The Center's work on 'State Budget and Tax' Issues

The Center’s State Fiscal Project works with state officials and state-based nonprofits to develop responsible budget and tax policies that take the needs of low-income families into account. We provide information and technical assistance on a variety of issues, including strengthening state tax systems, state budget priorities, and making low-income programs more effective. We also help state nonprofits understand how federal budget and tax decisions affect states and their residents.


4 Ways States Can Reduce Incarceration Rates

October 31, 2014 at 11:51 am

I outlined recently the causes and costs of states’ high incarceration rates. While most states, under both Republican and Democratic control, have enacted criminal justice reforms in recent years to reduce prison populations without harming public safety, most states’ reforms to date haven’t been extensive enough to have a big impact on prison populations.

State policymakers need to enact reforms that target the main drivers of high incarceration rates: the number of people admitted (or re-admitted) into correctional facilities and the length of their prison stays. States should consider four basic kinds of reforms:

  • Decriminalize certain activities and reclassify certain low-level felonies. The increased use of prison — and longer prison sentences — to punish crimes such as the possession of certain drugs, like marijuana, has contributed heavily to the growth in mass incarceration. Lawmakers should look to reduce or eliminate criminal penalties for such crimes when doing so would not affect public safety.
  • Expand the use of alternatives to prison for non-violent crimes and divert people with mental health or substance abuse issues away from the criminal justice system altogether. Policymakers should assess the range of sentencing alternatives available in their state, such as drug and mental health courts and related treatment, community correction centers, community service, sex offender treatment, and fines and victim restitution. Whenever possible, people whose crimes stem from addiction or mental illness should be diverted into treatment programs rather than sent to prison. New York State adopted this approach as part of its successful corrections reforms (see below).
  • Reduce the length of prison terms and parole/probation periods. Policymakers should reform unnecessarily harsh sentencing policies, including “truth-in-sentencing” requirements and mandatory minimum sentences, and allow inmates to reduce their sentences through good time or earned time policies. States also should expand programs that enable inmates meeting certain requirements to receive favorable decisions in parole hearings, especially in states where parole grant rates remain low.
  • Restrict the use of prison for technical violations of parole/probation. The share of individuals entering prison due to a parole violation grew rapidly between the late 1970s and the late 2000s. While it has fallen more recently, parole revocations accounted for more than a quarter of admissions to state prisons in 2013. Some of these violations are technical, such as missing a meeting with a probation officer or failing a drug test. States should heavily restrict the use of prison for technical parole violators and implement graduated sanctions for more serious parole violations.

States can also adopt more effective probation policies. For example, Hawaii has sharply reduced probation revocations with a program that punishes infractions more quickly and with more certainty, but with much shorter periods of incarceration.

These reforms are complementary; adopting just one or two won’t shrink a state’s prison population as much as a more comprehensive set of reforms that improves “front-end” sentencing and admission policies as well as “back-end” release and re-entry policies. New Jersey, New York, and California have adopted comprehensive reforms that helped drive down prison populations in each of those states by roughly 25 percent, even as crime rates continued to fall.

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. . . .

The Causes and Costs of High Incarceration Rates

October 29, 2014 at 1:12 pm

Most states’ prison populations are at historic highs, I explained yesterday, imposing high costs on states even as many states have cut education funding.  Here’s a closer look at the causes and impacts of high incarceration rates:

Incarceration rates have risen mainly because states are sending a much larger share of offenders to prison and keeping them there longer — two factors under policymakers’ direct control.  Reforms to reduce prison populations will need to target these two areas.

More specifically, research on the causes of rising incarceration rates has found:

  • Crime rates have risen and fallen independently of incarceration rates.  Crime rates began rising in the early 1960s, roughly a decade before incarceration rates did.  In the 1980s, violent and property crime rates fluctuated, while incarceration rates continued rising.  By the end of the 1990s, crime rates had fallen to 1970s levels, and they have continued to fall throughout the 2000s; yet incarceration rates continued to grow well into the 2000s, peaking in 2007 (see graph).

  • Arrests per crime have been relatively stable.  Incarceration rates may rise even when crime rates remain stable if police become more effective at apprehending offenders.  Yet, “by the measure of the ratio of arrests to crimes, no increase in policing effectiveness occurred from 1980 to 2010 that might explain higher rates of incarceration,” a recent National Research Council report concluded.
  • The share of offenders sent to prison has climbed dramatically.  For all major crime types, the likelihood that a person convicted of a crime will go to prison has risen sharply over the past 30 years.  That’s especially true for drug offenses; the likelihood of being sent to prison for a drug-related crime rose by 350 percent between 1980 and 2010.  The increase in the share of offenders sent to prison accounts for 44 to 49 percent of the long-term growth in state incarceration rates, the National Research Council study estimated.
  • Length of stay in prison has grown for all types of crimes.  Between 1990 and 2009, the average time served rose by nearly 25 percent for property crimes and by roughly 37 percent for violent and drug crimes, the Pew Center on the States estimates.  The increase in average sentences has contributed as much to the growth in incarceration rates as the rise in the share of offenders sent to prison, and possibly slightly more.

High incarceration rates impose significant human (as well as budgetary) costs.  People with criminal convictions face serious challenges in finding stable, decent-paying jobs.  Time behind bars is generally time lost developing the skills and education increasingly necessary in today’s labor market, a particular problem given that formerly incarcerated people typically have less education.

Even those who do find jobs typically earn less than otherwise-similar people who haven’t been incarcerated.  A Pew study found that men with a criminal conviction worked roughly nine fewer weeks, and earned 40 percent less, each year than otherwise similar non-offenders.

Incarceration also increases poverty, for former inmates as well as other household members, including children.  Many inmates are also parents and/or partners, and their incarceration leaves households with one less potential wage earner.

Tomorrow I’ll outline some ways that states can reduce high incarceration rates, generating savings that they can use more productively.

States Should Spend Less on Prisons, More on Schools

October 28, 2014 at 2:58 pm

The huge growth in state prison populations in recent decades has created mounting budget challenges for states, our new report explains.  State economies would be much stronger over time if states invested more in education and other areas that can boost long-term economic growth and less in maintaining extremely high prison populations.

If states were still spending on corrections what they spent in the mid-1980s, adjusted for inflation, they would have about $28 billion more each year that they could spend on more productive investments or a mix of investments and tax reductions.

Most states’ prison populations are at historic highs; in 36 states, the prison population has more than tripled as a share of state population since 1978.  This growth, which continued even after crime rates fell substantially in the 1990s, has been costly.  Corrections spending rose in every state between 1986 and 2013, after adjusting for inflation (see graph below), climbing from $20 billion nationally to over $47 billion.  Corrections spending is now the third-largest category of spending in most states, behind education and health care.

At the same time, states are underinvesting in educating children and young adults, especially those in high-poverty neighborhoods.  At least 30 states are providing less general funding per student this year for K-12 schools than before the recession, after adjusting for inflation; in 14 states, the reduction exceeds 10 percent.

Higher education cuts have been even deeper:  the average state has cut higher education funding per student by 23 percent since the recession hit, after adjusting for inflation.  Eleven states spent more of their general funds on corrections than on higher education in 2013.

Moreover, some states with the biggest education cuts in recent years are among those with the nation’s highest incarceration rates.

States can reduce their incarceration rates — without harming public safety — through such reforms as reclassifying low-level felonies to misdemeanors where appropriate, expanding the use of alternatives to prison (such as fines and victim restitution), and eliminating prison sentences for technical violations of parole/probation where no new crime was committed.  And they could use the freed-up funds in a number of ways, such as expanding access to high-quality preschool, reducing class sizes in high-poverty schools, and revising state funding formulas to invest more in high-poverty neighborhoods.  (We’ll discuss these criminal justice and education reforms in more detail in future posts.)

The savings from criminal justice reforms wouldn’t fully finance the increased education investments needed, partly because states will likely spend much of the savings elsewhere.  But reordering state priorities away from maintaining large prison populations and toward investing in human capital will pay off over the long term.

A Dangerous Way to “Fix” American Government

October 21, 2014 at 4:21 pm

“A dangerous proposal is circulating in states across the country that could widen political divisions and jeopardize cherished rights and freedoms,” CBPP President Robert Greenstein explains today in the Washington Post’s PostEverything blog.  He continues:

The push is coming primarily from well-organized, arch-conservative groups seeking to capitalize on the decline in public trust in government to limit the federal government’s role and spending powers.  And the method they prefer is a constitutional convention — the first since the 1787 conclave that produced the U.S. Constitution.

Under the Constitution, if two-thirds of state legislatures call for a convention to amend it, one must be convened.  Some of those pushing for a convention say that 24 of the needed 34 legislatures have approved such resolutions.  Advocates of a convention have targeted more than a dozen other states and are developing lobbying campaigns to push for such resolutions there.

The implications are enormous.  At stake, potentially, are the freedoms we take for granted under the Bill of Rights; the powers of the president, Congress and the courts; and the policies the government can or cannot pursue.  Conventioneers could alter absolutely anything about the way the United States is governed.  Some say they want to terminate all federal taxes and to require super-majorities in the House and the Senate to put any new taxes in their place.  Others want to bar the government from carrying out a number of its functions, for example by constraining its ability to regulate interstate commerce.  Whatever changes a convention approved would be enshrined in the Constitution if three-fourths of the states ratified them.

Yet the processes for impaneling the convention, selecting the delegates, setting the convention’s voting rules, and determining what issues the convention would consider and how much of the Constitution it would seek to rewrite are a mystery.  That means that under a convention, anything goes.  There are no rules, guideposts or procedures in any of these areas. . . .

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