THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING
Noah Berger

Look at what the state is doing right

By Noah Berger
January 23, 2011

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WITH THE governor scheduled to file his budget proposal for the coming year on Wednesday, and the Commonwealth facing a budget gap of close to $2 billion, knowing that our government provides services as efficiently as possible will be more important than ever.

While some nationally question whether the services government provides are even necessary, here in the Commonwealth we have always valued strong public schools, quality infrastructure, and a basic safety net that protects access to health care and other basic necessities for vulnerable residents. But, not at any cost — we want to be sure our government is doing these things as cost-effectively as possible. When we see waste and inefficiency, or worse, we should — and do — demand that those problems are addressed.

But how do we know whether government is spending too much for the services we rely on? In examining the efficiency of government spending, it is instructive to ask how government compares to the private sector. Most of state government spending is either for the purchase of services in the market or is aid to local governments to provide services. The Massachusetts Budget and Policy Center just completed a report that examines these comparisons in three areas of state government that together account for over half of all state spending: health care, education, and child care. We found that in each area, state government pays significantly less than private sector purchasers for the same or similar services.

In health care, we found the Medicaid payment rate to hospitals to be, on average, 80 percent of the private sector payment rate. To health care policy experts, it is common knowledge that state government pays significantly less than private payers. It is debatable whether it is good or bad that the state pays so much less than private sector purchasers of health care services (there is significant evidence that it leads to cost shifting to private payers). But any claim that the government overpays — relative to the private sector — for health care would simply be false.

In child care (which Massachusetts calls “early education and care’’), the state also buys a service from private providers. Again, when we compare payment rates, we find that the state pays less. The state is required to do market rate surveys. The data from market rate surveys show that the state pays only 66 to 96 percent of median market rates, depending on the region and age of the child.

Primary and secondary education is more complicated because we are not comparing identical services. The state runs public schools and there is a separate market of private schools. While the services provided by those two sets of schools are not identical, we can compare the costs. The data suggest that the average non-religious private school spends $32,000 per student (religious schools are not subject to reporting requirements so there is no comprehensive data). This is $19,000 more than the average public school spends.

While public schools in Massachusetts are consistently rated the best in the nation — and among the best in the world — it would not be accurate to say that we know we are getting the same quality of education for $13,000 per student that private sector schools get for $32,000 per student. But as long as our state is spending less than half as much per student as private schools — and educating a set of students with significantly greater challenges — it seems unlikely that the problem with public education in Massachusetts is that we are spending too much.

The headlines about government are often the scandals — and those deserve to be headlines. But we should not forget that those stories are news partly for the same reason that plane crashes are news and safe landings are not. It isn’t news when government is just doing what it does: making sure we have clean air and water, high-quality schools for our kids, roads that get plowed, playgrounds and libraries, prisons, police and fire protection we can count on, a reliable safety net that provides child care and other work supports for low income families, and all of the other essential public services on which our families, communities, and economy depend.

Noah Berger is president of the Massachusetts Budget and Policy Center.