Big Gains for State and Local Employment in June

July 3, 2014 at 12:09 pm

State and local government employment had a big month in June, rising by 24,000 jobs according to today’s jobs report.  Most of the gains came in K-12 school districts, which added 18,000 jobs.

The number of state and local public employees has been trending upward since the end of 2012 (see chart), with job growth accelerating since the start of 2014.  Still, states and localities have 425,000  fewer public employees — teachers, police officers, social workers, and so on — than when the recession started, even as the need for public services has continued to grow.

State and Local Jobs Far Below Pre-Recession Level

June 6, 2014 at 12:33 pm

The economy hit a milestone of sorts last month, as payroll employment finally topped its pre-recession level.  But there are two important caveats.

First, as we’ve pointed out, the growth in the working-age population since the recession started means that many more people today want to work but don’t have a job.  Second, the number of government jobs remains well below pre-recession levels.  State and local employment, for example, remains more than 450,000 jobs below the December 2007 level (see graph).

The large losses in government jobs are symptomatic of the sharp cutbacks in state and local spending that have slowed the recovery from the Great Recession.

Kansas’ Projections Show Tax Cuts Aren’t Paying Off as Predicted

May 14, 2014 at 10:09 am

When Kansas enacted a major tax cut in 2012, many state lawmakers predicted it would spur economic growth.  Instead, economic performance in Kansas has been unimpressive, and updated projections from its Division of the Budget offer no reason to expect that the state’s economy is about to boom.  Personal income in Kansas will grow more slowly than U.S. personal income in 2014 and 2015, according to the new forecast (see chart).

The state’s budget office also projects that gross domestic product (GDP) in Kansas will lag the nationwide rate in 2014 and 2015.  That would mark a downward departure for the Kansas economy, which over the last two decades has generally kept pace with the national economy.

There’s no evidence to believe that the tax cuts will improve the economy in later years, either.  The vast majority of research finds that differences in interstate income tax rates have little or no impact on state economic growth.  For example, when six states made large tax cuts in the 1990s, their income and employment grew more slowly than the rest of the country.

The new forecast wasn’t the only bad news that Kansas received in the past few weeks.  Moody’s Investors Services downgraded Kansas’ credit, citing the revenue loss from the tax cuts as an important reason.  A lower credit rating could mean the state will pay higher interest rates in order to borrow money for public spending.  Moody’s also downgraded the credit of both the University of Kansas and Emporia State University, two of the state’s six public universities.

The negative effects of Kansas’ tax cuts are mounting:  lower state revenues, serious cuts to services like education, and now lower growth forecasts and a downgraded credit rating.  These cuts aren’t setting Kansas up for economic success.

State and Local Jobs Climbing out of Deep Hole

May 2, 2014 at 12:03 pm

State and local governments added 18,000 jobs in April, according to today’s jobs report, and have added 43,000 jobs since the start of 2014.  This is great news given the steep loss of public jobs due to the Great Recession.

Yet, while states and localities have slowly begun to rehire in the past two years (see graph), the number of public employees remains far below six years ago.  Meanwhile, the demands on states and localities continue to grow.  For example, public elementary and secondary schools have 492,000 more students than before the recession.

The Top 5 (Okay, 6) State Tax Charts

April 14, 2014 at 1:51 pm

As we approach Tax Day, here are six charts focusing on state taxes.

More than half of state tax dollars go to fund education (K-12 and higher education) and health care, as the chart below shows.  State tax dollars also fund other critical services such as transportation, corrections, public assistance, care for residents with disabilities, police, state parks, and general aid to local governments.

State revenue losses from the Great Recession were both deeper and longer lasting than in previous recessions, as the chart below shows.  Not until the end of 2013 did revenues finally return to pre-recession (2007) levels, after adjusting for inflation.  But, the steady revenue increases of recent years offer states an opportunity to reinvest in education and other services that sustained unprecedented cuts during the recession.

While revenues have slowly recovered in most states, Kansas has moved in the opposite direction, as the chart below shows.  Kansas slashed income taxes, especially for businesses and wealthy Kansans, even as needs — like the number of K-12 students — have grown.  Revenues fell by more than 9 percent in Kansas in 2013.  Meanwhile, there is no evidence that the tax cuts have boosted the Kansas economy.

Five of the seven states that have made the deepest cuts to K-12 education since the beginning of the recession have also enacted major income tax cuts, as the chart below shows.  These tax cuts eliminated revenue that could have helped states reverse the deep funding cuts from the recession and invest in promising education reforms.

As the chart below shows, low-income families pay significantly more of their income in state and local taxes than very wealthy families.  State and local taxes push many families into — or deeper into — poverty.

A state Earned Income Tax Credit (EITC) is one powerful tool to prevent state and local taxes from pushing low-income working families deeper into poverty.  Twenty-five states and Washington, DC, have their own EITCs, as the map below shows.  A state credit builds on the federal EITC’s proven effectiveness in helping low-income working families make ends meet.  States looking to encourage work and reduce poverty, especially among children (the federal EITC lifts more children out of poverty than any other program), should considering enacting or expanding an EITC.