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