States to Residents: Forget Promises to Restore School Funding

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But instead of either restoring cuts in state services or increasing aid to local governments and school districts, several state legislatures are choosing to use their surpluses to cut taxes. Besides Kansas, at least seven other states have passed bills that cut taxes and reduce revenue in future years, and several more are still considering doing so.

“We have these three factors: huge state budget cuts in recent years, property tax revenues just starting now to show a decline, and state lawmakers seeming to respond to this by passing tax cuts,” said Matthew Gardner, the executive director of the liberal-leaning Institute on Taxation and Economic Policy, which tracks state and local tax policy. “If you’re looking at those three developments and asking yourself how they can all make sense together, the short answer is that they can’t.”

Kim Rueben, a public finance economist with the Tax Policy Center, agreed.

“States with a little money to play with have a huge number of worthy ways to use it,” she said. “That they are choosing to cut taxes makes you wonder if they even have any kind of long-term plan.”

Other priorities

The states that have already passed tax cuts, or have proposals to do so pending, range from Arizona to Michigan, Maine to New Jersey, and Nebraska to South Carolina. The nature of the tax cuts varies, as well. Some will have a relatively small fiscal impact, while others will significantly affect the state budget outlook for many years to come.

But in every state, critics were quick to identify other critical spending priorities that the legislature has subordinated to cutting taxes.

Restoring funding to education was the first priority for many. Indeed, tax cuts were proposed in several of the states that have cut education funding the most during the last three years.

South Carolina, which will have a surplus this year of nearly $1 billion, has cut K-12 education funding by over 24 percent since 2008, the most of any state. The legislature has proposed several tax cuts this year, including one that would reduce the income tax rate on small businesses by five-tenths of a percentage point each year for four years, ultimately bringing the rate from five percent to three percent, at a loss of $65 million a year. Another bill, which Governor Nikki Haley has pushed, would consolidate some personal income tax brackets, reducing revenue by a further $78 million.

 “I don’t understand how anyone could argue that this a good time for a tax cut,” said Democratic state representative Seth Whipper. “After all the money that we’ve taken away from schools, furloughing teachers, deferring repairs, what sense does it make to give some people $50 in tax cuts?”

“Education was very underfunded before the recession in this state,” said Holley Ulbrich, a distinguished scholar at the Strom Thurmond Institute of Government and Public Affairs at Clemson University in South Carolina who has long studied the state’s education policy. “Now, we’re at the level we were at in the nineties. And that’s because every time there’s an increase in revenue, rather than catch up on where we’ve fallen behind, the state wants to give it back” in the form of tax cuts.

Critics in other states argued that the legislatures should use budget surpluses to restore funding to state services that have been cut or eliminated. 

Arizona, for example, eliminated more than 300,000 people from its Medicaid rolls in 2010, became the first state to eliminate its Children’s Health Insurance Program — thereby leaving nearly 47,000 low-income children without coverage — and also dramatically reduced mental health services.