Tax Slashing Predictably Reduces Government’s Capacity to Do Its Job

Commenting for the NY Times yesterday on the tax reform bill being rushed through Congress, Peter Goodman and Patricia Cohen explain: “The tax plan has been marketed by President Trump and Republican leaders as a straightforward if enormous rebate for the masses, a $1.5 trillion package of cuts to spur hiring and economic growth. But as the bill has been rushed through Congress with scant debate, its far broader ramifications have come into focus, revealing a catchall legislative creation that could reshape major areas of American life, from education to health care.”

This warning about the persistent effort to reduce government should frighten those of us who worry about government’s capacity to educate the 50 million children and adolescents who fill public schools across our states. Perhaps you are taking comfort in the fact that fiscal responsibility for schools is shared by local, state, and federal governments, but it isn’t really that simple. What happens at the top—the federal level—or at the middle level, in your state—or in your local school district’s passage or failure of your most recent school levy is tightly woven together with the funding at other levels. On Wednesday, the Center on Budget and Policy Priorities released A Punishing Decade for School Funding, the latest in its annual bird’s eye surveys of what is being spent across the United States on K-12 public education.  This latest report comes a decade after the Great Recession caused tax collections to collapse across many states. The report examines whether and to what degree states and their public schools have been able to recover.

The Center on Budget and Policy Priorities (CBPP) emphasizes the essential concept of interconnectedness. Public education is primarily a state function; schools are established by the 50 state constitutions, not the federal constitution. Forty-seven percent of money for public schools is provided through taxation by state governments; 45 percent of school funding comes from local school taxes; and only 8 percent is currently provided by the federal government. The number of students enrolled has grown in the decade when the Great Recession hit in 2008: “(W)hile the number of public K-12 teachers and other school workers has fallen by 135,000 since 2008, the number of students has risen by 1,419,000.”

So… what has happened to cause the number of teachers to fall even as the number of students has risen?  “When the Great Recession hit… property values fell sharply, making it hard for school districts to raise local property taxes—schools’ primary local funding source—without raising rates, which is politically challenging even in good times. Raising rates was particularly difficult during a severe recession with steep declines in housing values in many areas.  As a result, local funding for schools fell after the recession took hold, exacerbating the even steeper fall in state funding.”

State funding has not caught up (when adjusted for inflation): “In 29 states, total state funding per student was lower in the 2015 school year (the most recent year for which data is available) than in the 2008 school year, before the recession took hold.  In 17 states, the cut was 10 percent or more.  In 19 states, local funding per student fell over the same period. In the other 29 states for which we have data local funding rose, but those increases usually did not make up for cuts in state support. In 29 states, total state and local funding combined fell between the 2008 and 2015 school years.”

And even before we learn what will happen with the current tax-reform bill being considered by Congress this week, we learn from CPBB that, “Federal policy makers have cut ongoing federal funding for states and localities—outside of Medicaid—in recent years, thereby worsening state fiscal conditions. The part of the federal budget that includes most forms of funding for states and localities… known as non-defense ‘discretionary’ funding (that is, funding that is annually appropriated by Congress), is near record lows as a share of the economy. Federal spending for Title I—the major federal assistance program for high-poverty schools—is down 6.2 percent since 2008, after adjusting for inflation.”

Authors of CBPP’s new report cite peer-reviewed research by C. Kirabo Jackson, Rucker Johnson and Claudia Persico, scholars at Northwestern University and the University of California at Berkeley, who tracked the long-term impact on children of their school district’s funding level: “As common sense suggests—and academic research confirms—money matters for educational outcomes. For instance, poor children who attend better-funded schools are more likely to complete high school and have higher earnings and lower poverty rates in adulthood.” Here are the learning essentials the CBPP report attributes to adequate school funding: recruiting, developing, and retaining high-quality teachers; trimming class size; and expanding learning time. Nothing fancy here: These are basic but very expensive fundamentals.

Why has spending on K-12 public education in many places never caught up to where it was in 2007?  The CBPP reports: “States disproportionately relied on spending cuts to close their large budget shortfalls after the recession hit, rather than a more balanced mix of spending cuts and revenue increases… State revenues have been hurt this year and last by a variety of factors, including falling oil prices, delayed sales of capital, and sluggish sales tax growth.”

Finally and not surprisingly, “Some states cut taxes deeply. Not only did many states avoid raising new revenue after the recession hit, but some enacted large tax cuts, further reducing revenues. Seven of the 12 states with the biggest cuts in general school funding since 2008—Arizona, Idaho, Kansas, Michigan, Mississippi, North Carolina, and Oklahoma—have also cut income tax rates in recent years.”

Austerity government and tax slashing—the reality in too many states in recent years—ought to serve as a warning to us all as Congress considers big reductions in federal taxes. There will inevitably be serious consequences for people who depend on government for things like healthcare and education.

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