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Despite Missed Revenue Projections, State K-12 Spending Remains Priority

Last fiscal year, more than half of the states overestimated how much tax revenue they'd pull in, resulting in midyear K-12 cuts in some states and forcing some to reexamine their education spending, according to an analysis by the National Association of State Budget Officers. 

Despite that fact, said John Hicks, the executive director of NASBO, education spending in most states remained flat, with the vast majority of states contributing toward their K-12 budgets at least the minimum amount required by their state law .  

"There's a surprisingly high number of states that had to revise downward their revenue estimates," Hicks said. "That so many states have missed their revenue projections is notable. But even with these very muted fiscal conditions, states will still prioritize K-12 education spending."

Read NASBO's entire state-by-state summary of  governors' proposed budgets this year.  

States are at least eight years out of the recession, and unemployment is at historic lows nationally. So, last year, when passing their budgets, legislators had "rosy outlooks" on fiscal conditions, estimating that they'd be able to boost spending back to pre-recession levels, Hicks said.  

But income tax and sales tax revenue—two areas on which states and their public school systems are heavily dependent—flattened and, in some instances, dipped, causing 29 states to completely miss their revenue forecasts. That's confused economists, who typically predict that incomes rise and people spend more post-recession.

"We've got revenue growth on the order of 2 percent at best," Hicks said, pointing out that many states for their 2018 fiscal year are either spending much more conservatively or looking for new revenue sources. 

In some instances, revenue dips were more dramatic and school spending was inevitably hit. Connecticut faces a $1.4 billion deficit this year, and Democratic Gov. Dannel Malloy proposed several cuts to its wealthiest school districts. Delaware faced a $395 million budget deficit, which dampened hopes for an update to that state's funding formula,which many have described as insufficient to help the state's neediest students.  

And states heavily dependent on oil and commodity prices, such as Alaska, Oklahoma, North Dakota, and Wyoming had to make particularly dramatic cuts to their budgets. Alaska's Senate, for example, has proposed reducing that state's education spending by 5.7 percent, leading to increased class sizes and teacher layoffs.  

Many governors and legislators have proposed new sources of revenue that would result in more education spending. 

In January, New Mexico's Republican Gov. Susana Martinez pulled from that state's reserves to spare the state's schools midyear cuts. Last month, she vetoed a proposal by legislators to raise several taxes to bring in more revenue. In an unusual move, the legislature responded by suing Martinez, saying that her veto violated the state's balance of powers.  

West Virginia's recently elected Democratic Gov. Jim Justice summed up his legislature's proposed budget that included no new taxes and dramatic cuts to its public education system as "bull-you-know-what" before revealing a plattered piece of actual bull excrement. He has instead pushed for $224 million in new taxes. 

After Texas' supreme court justices said it wasn't their role to dictate to the legislature how to spend their education funds, the Texas House this week passed a bill that would allow wealthy school districts to keep a larger portion of their locally-generated funds and inject  $1.6 billion new money into public schools over the next two years. The Texas senate is considering a similar bill. 

And, as I pointed out Monday, Washington and Kansas legislators are at odds  over how to address those states' supreme court rulings that demanded more money for public schools.  

There were a handful of bright spots this year, Hicks said. Idaho's legislature, which has seen a manufacturing and agriculture boom in recent years, forked over $100 million in new education spending this year. And Tennessee Republican Gov. Bill Haslam, with several pending school funding lawsuits, proposed in his budget to give teachers 4 percent raises and spend $22 million more on the state's growing English-language learner population. The legislature has yet to approve a budget.  

K-12 education spending has long taken up the majority of state's spending but there's fresh competition, Hicks pointed out. States are spending an increasing amount on Medicaid and, in some states, health-care spending could soon match or surpass K-12 spending, Hicks said. 

"Some states now are chosing to either not spend as much on health care, reducing services, or elbowing or crowding out other parts of the budget," Hicks said. "The size and scale of such a change would be a brand-new feature." 

At least 14 states have completed their legislative session as of this week and most plan to end their sessions by the end of this month or the beginning of May.  


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