learning Now initiative, then followed with his admittedly bullish viewpoint that investment in education technology can increase even while total revenues don't.

"To me, the issue is not about whether educational spending is going up," Wise said. "It's what you do with the education spending that you have."

Wise and former Republican Florida Governor Jeb Bush founded Digital Learning Now as an effort to get states to make 10 policy changes to eliminate what they see as barriers to online learning. Those changes include lifting restrictions like seat-time requirements, exclusive agreements with one content provider, and age minimums for accessing online coursework.

In making the case for his argument, Wise pointed to the Mooresville, N.C., Graded School District, one gaining increasing national acclaim for the apparent success of its digital conversion despite its relatively low funding-per-pupil spending.

Sims, however, saw altering tax policies as a more important decision state and district legislators could make to increase funding for all educational programs as the economy continues to recover. He said, while unpopular, income taxes are the only kind which have revenues that grow by more than a percentage point (1.21 percent) for every percentage point of total economic growth.

Corporate income, sales, and property taxes all fall a bit short of one percentage point, while cigarette taxes and lottery sales generate revenues—which Sims noted can be particularly popular with legislators—only grow revenues about half as quickly as overall economic growth.

And with property taxes remaining the biggest funding agent for education, their expected precipitous drop in revenues could mean even more lean times for school budgets.

"We still have about a 25 percent decline to go," in property tax revenues, Sims said. "That is 40 percent of education spending that is looking at a 1/3 decline."

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