You Get What You Pay For: Taxes and the Public Schools

Slashing income taxes will not grow your state’s economy, but it will very likely destroy your public schools.  If your state rolls back income taxes, your public schools will inevitably have fewer guidance counselors, and class sizes will be bigger—that is unless you can pass extra taxes locally to make up for the cuts in state revenue.  It is an old maxim: You get what you pay for.

Here is the warning that came in mid-May from the Center on Budget and Policy Priorities: “More than a dozen states have cut personal income tax rates in recent years in hopes of spurring their economies in the aftermath of the Great Recession.  Five states—Kansas, Maine, North Carolina, Ohio, and Wisconsin—enacted especially large cuts in the last five years.  In all five states, leading policymakers claimed that the tax cuts would produce stronger economic growth.  For example, after signing the cuts in his state, Kansas Governor Sam Brownback claimed, ‘Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy.’  None of these big tax-cutting states have seen their economies surge since enacting the tax cuts.”

The Center on Budget and Policy Priorities report continues: “Four of the five states that enacted the largest personal income tax cuts in the last few years have had slower job growth since enacting their cuts than the nation as a whole… States with the biggest tax cuts in the 1990s grew jobs during the next economic cycle at an average rate only one-third as large as more cautious states… Kansas, which enacted the most aggressive personal income tax cuts of recent years, has nearly drained its operating reserves to pay for the tax cuts.  It now faces hundreds of millions of dollars in cuts to funding for schools and other priorities already damaged by the recession.”  It’s a race to the bottom among the tax-slashing states: “Because states must balance their budgets, they must pay for tax cuts by cutting state services, raising other taxes, or both  Those actions slow the economy, offsetting the economic benefit of the tax cuts.”

Chris Suellentrop, a writer for the NY Times Magazine, shifts the point of view by showing us this story through the distorted ideological lenses of members of the Kansas legislature and Kansas Governor Sam Brownback.  Things look different in Topeka, if you hang out in the halls of a statehouse where conservative Republicans dominate both houses and where Governor Brownback doggedly insists that Kansas’s economic future hinges on a “march to zero” income taxes.

Here is what Suellentrop learns by talking to his uncle, the vice-chair of the Tax Committee in the Kansas House of Representatives: “‘People are leaving Kansas,’ he told me. The state has no mountains and no beaches, and thousands of jobs that were lost during the Great Recession, especially in Wichita’s aircraft industry, never returned.  The march to zero, which includes an already-passed provision that exempts the owners of 330,000 businesses and farms in Kansas from income tax, was designed… to turn Kansas into a different sort of tourist attraction. As he and his fellow conservatives see it, it’s an ‘open for business’ sign, one they hope will draw free enterprise to the state, perhaps akin to the way the national debate over the expansion of slavery once drew young abolitionists from New England to the plains.  At the very least, they hope it will prevent young people and existing businesses from moving elsewhere, to places with ski lodges or surf shops.”

Suellentrop describes the move to the far-right in Kansas’ politics: “In the past four years, Brownback has remade the Kansas Republican Party in his likeness.  The party’s once-powerful moderate wing has withered after steep losses in consecutive primary elections, the main battleground where policy is determined in a one-party state.  In 2011, the Kansas House welcomed 33 new Republican members, and then 40 more in 2013, a turnover of more than half the body in just a few years.  The Senate’s moderate Republican president, Steve Morris, was ousted in 2012 with Brownback’s support.  It has been a striking transformation for a state party long associated with a more cooperative approach to politics.”

Suellentrop explains the clash between Brownback’s vision and fiscal reality in terms that the Center on Budget and Policy Priorities would confirm: “The budget itself, at least in broad strokes, is not a complicated document.  About half the state’s spending goes to K-12 education, with another 12 percent or so given to the state’s public colleges.  Around 20 percent goes to Medicaid, some more to pensions for teachers and state workers.  Add those numbers up and you get a budget that’s relatively inflexible, even for a governor and legislature eager to cut it.”

The problem for Kansas’ governor and legislators, as Suellentrop tells the story, is that they want good schools and universities, but they want to have the tax cuts, too.  So far Brownback’s income tax cuts haven’t brought the promised economic growth that would make all this work out: “Government revenues plummeted.  In fiscal year 2014, which ended about a year ago, Kansas took in almost $330 million less than it had anticipated, almost 6 percent below the estimates of the state’s nonpartisan experts.  According to Pew, at the end of 2014 only five states had experienced declines in tax revenues for three consecutive quarters: Alaska, Connecticut, North Carolina, Wisconsin and Kansas.  Moody’s cut its debt rating for Kansas in April of last year.”

Late night budget negotiations continued through the spring of 2015 and into this summer.  The legislature repealed the over-twenty-year-old school funding formula, freezing school funding for two years as the legislature figures all this out, but at the same time restoring millions of dollars in emergency school cuts made mid-budget last February.  In a nod to fiscal reality, on June 12th, the legislature passed a plan that, “raised the state’s sales tax to 6.5 percent, from 6.15 percent; eliminated most itemized deductions for income taxes; raised cigarette taxes, and preserved a watered-down version of Brownback’s ratchet (that turns any revenue growth in future years to income tax cuts).”

Hanging over these negotiations, Suellentrop reminds us, is  a long-running lawsuit “before the Kansas Supreme Court over whether the Legislature’s K-12 cuts were constitutional and satisfied the legal requirement to adequately and equitably educate Kansas children.”  In late June the state’s supreme court released an 87 page ruling that the legislature’s new plan to fund the schools without a formula violates the state constitution.  The Wichita Eagle reports: “The court ruled that the bill violates the state constitution, ‘both in regard to its adequacy of funding and in its change of, and in its embedding of, inequities in the provision of capital outlay state aid and supplemental general state aid.'”  The court clearly disputes the governor and legislature’s arithmetic by which they have claimed that the state is providing enough funding for schools this year and distributing it as fairly as it did under the old formula.  Additionally, in a long-running case which the Kansas Supreme Court had sent back to a lower court for additional action last December, even before this spring’s finagling, “the District Court panel ruled that school funding was inadequate under the state constitution.”

What’s the matter with Kansas? An ideology of tax slashing in this one-party state is clearly one of the primary problems.