The Center's work on 'Budgets' Issues

Tax-Cut States Put Higher Ed on the Chopping Block

March 25, 2015 at 12:36 pm

With the recession behind them, many states are reinvesting in their higher education systems, though funding remains far below pre-recession levels.  A handful of states, however, have dug deeper budget holes with tax cuts — holes that they’re looking to their already beleaguered colleges and universities to help them fill.

For example:

  • No state cut higher education funding more deeply between 2008 and 2014 than Arizona, which reduced inflation-adjusted per-student spending by almost 50 percent. State lawmakers earlier this month passed a budget that further cuts higher education funding by nearly $100 million — including eliminating state support for community colleges in the state’s most populous counties.  Arizona enacted large corporate tax cuts in 2011 — in addition to other smaller cuts over a longer period of time — that are beginning to phase in.
  • Over the same period, Louisiana slashed per-student funding for higher education by 43 percent, second only to Arizona. Due largely to poor budgeting choices, the state faces a $1.6 billion shortfall in the upcoming fiscal year, which the governor plans to cover in part by cutting higher ed funding by another $211 million.  The state’s finances would be in much better shape if it didn’t enact costly income tax cuts for the state’s highest earners just before the recession.
  • In Wisconsin, where tax cuts have cost the state nearly $2 billion in revenue over the past four years, lawmakers are considering another $300 million cut to the higher education system in the 2016 budget. Wisconsin has already cut per-student funding more than 20 percent, in inflation-adjusted terms, since the onset of the recession.
  • In Kansas, lawmakers actually increased higher education spending for the 2014-15 school year. However, due to a fiscal emergency caused by massive tax cuts that took effect two years ago, Governor Sam Brownback pared back the increase by $16 million, among other mid-year cuts.  Between 2008 and 2014, after adjusting for inflation, the state had cut per-pupil funding by about 23 percent.  Kansas is facing another huge budget gap for 2016, so more cuts for higher education and other state services likely are on the way.

These cuts may result in more tuition increases, reductions in faculty and administrative staff, cuts to course offerings, and other programmatic cuts that may lessen quality for students.  As the economy continues to recover and revenues bounce back, states would do well to reject costly and ineffective tax cuts and instead reinvest additional resources into higher education and other important budget priorities.

House Bill to Extend Children’s Health Funding Would Ease Pressure on States

March 24, 2015 at 2:27 pm

The House is likely to vote this week on a bipartisan compromise to permanently fix Medicare’s flawed physician payment formula (SGR) and extend federal funding and current policy for the Children’s Health Insurance Program (CHIP) for two years.  The continued momentum for extending CHIP funding quickly and cleanly is important not only for the millions of children who rely on the program for health coverage, but also for states and their budgets.

Six state legislative sessions have already ended, and Kentucky will become the seventh when it adjourns today.  So while lawmakers have yet to make new federal funding for CHIP available starting in October, states are passing budgets for the next fiscal year — which in most states begin on July 1 — nowRepublican and Democratic governors alike have called for CHIP funding certainty and quick extension.

Each week that passes without congressional action on CHIP places states in a tougher position.  For example, a recent survey of state CHIP directors found that if uncertainty about the program’s funding persists, states will have to pursue contingency plans that reflect the risk that no new federal CHIP funding will be available, such as how to move kids out of CHIP coverage and how to inform families that coverage could end.

To be sure, it would be better if the House bill extended federal CHIP funding for four years in order to ensure longer-term stability for the program and the children it serves (and robust efforts are expected to secure that in the Senate once the House bill is passed).  Nevertheless, the House bill does right by states and kids in other critical aspects.  Most importantly, the House bill maintains program improvements that Congress made in 2009 and 2010, while leaving out proposals floated by House and Senate committee chairs last month that would likely cost many children their coverage while shifting costs to states.

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.

Mapping State Funding Cuts for Higher Education

March 6, 2015 at 12:47 pm

Public colleges and universities have experienced major cuts in state funding since the Great Recession — something state lawmakers should consider as they grapple with tough budget decisions in coming months. Our new fact sheets show that, in almost every state, these funding cuts have led to tuition hikes. In some cases, they’ve also been accompanied by cuts in campus staff and programs that may reduce the quality of education for students.

As our 2014 paper explained, after adjusting for inflation:

  • Forty-eight states — all but Alaska and North Dakota — are spending less per student than they did in fiscal year 2008. The average state has cut per-student funding by $2,026, or 23 percent.
  • Nine states have cut per-student funding by more than one-third. Three of them — Arizona, Louisiana, and South Carolina — have cut it by more than 40 percent.
  • Annual published tuition — the “sticker price” — at four-year public colleges has risen by an average of $1,936, or 28 percent, since the 2007-08 school year.

Some 42 states began reinvesting in higher education between fiscal years 2013 and 2014. That’s a good first step. But if states are to continue reinvesting in higher education, they’ll need to make sound tax and budget decisions — including rejecting costly and ineffective tax cuts.

Click on the state abbreviation to jump to its fact sheet.

Note: North Dakota and Alaska are excluded from the fact sheets because they increased per-student higher ed funding between 2008 and 2014.


Growing Incarceration Contributed Little to Drop in Crime, Study Finds

February 26, 2015 at 1:33 pm

Increased incarceration has contributed next to nothing to the sharp drop in crime over the past 25 years, a recent Brennan Center for Justice report finds. This research, along with other recent analysis challenging the belief that incarcerating a bigger share of offenders and for longer periods would significantly reduce crime, suggests that states would be better off spending less on locking people up and more on education, mental health, and substance abuse treatment.

As our report on criminal justice reform explains, 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 (see graph).  This growth has been costly.  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 to spend on more productive investments or a mix of investments and tax reductions.

The Brennan Center report found that while rising incarceration rates helped reduce property and violent crime rates in the 1990s, the effect was much smaller than some other studies have suggested, accounting for 0-10 percent of the total decline over the decade.  Since 2000, rising incarceration rates account for less than 1 percent of the decline in crime rates.

“This report’s analysis reveals that incarceration has been decreasing as a crime fighting tactic since at least 1980,” the authors conclude. “Since approximately 1990, the effectiveness of increased incarceration on bringing down crime has been essentially zero.”  Factors such as an aging population, higher earnings, lower alcohol consumption, and smarter police tactics may have done as much or more to reduce crime, according to the study.

We’ve outlined four basic ways that states can reduce their prison populations to free up funds for schools and other investments in human capital: decriminalize and reclassify certain low-level felonies, shorten prison terms and parole/probation periods, restrict the use of prison for parole violations, and divert people with mental health and substance abuse issues out of the system altogether.