Bill Gates on State Budgets, Entitlement Spending and Education Cuts

Microsoft-founder Bill Gates recently delivered a presentation entitled “How State Budgets are Breaking US Schools” at a TED Event in Southern California (h/t Robert A. Guth, Wall Street Journal). In short, he holds few punches and the ten-minute presentation is worth watching (full video available here).

Gates’ main argument is that, “state budgets are riddled with accounting tricks that disguise the true cost of health care and pensions and weighted with worsening deficits — with the financing of education at the losing end.”

After analyzing budget projections, he declares the fiscal situation “is an increasingly difficult picture, even assuming the economy does quite well, probably better than it will do.”

He targets California, describing the state’s recent budget gimmicks California as tricks that “the guys at Enron never would have done, so blatant, so extreme. Is anyone paying attention to some of the things these (politicians) do?” However, he also acknowledges that budgeting problems are systemic, since only four states have balanced budgets.

Gates cites unfunded healthcare benefits and public pensions as the primary contributors to the pending budget crisis, which boil down to a “young versus old” competition for scarce taxpayer dollars. And, he says that decreased funding for education means it will be more difficult to fund “bold experiments, teacher effectiveness measurement and incentives for excellence.”

His proposes the following solutions:

  • Educating taxpayers as to the basic picture of state budgets and school spending;
  • Holding states accountable with clear and honest accounting (specifically Generally Accepted Accounting Principles (GAAP); and
  • Rewarding courageous politicians who acknowledge the overall spending problem.

States will be wrestling with fiscal crises for the foreseeable future. Fortunately there are many ways to reform education without increasing spending. For the latest education reform news, read Reason Foundation’s Annual Privatization Report 2010: Education section. Topics include:

  • School voucher and tax credit student outcome data;
  • Special education voucher data;
  • 2010 charter school achievement data;
  • Highlights from New Orleans’ market-driven education reforms, and more.

Download the full Education section here, and the complete Annual Privatization Report 2010 here. For more, watch’s recent piece entitled California’s Parent Trigger Law: Compton Parents Take On the Public School System.

Harris Kenny is a state and local government policy analyst at Reason Foundation, a non-profit think tank advancing free minds and free markets.

Harris has worked alongside policymakers in Colorado, Texas, Florida, North Carolina, Arizona, Oregon and elsewhere to implement public policy solutions. Harris is currently serving as a member of the Local Authority Working Group of Colorado Governor John Hickenlooper's Amendment 64 Task Force, which is providing guidance on implementing recreational marijuana legalization. He conducts research on public finance, public-private partnerships, privatization, public safety, criminal justice and regulatory policy issues.

Harris has appeared on various television and radio outlets, such as National Public Radio, HuffPost Live, Al Jazeera, Voice of Russia and Colorado Public Television. His writing has been published in The Wall Street Journal, The Denver Post, The Sacramento Bee, The Orange County Register, Real Clear Markets,, and other print and online outlets. He also serves as co-editor of Reason Foundation's Annual Privatization Report ( and Innovators in Action ( publications.

Prior to joining Reason Foundation, Harris worked at the Los Angeles Economic Development Corporation. He earned a BA in Economics from Pepperdine University, where he worked as a research assistant to Dr. Luisa Blanco at Pepperdine University's School of Public Policy.

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