How state budgets are breaking US schools | Bill Gates
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How state budgets are breaking US schools | Bill Gates

Well, this is about state budgets. This is probably the most boring topic of the whole morning. But I want to tell you, I think it’s an important topic that we need to care about. State budgets are big, big money — I’ll show you the numbers — and they get very little scrutiny. The understanding is very low. Many of the people involved have special interests or short-term interests that get them not thinking about what the implications of the trends are. And these budgets are the key for our future; they’re the key for our kids. Most education funding — whether it’s K through 12, or the great universities or community colleges — most of the money for those things is coming out of these state budgets. But we have a problem. Here’s the overall picture. U.S. economy is big — 14.7 trillion. Now out of that pie, the government spends 36 percent. So this is combining the federal level, which is the largest, the state level and the local level. And it’s really in this combined way that you get an overall sense of what’s going on, because there’s a lot of complex things like Medicaid and research money that flow across those boundaries. But we’re spending 36 percent. Well what are we taking in? Simple business question. Answer is 26 percent. Now this leaves 10 percent deficit, sort of a mind-blowing number. And some of that, in fact, is due to the fact that we’ve had an economic recession. Receipts go down, some spending programs go up, but most of it is not because of that. Most of it is because of ways that the liabilities are building up and the trends, and that creates a huge challenge. In fact, this is the forecast picture. There are various things in here: I could say we might raise more revenue, or medical innovation will make the spending even higher. It is an increasingly difficult picture, even assuming the economy does quite well — probably better than it will do. This is what you see at this overall level. Now how did we get here? How could you have a problem like this? After all, at least on paper, there’s this notion that these state budgets are balanced. Only one state says they don’t have to balance the budget. But what this means actually is that there’s a pretense. There’s no real, true balancing going on, and in a sense, the games they play to hide that actually obscure the topic so much that people don’t see things that are actually pretty straight-forward challenges. When Jerry Brown was elected, this was the challenge that was put to him. That is, through various gimmicks and things, a so-called balanced budget had led him to have 25 billion missing out of the 76 billion in proposed spending. Now he’s put together some thoughts: About half of that he’ll cut, another half, perhaps in a very complex set of steps, taxes will be approved. But even so, as you go out into those future years, various pension costs, health costs go up enough, and the revenue does not go up enough. So you get a big squeeze. What were those things that allowed us to hide this? Well, some really nice little tricks. And these were somewhat noticed. The paper said, “It’s not really balanced. It’s got holes. It perpetuates deficit spending. It’s riddled with gimmicks.” And really when you get down to it, the guys at Enron never would have done this. This is so blatant, so extreme. Is anyone paying attention to some of the things these guys do? They borrow money. They’re not supposed to, but they figure out a way. They make you pay more in withholding just to help their cash flow out. They sell off the assets. They defer the payments. They sell off the revenues from tobacco. And California’s not unique. In fact, there’s about five states that are worse and only really four states that don’t face this big challenge. So it’s systemic across the entire country. It really comes from the fact that certain long-term obligations — health care, where innovation makes it more expensive, early retirement and pension, where the age structure gets worse for you, and just generosity — that these mis-accounting things allow to develop over time, that you’ve got a problem. This is the retiree health care benefits. Three million set aside, 62 billion dollar liability — much worse than the car companies. And everybody looked at that and knew that that was headed toward a huge problem. The forecast for the medical piece alone is to go from 26 percent of the budget to 42 percent. Well what’s going to give? Well in order to accommodate that, you would have to cut education spending in half. It really is this young versus the old to some degree. If you don’t change that revenue picture, if you don’t solve what you’re doing in health care, you’re going to be deinvesting in the young. The great University of California university system, the great things that have gone on, won’t happen. So far it’s meant layoffs, increased class sizes. Within the education community there’s this discussion of, “Should it just be the young teachers who get laid off, or the less good teachers who get laid off?” And there’s a discussion: if you’re going to increase class sizes, where do you do that? How much effect does that have? And unfortunately, as you get into that, people get confused and think, well maybe you think that’s okay. In fact, no, education spending should not be cut. There’s ways, if it’s temporary, to minimize the impact, but it’s a problem. It’s also really a problem for where we need to go. Technology has a role to play. Well we need money to experiment with that, to get those tools in there. There’s the idea of paying teachers for effectiveness, measuring them, giving them feedback, taking videos in the classroom. That’s something I think is very, very important. Well you have to allocate dollars for that system and for that incentive pay. In a situation where you have growth, you put the new money into this. Or even if you’re flat, you might shift money into it. But with the type of cuts we’re talking about, it will be far, far harder to get these incentives for excellence, or to move over to use technology in the new way. So what’s going on? Where’s the brain trust that’s in error here? Well there really is no brain trust. (Laughter) It’s sort of the voters. It’s sort of us showing up. Just look at this spending. California will spend over 100 billion, Microsoft, 38, Google, about 19. The amount of IQ in good numeric analysis, both inside Google and Microsoft and outside, with analysts and people of various opinions — should they have spent on that? No, they wasted their money on this. What about this thing? — it really is quite phenomenal. Everybody has an opinion. There’s great feedback. And the numbers are used to make decisions. If you go over the education spending and the health care spending — particularly these long-term trends — you don’t have that type of involvement on a number that’s more important in terms of equity, in terms of learning. So what do we need to do? We need better tools. We can get some things out on the Internet. I’m going to use my website to put up some things that will give the basic picture. We need lots more. There’s a few good books, one about school spending and where the money comes from — how that’s changed over time, and the challenge. We need better accounting. We need to take the fact that the current employees, the future liabilities they create, that should come out of the current budget. We need to understand why they’ve done the pension accounting the way they have. It should be more like private accounting. It’s the gold standard. And finally, we need to really reward politicians. Whenever they say there’s these long-term problems, we can’t say, “Oh, you’re the messenger with bad news? We just shot you.” In fact, there are some like these: Erskine Bowles, Alan Simpson and others, who have gone through and given proposals for this overall federal health-spending state-level problem. But in fact, their work was sort of pushed off. In fact, the week afterwards, some tax cuts were done that made the situation even worse than their assumptions. So we need these pieces. Now I think this is a solvable problem. It’s a great country with lots of people. But we have to draw those people in, because this is about education. And just look at what happened with the tuitions with the University of California and project that out for another three, four, five years — it’s unaffordable. And that’s the kind of thing — the investment in the young — that makes us great, allows us to contribute. It allows us to do the art, the biotechnology, the software and all those magic things. And so the bottom line is we need to care about state budgets because they’re critical for our kids and our future. Thank you. (Applause)

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100 thoughts on “How state budgets are breaking US schools | Bill Gates

  1. @1RadicalOne "Who is more humble? The scientist who looks at the universe with an open mind and accepts whatever it has to teach us, or somebody who says everything in this book must be considered the literal truth and never mind the fallibility of all the human beings involved?
    Interview with Charlie Rose (1996)" Carl Sagan

  2. @generationalist I think the natural response is: Yes.
    When we have more than we need and there's enough for everyone, we all get along.
    But when resources are scarce and there's isn't enough for everyone, fear, competiton, fights (for survival) arise.

  3. @Imoverallbetterthanu Its not for 'you'? Why does that make it not stealing? Why is it up to you to decide what someone can keep that they themselves created? And yes, taxes are theft in a society too disorganized to develop more efficient and non-coercive methods of collective payment. Your suggestion to steal the wealth of the most productive amongst you, without limit is the extreme suggestion.

  4. @Imoverallbetterthanu If its voluntary than by all means its their wealth to do with as they please. The voluntary aspect was not clear by your choice of words. Apologies. However working for the brotherhood is the quickest way to ensure poverty for all. History has shown that repeatedly.

    "Taxes pay for street lighting, roads, infrastructure and civilisation".
    No, taxes pay for coercive state monopolies on those services. Slight difference.

  5. I'm sorry, did he give any solutions? Hire the private sector? Where are the taxes on the higher income brackets?

  6. @rbairos1

    stfu shill bitch mofo. anyone that gets rich in this country is far from self-made. their wealth is a product of the whole culture.

  7. COLLECTIVIZING effort for shared benefit is the cornerstone of CIVILIZATION.

    shared language is a form of collectivism. shared culture and technology, likewise. shared roads and public buildings,
    National Defense, FDA, Interstates, FAA, Social Security, NASA, CDC, School lunches, Post Office, Public Education, Soil Conservation Service, Medicare, Fire Dept, Police, DMV, National Parks and Preserves, Free Public Libraries, FCC, 911
    Here' to non-zero sum equations!

  8. @baronmorris Wealth is a product of the whole culture? Awesome, so exactly what operating systems and computer networking industries did *you* give rise to? Sweeping the floor at a computer factory isn't the same as managing a new computer industry. Thats why citizens compensate each other accordingly. Keep your gutter mouth and looting attitude to yourself next time.

  9. @baronmorris National Defense, FDA, Interstates, etc. Public "education". Really?? Man, its obvious you haven't spent one minute differentiating between whats a coerced state monopoly and what is not. At least educate yourself on the opposing view before spouting off the tired "But who will build the roads?" chant. Its like a creationist smugly asking an evolutionist to explain how their facts square up with Noah's ark.

  10. @rbairos1

    or perhaps you are a spoiled child taking for granted all the synergy of civilization, beating your chest with arrogant and ignorant indignant ingratitude for all the things you want to borrow without giving anything back. Like WORDS and THE INTERNET… Solipsist.

  11. @baronmorris Im no objectivist, and to call me a spoiled child reveals: 1) you utter failure as a psychic (keep your day job) 2) your propensity for ad hominem. Take your insults elsewhere.
    You obviously cannot comprehend the difference between consensual and coercive cooperation. Once you do perhaps you'll stop defending hierarchical power structures based on tyranny.

  12. @baronmorris Its maddening that you define civilization as coercive non-voluntary interaction. What part of voluntary cooperation is incompatible with your examples of "WORDS" and "INTERNET". Sorry to be rude, but your arguments are plain ridiculous.

  13. oh. we also need a BOLD politician not some half-ass speech specialist.
    i say this won't happen so this country will go down so yeah. i am buying gold

  14. @MrFrankBullitt
    Facepalm. Do you realize that NEITHER of those issues are paid for by state governments?

  15. "Wars,Wars,Wars…."Stop the Wars and that "Money "will help The U.S. Economy…simple. "stop using the "illegals as scape goats"..comprende!!!

  16. @Sinuev1 I absolutely agree man. Electing imbecile presidents taking you to war, governors ex-action movie stars, and sinking into overconsumption and debt is all the "illegals" and "brown-ish" people fault. The typical oblivious American has nothing to do with it!

  17. Look at the graph at 2:28 and stop to think: when did the US started two wars its people could not afford?

  18. Cisco commercial at the end…. WTF, they are the ones perpetrating the unethical censorship of all Chinese media and they have the balls to make THAT commercial.

  19. I'm disappointed with the man who knows something about extracting brain power. (Not that I was a fan, but he has time to think, which many can't afford.) When he charted spending in California, Microsoft, and Google and spoke of "brain power" among the three bodies, he pointed spending scrutiny in MS and Google toward analysts! Man. The fundamental difference between private and public is the ability to vote by feet. Take away this from private sector and its books will become just as murky.

  20. State governments are going broke for the same reason the federal government has been running deficits for years. Too much spending and wasteful spending.

  21. @DJTmaq The job market, like any other market, is free and the US, like any other country, competes in that free market. If your country is not competitive then it will loose to China or others who are. Jews are not related to this, keep them out. It's a free world and your achievements or failures determine whether or not your economy will recover. It is not about the illegals or the Jews, it's about if you guys will be competitive.

  22. @dankcro Actually, that's not true. He dropped out of university when he realized he wasn't getting what he needed, which is understandable considering he needed access to a computer in the 60s.

  23. State Budgets are huge compared to our top industries, yet the political process isn't allocating resources appropriately. We need more people like Gates interested in this problem.

  24. The schools are broken because they are meant to be broken. Bill Gates knows that full well. Chalotte Iserbyt covered it in her work.

  25. schools are broken because there's not enough emphasis on inspiring students to learn at their own pace and be curious learning something. pushed into a one size fits all mold doesn't help anyone.
    khanacademy ftw

  26. "Medical innovation may raise cost even higher". Really?
    It's actually opposite.
    Regarding California budget: isn't a Brown who fought prop 13. 30 years ago? What was prop.13 is a taxpayer revolt. After then State government failed to constrain medicare and pension cost for public union employees. Why shell it? It's in one bed with public unions who are helping to propel politicians to power.

  27. You should all shut your mouths and open your ears. I don't know how retards stumble across tedtalks anyway. Go watch jersey shore or nascar or something.

  28. You know. I would point out that during America's most prosperous period of growth, they were arguably the most multicultural nation on the planet, and that modern day America was formed by immigrants and therefore no one can really call themselves 'true' Americans. But I won't point that out, because you seem like such a narrow-minded person, who is not worth having a discussion with.

  29. Yep, just as I expected, a nice, well-researched argument coming from a person who has clearly spent several years outside his own country.

  30. Not all laws are written into the constitution, most are not. This is because, according to the bill of rights, all rights not enumerated in the consitution are passed down to the states, no strings attached. Also, the government does not always follow along with the constitution. For example, executive orders are not mentioned in any legal article that has ever been legislated in this country. However, an executive order(clinton), for example, allows bill gates to drive his porsche (illegally)

  31. Also, you do realize that 650 billion is only the direct funding spent on the military, that may not necesarly include the spending on say, intelligence(sadly, records are kept very poorly and even the cia world fact book only gives us an approx #). And you realize the spending comes out to about 18 thousand dollars a second at that sum… a very large sum of money for a war that need not happen, spurred on by our actions in the cold war. Also, it is less than 5%, as disclosed by the CIA.

  32. That is because teachers do not have the time to allow students to be curious. If you have a class size of say 30, and you have 40 minute period. This means the best way to use your time is horrofying! You take 10 minutes to assign something and spend at most a minute of 1 on 1 time a day with a student. This means a student can spend the entirety of the class, except for one minute alone, lost, and confused. Without the funding (which is broken) to lower class sizes, teachers cannot work!

  33. Also, it is not about fitting students into a mold. During time spent at university, instructors discuss different methods of teaching students. When one is becoming an instructor they are learning from seasoned proffesionals how best to give students a number of ways to learn and discuss a subject in an interactive format. Schools are not broken, the funding system is broken.

  34. The system is broken. No matter how much money you throw at it, it won't get better until you fix the system.

  35. Gates is right. Private accounting is sound. It's because it's _their_ own money. Private accounting follows private funds. MSFT and GOOG have to be smart with their money because they can't just take more of it later if they suck. States get money irrespective of performance and thus, have no incentive to not suck. Murray Rothbard has said a thing're two about the incentive problem of state resource management. Look him up.

  36. My sister recently got her Masters in Elementary School Teaching (I don't know the exact degree name…K-2nd grade I think). Everywhere she's looked it's the same: overstress Language Arts of course even beyond what will help kids, but do not give them more than 30 minutes a day for play/art/creative time. There's almost no funding for that either: Most of what teachers do for those, they paid out of their own pocket. But if this was encouraged, kids would have bigger curiosities

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  40. Point 1 ) he is talking a bout economics, which he is well qualified to speak about. You do not become so wealthy without understanding money.

    Point 2) part of the reason you do talks like this is to raise funding for causes you beleive in. IE he is also backing a nuclear power venture that has the technical capability to burn 99% of the waste we currently have.

    Point 3) He started his career as an entrepreneur. All Entrepreneurs are told exactly what your saying now.

  41. Last Point ) an Export is someone who tells you how something CAN'T be done. The world has only be improved by outsiders. It costs nothing to let bill gates try fix a broken, obsolete education system, and it might actually do some good. IT costs 10k per student per year to educate a child, most of whom are at the point of tuning it out and getting the knowledge they want off the internet anyways. The only real "learning" that is going on past 7th grade is by compulsion. There is a better way.

  42. capitalism….having to pay for a label. i.e. phd. is breaking our schools. capitalism……its breaking the world. i say no money. forget money. bill gates with all his greed would know nothing about fixing civilization. hed rather burn trash than recycle. trust an entrepreneur? no thanks. since when was starting a monopoly for the good of all americans? just my opinion.

  43. i guess to someone whose goal was lots of money and has lots of money the problem with everything will always be money.

  44. Acknowledging that state spending is the primary driving force of technological innovation. Nice.
    Failing to point out that the protectionist mesures to assure obscene profits for drug companies while bankrupting the country on a federal and state level. less so.
    Wish I was rich enough that people would listen to me spout unimaginative dribble. I'm resigned to bitch on youtube commentary, what a world.

  45. Whenever there's a battle against the Young vs Old, Old always wins. The old make up the largest population of people who vote in America. If a politician were to cut a social program such as social security, they would be voted out of office the next upcoming election.

  46. Microsoft was never a monopoly. Also, money will never be forgotten because it's a cultural promise to do work. Oh, and Bill Gates is one of the largest philanthropists in the world.

  47. I don't see what people are complaining about what Bill Gates is talking about. Simply put, corporations look after their budget in a way to gain profits and not waste. While government spending is controlled by idiots who doesn't know better or doesn't have the incentive to better spend the money.

  48. Gates is a con man.

    He was one of the pioneers of outsourcing middle class jobs. That is at the heart of what is wrecking the economy. He still believes in outsourcing today. You have to learn to look past the public face and see the reality that veneer is meant to hide.

    Gates is pure 1 percenter.

    "Every time I hear about some billionaire who says he wants to give back I wanna tell him not to take in the first place" – Fran Lebowitz

  49. because he can do more this way and is the boss of his own operations. and he doesn't have to deal with politicians or voters' opinions or media hysteria…

  50. I know your comment is 9 months old, but the answer is: because Gates is a problem solver, not a politician… at least that's my take on things.

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  52. Without even watching this… I know that it's a PROBLEM, REACTION, SOLUTION… and he gets to benefit somewhere along the line.

  53. Bill is a smart guy but what he propuses is wrong. He is speaking the lingua franca of Microsoft. Gates has no experience of what it's like to be in the public sector and that's why his solutions will not work.

  54. We have all been brought up in an era where government funding of education is taken for granted. And therein lies the problem. The best education will always be a classical education in a private school system.

  55. Miss Melinda dekhea Bill ji gussa ho Gaye hai ,i known Money doesn't matter ,it was just to add one more M😂😂😂

  56. Mr Gates is no longer petty .He is so far ahead in his thinking big that while other Rich guys are still thinking about the next yacht and their little deals , Bill is thinking about Changing The Whole World and little by little he is getting there . Talk about thinking BIG !

  57. Actually Guys like Gates are often misunderstood because game changers are so far ahead of the crowd that they cant be followed by the rest until they deliver and then it dawns on the rest that it was never rocket science but priority focus added to genius vision . Inventors always went though these stages in time.

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  60. The Federal government collected most of the money and also wasted most of it. Fed return little to the American people.

  61. You don't win elections in usa by proposing tax increases. Too many people in the world expect great public services but aren't prepared to pay for them.

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