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


A Diminished Future: Tax-Cut States Shortchanging Education

March 12, 2015 at 4:49 pm

Legislation is on a fast track in Kansas — poster child of the “slash income taxes for the wealthy and everything will be great” approach — that would replace the time-tested way of supporting schools with an arbitrary one that would fall far short of meeting growing needs. And unfortunately for the nation’s students, Kansas isn’t alone in shortchanging its schools.

Under the traditional school funding formula, Kansas — and nearly every other state — bases K-12 school funding in part on the number of students in a given school district and other needs.  The Kansas legislature appears likely, perhaps as soon as tomorrow, to pass a bill to scrap that formula.  Instead, in the next two years, schools would receive an arbitrary amount based not on school needs, but simply on how much the legislature wishes to appropriate.  The bill doesn’t specify what will happen after that.  Governor Sam Brownback proposed to dump the formula, so there’s little doubt that he’ll sign the bill.

That doesn’t bode well for the state’s schools.  Because the new funding levels would not be required to keep up with enrollment changes and inflation, some schools — already hammered since the recession — would have to raise class sizes, lay off more teachers, and otherwise do less for kids (see chart).

Governor Brownback and his supporters call the new funding method a “block grant.”  They claim it will give schools more “stability” since they’ll know how much funding they have to work with.  The euphemistic language obscures the truth.  In fact, the state would be undercutting its future to pay for the big tax cuts Brownback signed two years ago that went disproportionately to the wealthy.  And by lifting the legislature’s obligation to give schools the money to keep up with growing needs, the “block grant” approach will help the state pay for additional tax cuts scheduled to kick in in future years.

Kansas isn’t the only big tax-cutting state that’s shirking its obligation on education.  Last year, North Carolina — another of the big income tax-cutting states — dropped a provision in place since the Great Depression requiring the legislature to consider student enrollment changes when determining school funding.  And Wisconsin Governor Scott Walker — another champion of the “tax cuts first” approach — wants to “block grant” and sharply cut funding for the state’s higher education system.

The damage that huge tax cuts will do to these states, and by extension the country as a whole, is becoming apparent.  By charting a new, far less ambitious course for how they fund education, these states are promoting a diminished vision of our future.

States Reaping Consequences of Tax Decisions

March 6, 2015 at 11:12 am

In Minnesota, which raised income taxes on wealthy residents two years ago, revenues are surging beyond expectations, according to the state’s latest forecast.  In contrast, Kansas, Wisconsin, and North Carolina — which cut income taxes in recent years — face serious fiscal problems, despite the promises of tax-cut supporters.

Minnesota’s Governor Mark Dayton secured a package of tax measures that included a new, higher income tax bracket for high-income households (over $250,000 for a married couple), with the revenues going to expand access to full-day kindergarten and make preschool and college more affordable.  Opponents’ prediction that wealthy residents would flee the state in droves hasn’t materialized, and revenue growth has been stronger than expected.

As a result, Minnesota lawmakers this year are in the happy position of deciding what to do with the unexpected funds.  Governor Dayton and some lawmakers want, among other things, to greatly improve child care support for working families.  By helping many parents continue working, this would boost their long-term prospects and thereby benefit the state as a whole.

Kansas’ massive income tax cuts took effect the same day as Minnesota’s tax increase, but the legislative debate there is far from happy.  Governor Sam Brownback and lawmakers are debating where to cut spending further in order to escape the fiscal crisis that the tax cuts helped create.

Already, Governor Brownback has imposed a new round of school funding cuts for this fiscal year.  Revenues have come in lower than expected since the tax changes were enacted.  To help finance the tax cuts, the state has spent down its only operating reserves, leaving it very vulnerable to the next recession.  And bond rating agencies, disturbed by the fiscal mess, have lowered the state’s bond rating.

Similar news is emerging from Wisconsin and North Carolina, which also tried big tax cuts to expand their economies.  Both states face major budget shortfalls for the coming fiscal year, which may mean more cuts to schools and other services already badly damaged by the recession.

In these tax-cutting states, policymakers are facing the consequences of tax cuts that so far have failed to produce the promised economic surge.  Minnesota, too, is living with the consequences of its actions, but those are much more pleasant — and more promising for the state’s future.

State and Local Jobs Fell in January

February 6, 2015 at 4:14 pm

While today’s jobs report shows that the economy added jobs at a healthy pace in January, job growth could have been even stronger if states and localities hadn’t cut 4,000 positions.

About a third of the lost jobs were for teachers and others working in K-12 schools, preliminary data suggest.  The rest were non-education jobs at the state level, a category that includes state police, public health employees, and child protective workers.

The January job losses further slowed the already very weak recovery for state and local government jobs.  Over the last six months, states and localities have added jobs at a pace that’s only one-eighth the pace of total job growth nationally.  Part of the problem is recent tax cuts in states like Kansas, North Carolina, Wisconsin, which make it harder for a state to maintain public services.

Despite a modest improvement since bottoming out in mid-2013, state and local government jobs are still down 635,000 from their August 2008 peak.  (See chart.)  Nationally, the number of jobs returned to pre-recession levels last spring, but states and localities have added back less than one-fifth of the jobs they cut after the recession took hold.

5 Pieces of Context for the New Kansas Budget

January 16, 2015 at 10:45 am

With Kansas Governor Sam Brownback releasing his budget this morning, it’s a good time for a refresher about what’s happened since Kansas enacted one of the largest state income tax cuts in history two years ago.

  1. Kansas’ finances are a mess. The tax cuts have proven even more expensive than originally imagined, leaving the state with far less revenue than it will need to pay for schools and other state services.  To get through the past two years, the governor has nearly drained Kansas’ operating reserves, leaving the state highly vulnerable to the next recession.
  2. Kansas’ schools and other services have been weakened and face even more cuts. General state aid for schools per student is 15 percent below pre-recession levels.  And with the state’s financial picture so bleak, more cuts are likely on the way, though a court ruling that the state’s school funding is so low it violates the state constitution may help.
  3. Taxes are down for the wealthy but up for the poor. Kansas’ tax cuts didn’t benefit everyone.  Most of the benefits went to high-income households.  Kansas even raised taxes for low-income families to offset part of the revenue loss; otherwise, the cuts to schools and other services would likely have been even bigger.
  4. The tax cuts haven’t boosted Kansas’ economy.  Since the tax cuts took effect two years ago, Kansas has seen private sector jobs grow by 2.6 percent, notably slower than the 4.4 percent growth nationally.
  5. There’s little evidence that the tax cuts will improve its economy in the future.  The latest official state revenue forecast, from last November, projects personal income will continue to grow more slowly in Kansas than in the nation as a whole this year, next year, and the year after that.  (See chart.)

State and Local Tax Systems Hit Lower-Income Families the Hardest

January 15, 2015 at 9:59 am

In nearly every state, low- and middle-income families pay a bigger share of their income in state and local taxes than wealthy families, a new report from the Institute on Taxation and Economic Policy (ITEP) finds.  As the New York Times’ Patricia Cohen wrote, “When it comes to the taxes closest to home, the less you earn, the harder you’re hit.”

Only California taxes the top 1 percent of households at a higher effective rate (8.7 percent) than middle-income taxpayers (8.2 percent), ITEP found.  In the ten states with the most regressive tax systems, the bottom 20 percent pay up to seven times as much of their income in taxes as their wealthy neighbors.

Washington State’s tax system is the most regressive, according to ITEP.  The bottom 20 percent of taxpayers pay 16.8 percent of their income in taxes, while the top 1 percent pay just 2.4 percent.  After Washington, the most regressive state and local tax systems are in Florida, Texas, South Dakota, Illinois, Pennsylvania, Tennessee, Ari­zona, Kansas, and Indiana.

A number of states, including Kansas, North Carolina, and Ohio, have made the situation worse in recent years by cutting income taxes, the only major state revenue source typically based on ability to pay.  Income tax cuts thus tend to push more of the cost of paying for schools and other public services to the middle class and poor — exactly the opposite of what is needed.