Who's Needed On The School Board
By Alex Saitta
October 9, 2008
There is a real economy and a financial economy. When a person works for BMW and is manufacturing a car (a tangiable or real asset), that occurs in the real economy. When you buy a hamburger -- something you can touch -- that’s a real transaction.
The financial economy is the paper economy -- stocks, bonds, mortgages. When you buy a home and the bank agrees to lend you money, that paper contract is a mortgage or a financial asset. When you buy a stock, that is a financial transaction.
In my 25 years in finance, I have never seen our financial economy in such bad shape. Eleven of the 15 largest companies in this country have either gone bankrupt, they were taken over by the government, they’ve been taken over by other company or they took over a distressed company and now their balance sheet is stretched.
The question is, will this financial crisis, spill over to the real economy? It will. Sales are slowing and unemployment will rise further. With all the government and private debt out there, they’ll be many business defaults and individual bankruptcies.
The timing of this surprises me. You never know when such things will happen. However, the fact that it is occuring does not. I wrote about the "Path to Economic Crisis"
in June of 2005. I've mentioned, talked about and warned everyone of the ills of over-spending, over-borrowing and over-taxing
For years our country has spent more than its income in the private sector and the public sector, resulting in too much borrowing and too high of tax rates. My philosophy of limiting spending, living within your means, keeping borrowing to a minimum, holding the line on tax rates and saving for a rainy day is rooted in the belief the opposite leads to financial difficulty, strain or crisis.
I don't know if it will lead to a collaspe of the real economy. I doubt we'll have a depression, because the government is doing all it can to avert that, but this financial crisis will likely to result in a severe recession, probably worse than the recession of 2001-2002. Maybe as bad at 1982-83.
What does this mean for the school board?
State revenues will fall and this will strain school district budgets. Initially the district will run down its savings account. After that, it will recommend raising property tax rates. The board just raised property taxes by 40 mills. It will be harmful to raise taxes even more on residents and businesses when the economy is in a recession.
To make ends meet, the board will need to say “No” to higher tax rates, and order the district to cut the fat out of its the budget, in order to protect vital services that we provide students and keep tax rates down.
To get through this budget challenge, we need school board members with degrees in business, experience in finance and budgeting, and those who have the ability to say, “No”.
I have a degree in business management, was a bond analyst for 17 years and my record shows I can say “No” to wasteful spending.
For that reason, I'm running for re-election to the school board.