School Board and Economic Update
A November 15, 2008
Q&A with Alex Saitta
Question: Congratulations on your election. How do you feel?
Alex: I thank everyone who voted, and those who helped me. I was humbled by the 68% to 32% margin. The first time I won with only 52% of the vote. Most didnít know me, but trusted what I said to them. Iím glad I didnít disappoint them. because so many politicians say one thing in the campaign and do the opposite after they are elected.
Question: What did you like the most and least about campaigning?
Alex: I enjoy meeting people, so I do a lot of door to door campaigning. That gets me more in-touch with the people. On the negative side, there are a few who have the approach, Alex, you disagree with me, so I hate you. I donít agree with Joe Biden, but I would shake his hand and be pleasant to him.
Question: You were a financial analyst. What do you think of the financial situation?
Alex: The financial sector was within inches of collapsing on September 17th, but the US Government bailed it out with even more borrowed money. It solved the immediate problem (imminent bank failures), but made the long-term problem (excessive debt) worse.
Question: Spell out the long-term problem as you see it.
Alex: For years individuals and companies in this country have been earning this, spending all that, and borrowing the difference. Governments have been doing the same thing, plus they have been raising tax rates and fees to plug their deficits. As a result, borrowing and tax rates are too high. For example, the federal debt is $10.6 trillion. That works out to $93,000 per household. Add in each householdís share of the state and county debt, the mortgage on that home and whatever credit card and auto loans people have and the debt is staggering.
That has negative consequences. What is the mortgage crisis? Too many people borrowing money they couldn't afford to pay back. Now the national housing market and many owners are experiencing a lot of financial pain.
Additionally, federal, state and even local governments have made too many future spending promises.
Question: There isnít the money to pay for the debt and all these promises. What will happen next?
Alex: Clearly we are in a recession by definition. GDP was -0.3% in Q3 and it is forecasted to be -3.0% in Q4. Two negative quarters in a row equals a recession.
Question: Thatís looking back, what about ahead?
Alex: Iím not an economist but have analyzed economic figures for years. Weíve had four recessions the past 30 years: the mid-70ís, early 80ís, early 90ís and in 2001/02. No doubt this recession will be worse than 2001/02. Likely it will be worse than the recession of the early 90ís. I donít think itíll be as bad as the early 80ís with 10.8% unemployment, because we had a bad inflation problem. Then the Fed had to put the economy is reverse to kill inflation. I think the current recession will be like that of the mid-1970ís, where unemployment reached 9%. That will be an eye-opener for those under 50 years old, who havenít lived through anything like that.
Question: How long wll the recession last?
Alex: Looking at the mid-70's recession we had about two years of slow or negative growth. We've had slow growth for the past year or so, so we are probably half way through this downturn. Slow economic growth and falling incomes, coupled with all this debt and too high tax rates will put a lot of strain on individuals, companies, and the federal, state and local governments during the next year or so.
Longer-term, all this debt and too high tax rates are slowly strangling our economy. This decade the growth in annual Gross Domestic Product is 2.3%. Thatís the lowest rate since the 1930ís. This is one of the reasons Iíve been saying for years we need to control spending growth, limit borrowing, pay down our debts, and hold the line on tax rates. Click here for one example
Unfortunately, most of our leaders from Washington to Pickens County donít understand this, evidence the bailouts and stimulus packages, funded with more borrowed money. Heck, the $336 million bond issue for schools in our county was too big and its 40 mill tax hike is now weighing on local business and John Q. Pickensí wallet.
Question: The government is lowering interest rates and telling banks to lend. Will that help?
Alex: I donít believe lower rates will help a lot, when so many people have more debt than they can service now. Banks have enough bad loans on the books. Why would they want more? Government leaders telling banks to lend and the rest of us to borrow is another sign they have no idea what the problem is -- too much debt!
Question: I understand the state has cut funding by 8 percent. Do you think thatís the end?
Alex: No. In my opinion, its a sign of things to come. Sooner or later the legislature and local school boards will realize they canít continue to grow spending like they have in the past. For example, the Education Financing Act promises to grow funding every year by a given percentage. That promise has been down-sized this year, and it wouldnít surprise me if that promse is ignored or scrapped over the next few years.
Question: How will the school board handle the 8 percent cut?
Alex: The board needs to address the deficit without complaining. The recession is not the state legislatureís fault. If the board does a lot of finger-pointing, itíll just be admitting it doesnít have the financial skills or backbone to deal with such financial challenges. Plus, everyone in Pickens County is having to get by on less. Theyíre dealing with the challenge without complaining. Finally, to a degree the district leadership and board majority brought this on themselves. Theyíve done a lot of excessive spending.
Question: Will the board raise property tax rates?
Alex: Right now they can't raise taxes, because the tax bills have already gone out. Next year they may. Due to the tax-swap legislation of 2006, the board can only raise tax rates on businesses, non-residential homes, vehicles and land. The board can no longer tax residential or 4% property. Thus, any school board tax increase will fall squarely on business. Further raising taxes on business will drive more businesses out. Pickens County is predominantly small businesses. The other day a business owner told me his property taxes were $700 in 1999. Now they are $4,000. Sales are down and heís just trying to hang on. Business canít afford to pay more taxes.
Question: The district is proposing a 50 percent cut in classroom supplies to plug this year's deficit.
Alex: I wonít vote for that either. Cutting classroom supplies or teachers should be the last choice, not the first. Look, the board doesnít need to raise taxes; they donít need to make cuts in the classroom. The deficit can be plugged by cutting out the fat in places like the district office or eliminating perks like employee vehicles.
Question: Why do you always say ďtheyĒ or the ďthe board majorityĒ?
Alex: I donít create these plans or determine what goes before the board for a vote. The district leadership and the board majority do. Given that, I have two choices. I can vote for their plans, which are usually loaded with excessive spending, borrowing or a tax hike, or I can vote against them. For example, when the people rejected the $197 million referendum, my solution was to renovate the high schools, and do a bit at a time. The Superintendent and board majority didnít want that, so they quietly designed a $336 million version of the Greenville Plan, quickly put it before the board and approved it in one meeting. Thorsland and myself voted against it.
Until the people elect more fiscal conservatives to the board, thatís the position Iím in -- often kept in the dark, not in a leadership role and I can either vote for or against the plans they create.
Question: Did the election change the make-up of the school board?
Alex: June Hay left the board because her at-large seat was phased out. She voted for every tax increase and spending initiative the past two years. Judy Edwards was just elected in Easley, so she hasnít cast a vote yet. With Hay leaving I suspect the board inched to the right in terms of spending, borrowing and taxation.
Question: I heard some on the board want Dr. D'Andrea to leave December 31. Is that true?
Alex: That's nothing new. When the board voted to accept her resignation and June 30th exit date, I said she should leave December 31. It makes no sense for her to create the 2008-09 budget, when she will not be here one day in the 2008-09 school year. That point of view didn't have enough board votes, when she submitted her resignation. I don't see that changing unless some of the board members change their minds or Dr. D'Andrea decides to leave early.