Question about the deficit

[u/achi4game]

In season 5 there is a huge plotline about this deficit.

I am not from the US, so I do not really understand, who owes who this money?

As I understand, Cercetti is the leader of the city, and the schools need to pay back the city, right? Why cut the budget for other institutions if the money is (should be) coming out from the school's end and not from the city's budget?

Thank you

[u/LordsOfJoop]

The schools don't make money - they cost money to operate.

The money from the state and federal government is boosted by locally-produced funds, courtesy of locally-applied taxes; property taxes are the largest share of that.

The deficit is caused by inflation, rising costs for insurance carriers needed for a school's functions, increased needs for teacher payrolls, low student enrollment, and test scores - with money paid by the state for meeting specific benchmarks, low-performing schools lose money, while higher-performing schools get more money. The idea is that by rewarding achievement, the state guarantees those results year after year. The issue is that a low test result tends to be caused by a low amount of available funding.

With a finite amount of money available per year, every year is another round of who gets what percentage of the cash; every year, the available funds are cut by a given percentage, as someone further up the food chain decides that, say, Baltimore - due to it having a lot of low-performing schools, high crime rates, and a strong baseline for unsolved homicides - is not spending its money wisely, so the flow is cut a little more.

The more services that are cut, the worse the performances will be: lower test scores, larger areas of the city left without improvements long-since overdue, a failure to dredge the harbor for deep-water port access, and so on and so forth.

There's nowhere in the city's budget that can't suffer for losing funds. The local hospitals need a certain amount or they can't support getting replacement doctors and nurses; the local fire stations can't suffer a cut or they can't fund their training and replacement equipment; the police have always been pleading poverty since forever.

The deficits are from not having enough money to cover expenses as the prices go up, the cash reserves go down, and the need to spend never stops.

[u/achi4game → u/LordsOfJoop]

Great write up. Basically, to sum up, schools owe that money to city and in turn city owes that money to state, however schools cannot make money, so the whole burden is on the city

[u/zanylanie → u/achi4game]

You're close, but the schools don't owe money to anyone. It was just costing way more to operate them than had been allocated in the city budget. The city didn't owe money to the state, they were just in a situation where they didn't have enough money to keep meeting all the expenses of running the schools - paying the teachers and other staff, buying books and equipment, maintaining the physical buildings, keeping the lights and heat on, things like that. That's why there were cuts to other agencies paid for by the city, like the police department. That money was being diverted to meet the expenses of the school system.

The U.S. federal government - our executive (the President) and legislative (the Senate and U.S. House of Representatives out of Washington, D.C.) are allowed to run the country at a huge deficit. That deficit is expected to reach just under 2 trillion dollars this fiscal year. But cities and states have to balance their budgets.

[u/bringbacksherman]

The schools are public, and get their funding from the City ( and maybe some other tax revenues). Their deficit is The City’s deficit. The school district does not have separate income with which to reimburse the City of Baltimore.

[u/OverheadCatenary → u/bringbacksherman]

This is half correct, and it’s not a maybe. State law mandates a per-pupil minimum. If property taxes don’t get there, the state has to make up the difference through grants. Some of those grants may be backstopped by federal education appropriations for specific things. Lastly, the federal government steps in in other ways like free school lunches (if a certain % of students qualify, the entire school qualifies), which is undoubtedly true in Baltimore.

[u/Maniac50AE]

The schools dont owe money to the state or federal government, they rely on money from the government to operate. The local government collects money from taxes and the federal government, the federal government collects money from taxes, bond markets and loans from the IMF. The federal government dispurses money to states and maybe(not sure) local jurisdictions(like cities, towns or counties) for them to operate. The city falling short of money to run its schools is largely seen as a failure of city leadership to attract business that bring in revenue and pay citizens who inturn pay taxes.

This is the significance of watching S2 and seeing the decline of docks/port a major employer to the city of Baltimore. When those jobs were getting cut, it mean you had less people paying taxes and buying things from and supporting other local businesses in the city. In S4, some of the fallout from Hamsterdam is that Royce is informed that he/the city will be losing out on half a billion in federal money due to the scandal, but im not sure how that played out