How state budgets are breaking US schools Bill Gates

[Music]

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 money for those things is coming out

of these state budgets but we have a

problem here’s the overall picture US

economy it’s big fourteen point seven

trillion now out of that pie the

government spends thirty six percent so

this is combining the federal level

which is the largest the state level in

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%

well what are we taking in simple

business question the answer is 26% now

this leaves 10% deficit sort of a

mind-blowing number and some of that in

fact is due to the fact we’ve had a

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’s various

things in here I could

say you know we might raise more revenue

or medical innovation will make the

spending even higher

it is a increasingly difficult picture

even assuming the economy does quite

well probably better than it will do

this is is what you see at this overall

level now why how did we get here I mean

how could you have a problem like this

after all there 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 straightforward

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

Enron never would have done this I mean

this is so blatant so extreme you know

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

withholding just

helped their cash flow out they sell off

the assets they defer the payments they

sell off the revenues from tobacco in

California is not unique impact there’s

about five states that are worse the

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 healthcare 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 allowed to develop over time that

you’ve got a problem this is the retiree

health care benefits 3 million set aside

sixty two billion dollar liability much

worse than the car companies and

everybody looked at that knew that that

was headed towards a huge problem the

forecast for the medical piece alone is

to go from twenty-six percent of the

budget to forty two 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 D

investing 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 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 Willie you have

allocate dollars for that system and for

the that incentive pay in a situation

where we 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 order to move

over to use technology in the new way so

what’s going on where where’s the brain

trust that’s in error here well there

really is no brain trust it it’s sort of

the voter’s it’s sort of us showing up

you know just look at this spinning

California we’ll spend over a hundred

billion Microsoft thirty-eight Google

about 19 the amount of IQ and good

numeric analysis both inside Google and

Microsoft and outside with analysts and

people that there is opinions should

they have spent on that now they wasted

their money on this what about this

thing it really is quite phenomenal you

know everybody has an opinion that

there’s great great feedback and the

numbers are used to make decision if you

go over to the education spending the

healthcare spending particularly to

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

that’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’ve gone through and given proposal

for this overall federal health spending

state-level problem but in fact their

work sort of pushed off in fact the week

afterwards some tax cuts were done that

that made the situation even worse than

their assumptions so we need these

pieces and I think this is a solvable

problem you know it’s a great country

with lots of people but we have to draw

those people in because this is about

education and just looked at what the

tuitions happened with the University of

California and project that out for

another three four or five years it’s

unaffordable and that’s what 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 those magic things and so the

bottom line is we need to care about

state budgets because they’re critical

for our kids in our future thank you

[Applause]

[Music]

when I think about succeeding in

business I think there’s a couple of

considerations first and foremost is

teamwork

today’s problems are just too

complicated to be solved as an

individual and the opportunity to work

with others collaboratively where you

can build on each other’s ideas I think

is particularly important I think a

second area that’s quite important is

the understanding of different

disciplines it is critical that one be

an expert in your major but it is

absolutely essential that you have the

ability to understand where other

disciplines the input from other

disciplines and be able to incorporate

that to make effective decisions and

then last but not least we are in a

global business community and so the

opportunity to understand cultures

different cultures around the world to

be able to incorporate some of the

learning from those cultures and to

incorporate that into your business

decisions is essential to success I have

three degrees from Cornell so I’d say

just about everything that has prepared

me came from Cornell and I am indebted

to the University for that experience

but as I think particularly about my

business school career I think the

exposure to a variety of disciplines the

wealth of resources across the

university

we’re exceptionally helpful