Not So Fast: Echoing the Call for State Budget Caution

We recently explained that policymakers shouldn’t use the arrival of budget surpluses to start cutting taxes.  Now, others also are urging states to use caution before prematurely cutting taxes.

Twenty-three states cut taxes or other revenues in their fiscal year 2014 budgets, according to the National Association of State Budget Officers (NASBO).  Noting this point, Katherine Barrett and Richard Greene, long-time state budget experts, say it’s “premature in most cases” to cut taxes.  “While we can understand the political pressures at play, states are still smarting from all the service cutbacks they had to make the last time the economy turned south and their revenues followed along,” they write in their B&G Report.

We agree.  A surplus means the state has more money than it expected, not necessarily more money than it needs, as we’ve explained.  Having experienced the worst recession since the Great Depression, states’ needs remain high.  Most states — including Michigan, New York, and Wisconsin, where policymakers are advocating for tax cuts — provide less general support for their schools per student than they did when the recession hit, often far less.

The economic recovery remains fragile.  It isn’t the time for tax cuts that won’t do much to grow the economy.  Instead, states should make the investments necessary to rebuild and strengthen key services — including schools — that will help them grow today and into the future.