Following Year of Devastating Cuts, States Turning to Revenue Options

During 2011 legislative sessions, most states chose to close severe budget gaps without revenue increases, instead opting for further damaging and deep cuts to critical education, health care, and social service programs. However, now that most sessions have ended, lawmakers, business leaders, and community groups in a number of states appear to be increasingly interested in taking revenue increases to voters as an alternative.

Coloradans will likely be voting this November on a proposal that would temporarily increase taxes to fund education.  Supporters of the measure, sponsored by State Senator Rollie Heath, turned in 142,000 petition signatures on Monday, far exceeding the 86,105 needed to qualify for the ballot.  If approved, the measure would temporarily increase the income tax from 4.63 percent to 5 percent and the sales tax from 2.9 percent to 3 percent.  It’s estimated that the proposal would raise an additional $3 billion over the next five years, which would go toward funding K-12 and higher education.

The proposal comes in response to years of cuts to education spending.  According to the Bell Policy Center, the state has cut K-12 by nearly $600 million over the past three years and spending per college student has been cut almost in half over the past decade, when adjusted for inflation.  After delivering the petitions, Senator Heath said, "Doing nothing in the face of these horrible budget cuts is just not an option."

In California, the recent dip in the stock market has contributed to lower than expected revenue projections which could eventually automatically trigger massive education cuts.  Some groups, including the California Federation of Teachers, are calling for a tax on the wealthy to avoid such cuts.  The proposal, which advocates are hoping to qualify for the November 2012 ballot, would levy a one percent tax on the wealthiest one percent of Californians, and could bring in upwards of $2 billion annually.  According to a recent poll, nearly 80 percent of likely California voters would support such a measure.

Meanwhile in Nevada, an unlikely coalition of business and labor leaders is forming out of frustration with the legislature’s failure to address problems with the state’s tax structure in the recent legislative session. The emerging group has yet to publicly announce a specific proposal but it will likely seek to protect education from further cuts by raising new revenue.

As other states consider revenue increases to help close budget gaps caused by the Great Recession, they might find lessons from Oregon, which enacted two progressive revenue increases in early 2010. When voters passed Measures 66 and 67, taxing corporations and wealthy individuals, respectively, opponents claimed they would be job-killers.  Yet Oregon has been ahead of the national curve in economic recovery, and only four states (Oklahoma, Indiana, Nevada and Michigan) have seen larger drops in their unemployment rate over the past year.

With little prospect for help from the federal government and the impact of three years of deep cuts to popular and critical services taking its toll, recent legislative momentum and numerous polls indicate that voters are willing to consider tax increases if it means preserving education and other critical services they care about.

Full Resources from this Article

Following Year of Devastating Cuts, States Turning to Revenue Options

Progressive States Network - PSN 2011 Tax and Budget Roundup: Middle Class Reels From Extreme Cuts, Damaging Right-Wing Fiscal Priorities
LA Times - California tax revenues plummet in July, raising fear of trigger cuts
Support Our Schools for a Bright Colorado - How Initiative 25 Works
Oregon Live - The New Normal: Once Trailing, Oregon a Leader in Economic Recovery
Center on Budget and Policy Priorities - State Budget Cuts in New Fiscal Year Are Unnecessarily Harmful

This article is part of PSN's email newsletter, The Stateside Dispatch.
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