There is a great deal of fear over the financial crises in America’s cities and states. But one woman-and she is one of my favorite women-sees opportunity.

My colleague Romina Boccia has already blogged on the piece in today’s Wall Street Journal by Michelle Rhee, former chancellor of public schools in Washington, D.C. and more recently founder and CEO or an organization called StudentsFirst. But since Rhee’s piece appears to validate one of my pet pet peeves, I am also going to say a few words about the article. 

Rhee notes in the article that last year 46 states grappled with $130 billion deficits. This year could be worse. “And yet, for education reform, 2011 could be the best of times,” Rhee writes.

Rhee goes on to point out how smaller piggy banks can force educators to make better decisions. This is music to my ears. One of my pet peeves is that more money is not what is needed to improve public education, even though professional educators constantly clamor for more and more $$$. But it is often the highest-spending school districts that produce the most abysmal test scores.  Rhee’s piece suggests that there is already be enough money in the school system to fix it. Indeed, there may be too much money: When too flush, schools (and, by extension, other public institutions) spend money badly. They are empowered to do all sorts of things that aren’t helpful may actually be harmful. So a budget crunch may be just the ticket to improve public education.  

Rhee has some specific instances where the budget crunch might help:

The budget crisis inevitably requires layoffs of school staff. Teacher-layoff policies are a good example of how recognizing quality over seniority translates into responsible decision-making during difficult economic times. Currently, layoff decisions are based on seniority, which means the last person hired is the first person fired. However, research, such as a recent study by Dan Goldhaber at the University of Washington, shows that when teacher layoffs are determined by seniority it hurts students and teachers. …

States will continue to find it difficult to solve budget deficits if they continue to ignore problems surrounding the current structure of their benefits and pensions for teachers and administrators. For example, states and districts must shift new employees from defined-benefit pension programs to portable, defined-contribution plans where employees can contribute a proportionate amount to their own retirement savings. This will help ensure that states aren’t draining their budgets with pension payouts.

Sometimes only a shakeup in the school governance structure can bring about fiscal responsibility. After all, the buck has to stop somewhere-and knowing exactly who is responsible and accountable for spending and academic achievement has proven to show positive results. Mayoral control is one way to achieve this. We’ve seen success is places like Washington, D.C., and New York City, where funds are directed toward initiatives that improve achievement, and test scores and graduation rates have greatly increased.

One of my hobby horses is that we may be spending too much money on education and spending it without much regard to how effective it is. A budget crisis could turn out to be a good thing. But is it just in the field of education that shrinking funds actually could be a boon?

When the Constitution was read aloud to kick off the 112th Congress, there must have been many people thinking, “Hmmm. We’re asking government to do a lot of things this founding document simply doesn’t authorize.” Perhaps not having the money to do some of these things will turn out to be a good thing in helping us trim and restructure government.