Introduction | Investing in the Future
There are progressive research organizations in almost every state that have expertise in revenue issues and other policies that relate to building strong state economies that can support broadly shared prosperity. Education advocates interested in these issues could benefit from connecting with these organizations. The two leading national networks of such organizations are listed below, along with links that will lead advocates to contact information for groups in each state.
The SFAI Network
In each of 35 states (soon to be 41 states), there is an organization that belongs to the State Fiscal Analysis Initiative (SFAI), a network of non-profits think-tanks and advocacy groups directly involved in understanding their state’s tax and budget issues, and using this knowledge to improve the lives of low and moderate income residents in their state. This network is coordinated by the Center on Budget and Policy Priorities (CBPP) in Washington D.C. For state-level advocates interested in exploring further any of the revenue options presented here on this OTL website, reaching out to the appropriate SFAI organization is an excellent place to begin.
A list of all the states that currently have an SFAI organization - along with the specific contact information for each organization - can be found at the following website: http://www.statefiscal.org/
The EARN Network
The Economic Analysis and Research Network (EARN) currently includes 61 organizations in 44 states, and 26 national partners. EARN is coordinated by the Economic Policy Institute (EPI) and works with a broad range of other national organizations. Among other competencies, these organizations have expertise in assessing the economic impacts and labor market effects of state policy changes.
EARN’s mission is to improve the lives of Americans through state and local policy, and change the nature of the national policy debate—state by state. EARN seeks to advance progressive policy at the state and regional level, to deliver important national messages, and to use the collective capacity of its organizations to develop new ideas and strategies. For state-level advocates interested in exploring further any of the revenue options presented here on this OTL website, reaching out to the appropriate EARN organization is another excellent starting point.
A list of all the states that currently have an EARN organization (as well as national groups affiliated with the EARN network) and the specific contact information for each organization can be found at the following website: http://www.earncentral.org/
The Great Recession and its aftermath have had a profound impact on state budgets. States are facing the worst fiscal situation they have seen in at least 70 years.1 Collectively, in FY 2008 through FY 2012, states made $290 billion worth of cuts.2 As a consequence, state and local governments together have shed some 530,000 jobs net from the onset of the Great Recession (December 2007) to the present (August 2013).3
Given the importance of state investments in education and other essential public goods – and given the crucial role these investments play in a state's long term economic strength and the well-being of its residents – these numbers offer ample reason for concern. If states want to help businesses expand within their borders; want to encourage creation of good jobs leading to strong wage and income growth; want to increase the ability of all of their people to contribute effectively to an economy that fosters broadly shared prosperity, then they need the capacity to offer every child a meaningful opportunity to learn.
Unfortunately, state budget shortfalls have reduced school funding in many states.4 With states as fiscally stressed as they now are, effective investments in education likely will require new state revenue. The alternative would be deeper cuts in other core public programs that also are critically important to preparing children for success and maintaining a good quality of life in our communities. As such, it is important that education advocates focus not just on what needs to be done to improve the quality of education in all of our schools, but also on how to pay for those reforms that can be most effective.
While significant variation exists among the states, in almost all cases, state governments now provide more than a third of the funding required for public K-12 schools; in well over a dozen states, the state government provides more than half of the funding.5 Though it is possible to raise new revenue from local sources (primarily the local property tax), there are significant fairness and adequacy issues involved with raising revenue at the local level. One problem is that property taxes tend to be regressive, meaning their costs weigh more heavily on lower- and middle-income households.6 Perhaps even more importantly, any type oftax that is collected locally (rather than at a regional, state-wide, or national level) will disadvantage lower income communities; towns with fewer resources (a smaller or less valuable set of properties and/or households with lower incomes) will not be able to generate the same level of funding for their schools as will resource rich communities.
As a result, a heavy reliance on local property taxes to pay for public schools has been shown to result in sharp disparities in educational funding among communities.7 Further, the evidence indicates that funding disparities are linked closely to disparities in educational outcomes.8
In response to these inequities, legal challenges across the country have produced court rulings that require states to ensure that all students have access to an adequate education, often resulting in greater state-level funding as well as revisions to school funding formulas that help to reduce disparities among school districts.9 Such reforms, however, are by no means universal throughout the nation.10 To provide a real Opportunity to Learn for children in lower income communities as well as for those in upper income communities, education funding systems require adequate revenue from state level sources. This website aims to help education advocates identify and effectively pursue strategies for generating such revenue in equitable and efficient ways.
EVALUATING REVENUE OPTIONS
In the factsheets available on this webpage, we present a wide a variety of options for generating these additional, state-level revenues. In general, we consider only those options that meet three basic criteria: 1) they are able to raise a significant amount of additional revenue, 2) they would raise that new revenue in a way that reduces the regressivity of state tax systems, and 3) they are plausible given the broad contours of the current public debate around taxes.
For each of the various options, we discuss the most significant pros and cons, and identify which states already levy a given tax and which states still stand to benefit from adopting a new tax or reform option. Where possible, we attempt to quantify the likely revenue gains for each option and to direct readers to sources for more specific, state-by-state estimates. We offer general discussion of potential economic impacts for the various types of options presented, as well as the likely impacts to households of differing income levels. We also present "Stories from The States", examples of efforts undertaken by state-level advocates to enact one or more of these proposals, including valuable "lessons learned" that may prove helpful to advocates in other states who are considering mounting their own campaigns. Finally, we provide readers with additional resources, both through links to other reports and by listing experts whom state-level advocates can contact if they require more detailed information.
Specifically, we present 23 different options within three major tax categories: Personal Income Tax Options, Business Tax Options, and Sales and Excise Tax Options. The Personal Income Tax category includes the most options, fourteen in all, ranging from a variety of possible "Millionaire's Taxes" to several "Estate Tax" options. We break our six Business Tax Options down into two types: those options aimed at reducing corporate tax avoidance and those options aimed at eliminating special business tax breaks. Finally, we present just three Sales and Excise Tax options, recognizing that it is especially challenging to raise additional revenues from these sources without increasing their cost to low and moderate income families.
Every state has its own set of revenue needs and its own policy environment in which advocates must operate. Of course, state-level advocates will know best the specific revenue needs of their own states and the various factors that either will help or hinder their reform efforts. An understanding, however, of what some of the best revenue options are, what has been tried in other states, and what has been learned by those who have pursued these options can provide a valuable starting point. We hope that Opportunity To Learn advocates and others will find that information here, presented in a manner that is both accessible and directly applicable to their own work.
1. Center on Budget and Policy Priorities, "Out of Balance", April 2012: http://www.cbpp.org/cms/index.cfm?fa=view&id=3747
3. US Bureau of Labor Statistics, Current Employment Statistics Survey
5. Massachusetts Budget and policy Center, "Public School Funding in Massachusetts", December 2012 (see Fig. 4): http://www.massbudget.org/report_window.php?loc=ed_census_2012.html
7. The Equity and Excellence Commission report to U.S. Secretary of Education, Arne Duncan, For Each and Every Child, 2013 (see pages 17-20): http://www2.ed.gov/about/bdscomm/list/eec/equity-excellence-commission-report.pdf
8. The Equity and Excellence Commission report to U.S. Secretary of Education, Arne Duncan, For Each and Every Child, 2013 (see pages 17-20): http://www2.ed.gov/about/bdscomm/list/eec/equity-excellence-commission-report.pdf
Report prepared and written by the Massachusetts Budget & Policy Center for the Schott Foundation's Opportunity to Learn Campaign.