More About Michael Leachman

Michael Leachman

Michael Leachman joined the Center in July 2009. He is the Director of State Fiscal Research with the State Fiscal Project.

Full bio and recent public appearances | Research archive at CBPP.org


Debating Kansas’ Tax Cuts

October 30, 2014 at 1:10 pm

With Kansas’ radical tax cuts drawing national attention this election season, I recently debated the Heritage Foundation’s Stephen Moore, who advised Governor Sam Brownback on the tax cuts, on their impact.  The full debate, published by State Tax Notes and moderated by its commentary editor Doug Sheppard, is here.  Below is a brief excerpt:

Leachman:  In 2012 you and Arthur Laffer wrote, ‘‘The quality of schools also matters as does the state’s highway system, but it takes years for those policies to pay dividends, while cutting taxes can have a near immediate and permanent impact, which is why we have advised Oklahoma, Kansas, and other states to cut their income tax rates if they want the most effective immediate and lasting boost to their states’ economies.’’  Why — 18 months after the income tax rate cuts were implemented — isn’t Kansas’s economy performing better?

Moore:  It’s a little early to tell about Kansas.  A 1.5 percentage point tax cut isn’t going to turn this Midwestern state into Beverly Hills or Boca Raton.  If Kansas can continue to get the rate down to close to zero, we would expect to see some strong growth effects.  Our advice to Brownback is full speed on the tax cuts.

Leachman:  The total income tax cut in Kansas was very large, equaling at least 9 percent of revenues this fiscal year.  It’s hard to expect a state to do more than that.  And again, Moore said cutting income taxes is the most effective way to immediately boost state economies.  Hearing now that they’ve got to do substantially more tax cutting before they’ll see strong growth effects has got to be disappointing to people who believed in the Kansas experiment.

And here’s part of my final statement in the debate:

Kansas followed Moore’s simplistic advice:  Slash your income taxes and your economy will surge.  But that advice is wrong.  And now, Kansas’s finances are in shambles, its economy is ho-hum, and its future looks worse — not better.  Other states that follow this path can expect a similar result.

This debate is not really just about Kansas.  Other states have passed — more recently than Kansas — irresponsibly large income tax cuts under the guise of economic revitalization.  The tax cuts enacted by these other states — Missouri, North Carolina, Indiana, and Ohio, for example — are not much different from Kansas’s.  While none were as big as the Kansas cuts, they generally included many of the same ingredients.  At their core is big cuts in income tax rates for the highest-income households to be paid for with cuts in funding for schools and other public services key to future economic growth, and often tax increases for low-income families. . . .

Economic growth will not save these states from further diminishing their education systems or other important public services — services already damaged by the Great Recession and its aftermath.  And as in Kansas, there’s no reason to think the tax cuts will cause these states to see their economies boom in the years ahead. . . .

Lasting School Cuts Endanger Critical Reforms

October 17, 2014 at 10:27 am

States have imposed large cuts in general education spending — as our new report details and I explained yesterday — with serious consequences for students, schools, and the economy.  Deep state funding cuts have led to job losses, slowing the economy’s recovery from the recession.  Such cuts also have counteracted and sometimes undermined important state education reform initiatives.

School districts began cutting teachers and other employees in mid-2008, when the first round of budget cuts began taking effect.  By 2012, local school districts had cut about 330,000 jobs. Since then they’ve added back some of the jobs, but they’re still down 260,000 jobs compared with 2008 (see chart).

Deep cuts in state spending on education — including those job cuts — can limit or stymie education reform efforts.  Reforms endangered by funding cuts include:

  • Recruiting better teachers.  Research suggests that teacher quality is the most important school-based determinant of student success.  So recruiting, developing, and retaining high-quality teachers is essential to improving student achievement.  These tasks are more difficult when school districts are cutting their budgets.  Teacher salaries make up a large share of public education spending, so funding cuts inevitably restrict districts’ ability to expand teaching staffs and supplement wages.
  • Trimming class size.  Evidence suggests that smaller class sizes can boost student achievement, especially in the early grades and for low-income students.  Yet, small class sizes are difficult to sustain when schools are cutting spending and enrollments are rising.  Kansas schools, for example, have 19,000 more students than they did in 2009, but 665 fewer teachers.
  • Expanding learning time.  Many education policy experts believe that more student learning time can improve achievement.  Budget cuts make it more difficult to extend instructional opportunities because extending learning time generally adds costs.  Some states have even reduced student learning time because of budget cuts. Arizona, for example, eliminated state funding for full-day kindergarten, to which some school districts have responded by offering only a half-day program or by requiring parents to pay a fee for a full-day one, likely reducing the number of children who can attend.
  • Providing high-quality early education.  A number of studies conclude that pre-kindergarten or pre-school programs can improve cognitive skills, especially for disadvantaged children, but most states cut funding for those programs after the recession hit.  Of the 40 states that provide funding to preschools, 28 had reduced per-child funding as of the 2012-13 school year — often by large amounts.  (States typically support their preschool programs outside of their general K-12 “formula” funding, so these cuts come on top of those documented in our new report.)

These recent cuts may cost states much more in long-term economic growth than they save.  The cuts that states have enacted will weaken the future workforce by diminishing the quality of elementary and high schools.  At a time when the nation is trying to produce workers with the skills to master new technologies and adapt to the complexities of a global economy, large cuts in funding for basic education undermine a crucial building block for future prosperity.

K-12 Funding Remains Below Pre-Recession Levels in Most States

October 16, 2014 at 9:58 am

Most states continue to spend less — often far less — per student for kindergarten through 12th grade than they did seven years ago, our updated analysis of state general school funding shows.

Our review of state budgets finds that, after adjusting for inflation:

  • At least 30 states are providing less funding per student for the 2014-15 school year than they did before the recession hit (see chart).  Fourteen of these states have cut per-student funding by more than 10 percent.  (Our analysis focuses on funding distributed through general aid formulas, the primary form of state aid to local schools.)
  • The four states with the deepest cuts — Oklahoma, Alabama, Arizona, and Idaho — each have reduced per-student funding by more than 15 percent from pre-recession levels.
  • Most states are providing more funding per student in the new school year than they did a year ago, but funding generally has not increased enough to fully offset cuts in past years.  For example, Alabama is increasing school funding by $16 per pupil this year — but that’s after cutting it by $1,144 per pupil over the previous six years.
  • At least 20 states cut per-student funding this year.  In most of these states, the cuts added to those the states had made in previous years, leaving them even further behind pre-recession levels.

Click here to read the full paper.

A Deserved Downgrade of Kansas’ Bonds

August 11, 2014 at 9:41 am

The meaning of Standard & Poor’s recent downgrade of Kansas’ credit rating, in which it cited Kansas’ “structurally unbalanced budget,” is clear:  Kansas’ budget is a train heading off a cliff.

Here are the details:

  • Kansas’ massive tax cuts have sharply cut state tax revenues.  Since Kansas’ massive tax cuts took effect a year and a half ago, revenues have nosedived.  Revenues were down about $700 million in the last fiscal year.  That’s much more of a drop-off than the state’s official forecasters expected.
  • There’s not enough revenue coming in this year to cover the state’s budget.  Hoping the tax cuts would produce more economic growth and wanting to avoid additional spending cuts, Kansas lawmakers approved a budget for this fiscal year that’s $326 million larger than the state forecasts it will collect in revenue.  In reality, the imbalance is even worse, because the budget is based on overly optimistic revenue projections.  The state assumes revenues will surge over the next year — even though more tax cuts will kick in in January.  That’s why Duane Goossen, the state’s former budget director, recently wrote, “[t]he Kansas budget appears to be teetering on the edge of a fiscal cliff, but that’s an illusion.  We’ve already gone over the edge.”
  • Kansas is avoiding immediate budget cuts only by drawing down its operating reserves.  The state isn’t in emergency mode already because it’s using its only operating reserves to cover the cost of state services.  (Kansas is one of only four states with no formal “rainy day fund,” so its operating reserves are not well protected and can be used in this imprudent way.)
  • The reserves likely will run dry sometime in the next few months, creating a budgetary emergency.  Once the reserves are gone, Kansas will be forced to make emergency cuts to state services, or to raise new revenue.  And any cuts would come on top of deep cuts the state has already made in recent years to its schools and other services.
  • The future looks even worse.  The new tax cuts taking effect at the beginning of 2015 will be followed by even more income tax rate cuts in each of the subsequent three years.  The additional cuts in 2016 alone will reduce revenues by about another $113 million.  So when the legislature comes back in session next January to write the state budget for 2016, lawmakers will have even less revenue to work with, making it even harder for Kansas to fund its schools and other services.

It’s no wonder that Standard & Poor’s downgraded Kansas’ credit rating, or that another major credit rating agency — Moody’s — did so earlier this year.  The rating agencies rightly understand that Kansas’ fiscal policy is a disaster.

A Constitutional Convention Poses Grave Risks

July 16, 2014 at 4:33 pm

The idea of convening a constitutional convention to propose a balanced budget amendment or similar amendments raises grave problems, as we explain in a new paper.  A number of states have passed resolutions calling for such a convention, and proponents of a constitutional convention are targeting more states in an effort to obtain the 34 states needed to call one (see map).

A balanced budget amendment poses serious risks in and of itself.  But, as a number of legal experts across the political spectrum have warned, a convention could open up the Constitution to broader radical and harmful changes.  Such serious concerns are justified, for several reasons:

  • A convention could write its own rules.  No constitutional convention has been called since the 1787 meeting that wrote the Constitution, and the Constitution provides no guidance whatsoever on what a convention’s ground rules would be.  This leaves wide open to political considerations and pressures such fundamental questions as how delegates would be chosen, how many delegates each state would have, and whether a supermajority vote would be required to approve amendments.  To show the importance of these issues, consider that if every state had one vote in a convention and the convention could approve amendments with a simple majority vote, the 26 least populous states, with less than 18 percent of the nation’s people, could approve constitutional amendments for ratification. 
  • A convention could set its own agenda, possibly influenced by powerful interest groups.  The 1787 meeting went far beyond its mandate.  Charged with amending the Articles of Confederation to promote trade among the states, the convention instead wrote an entirely new governing document.  A convention held today could set its own agenda, too.  There is no guarantee that a convention could be limited to a given set of issues, such as balancing the budget.  
  • A convention could choose a new ratification process.  The 1787 convention ignored the ratification process under which it was established and created a new process, reducing the number of states needed to approve the new Constitution and removing Congress from the approval process.  The country then ignored the pre-existing ratification procedures and adopted the Constitution under the new ratification procedures that the convention proposed.  Given these facts, it would be unwise to assume that ratification of the convention’s proposals would require the subsequent approval of 38 states, as the Constitution specifies.  For example, a convention might remove the states from the approval process and propose a national referendum instead, or approval by a simple majority of states. 
  • No other body, including the courts, has clear authority over a convention.  The Constitution provides for no authority above a constitutional convention, so it isn’t clear that the courts, Congress, state legislatures, or a President could intervene if a convention went beyond the language of the state resolutions calling for a convention or the congressional resolution establishing it.  Likewise, there may be no recourse if the convention altered the process for ratifying its own proposed amendments.  The Constitution has virtually no restrictions on the operations of a constitutional convention or the scope of the amendments that it could produce, and the courts would likely regard legal challenges to a convention as “political questions” that the judiciary does not wade into. 

States should avoid these risks and reject resolutions calling for a constitutional convention, and those that have already approved such resolutions should rescind them.

Click here to read the full paper.