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Published in Print: January 8, 2003, as A 50-State Budget Snapshot

A 50-State Budget Snapshot

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As the 2003 legislative season begins, tight budgets and looming deficits are forcing lawmakers to make hard decisions about K-12 spending. This Education Week sumary shows the state-by-state outlook and the implications for education.

Alabama: Though a $200 million shortfall is projected in the fiscal 2003 state budget of $17.1 billion, Alabama’s $3.02 billion education budget is likely to be protected, thanks to a $250 million rainy-day fund voters approved in June. Fiscal 2004 is likely to spell trouble, though. If rainy-day money runs low, the state will have to find other revenue to cover expected cost increases in retirement and insurance benefits for teachers and state employees.

Lawmakers dipped into state reserves to close an $859 million deficit before passing a fiscal 2003 budget of $2.4 billion that raised education aid slightly over the previous year. A recent state estimate, however, puts the gap at a somewhat narrower $748 million. Now, Alaska foresees a deficit of about $896 million in fiscal 2004. State leaders, including new Gov. Frank H. Murkowski, are likely to again dip into a $2.1 billion reserve from oil and gas royalties to close the gap.

Legislators cut spending in a special session in November to partially close a fiscal 2003 spending gap of $500 million, out of a total budget of $6.2 billion. Meanwhile, the fiscal 2004 budget deficit is expected to be about $1 billion. The education department took an administrative cut in the special session, but the budget for local K-12 schools remained intact, thanks to a voter-approved shield that protects those funds.

Gov. Mike Huckabee announced in October that state revenues were up for the fourth consecutive month. Also, revenues for the first three months of fiscal 2003 were 4 percent above forecasts. No significant cuts to education are in the works. Following the state supreme court’s ruling in November that Arkansas’ school aid system is unconstitutional, legislators in January will begin trying to revamp how the state pays for K-12 education—a move that could cost between $400 million and $900 million a year.

The legislature began meeting in a special session in early December to deal with a gaping fiscal 2003 budget shortfall, which could total upwards of $30 billion in the next year and a half. The fiscal 2003 state general-fund budget is $78 billion. Gov. Gray Davis has proposed a 3.66 percent across-the-board cut in state programs. Some legislators want targeted cuts to nonclassroom education programs.

The Centennial State has had to contend with a deficit of nearly $700 million in its fiscal 2003 budget of $13.8 billion. Gov. Bill Owens vetoed programs and ordered cuts and layoffs in state agencies. K-12 education was largely spared because of a state constitutional measure that protects school funding. But state budget officials have already identified potential areas in education for cuts in fiscal 2004, such as artists teaching in schools and the state’s preschool program for at-risk children.

Lawmakers began a special session in December to address the state’s two-year budget. The legislature must close a $500 million hole in the $13 billion budget for fiscal 2003, and revise next year’s budget to deal with projected $1.5 billion deficit. Those changes came after Gov. John G. Rowland had ordered cuts of more than 5 percent to agency budgets, including education. More than 75 state education employees have been laid off, and spending for bilingual programs and for grants to high-poverty districts were reduced.

The state is facing a projected deficit of about $91 million out of a $2.3 billion budget for fiscal 2003, and projects a $135 million shortfall in fiscal 2004. About $5.5 million of roughly $30 million in spending cuts Gov. Ruth Ann Minner has approved since September have come from the education department. She also asked school administrators to voluntarily return $10 million in state aid. State agencies will face even more cuts in fiscal 2004.

The state estimates a surplus of $1.7 billion in the $50 billion state budget in fiscal 2003. Gov. Jeb Bush is expected make his budget recommendations for fiscal 2004 in mid-January, and will need to lay out his plan to deal with a constitutional amendment to reduce class size that voters approved in November. Estimates of the cost to implement the amendment vary from $8 billion to $27 billion over eight years.

To date, Georgia is not projecting a deficit in its $16.1 billion fiscal 2003 budget, but revenue forecasts will not be released until later this month when Gov.-elect Sonny Perdue takes office. During 2002, Gov. Roy Barnes took several steps to keep spending in check. The 2003 education budget was cut by $47.4 million. Then, after the budget was passed, all departments had to cut spending by 3 percent, which was followed by another 2 percent reduction for fiscal years 2003 and 2004 .

Revenue forecasts are due in Hawaii in January. So far, cuts from the $3.5 billion fiscal 2003 state budget have not been made, but state officials say that could change under first-year Gov. Linda Lingle. The state’s $1.3 billion education budget has not grown significantly in recent years.

With the state projecting a $160 million shortfall in fiscal 2004, the state board of education has halved its original request for a funding hike of 5.3 percent over the fiscal 2003 level of $920 million. Idaho closed a similar budget gap in its $1.9 billion budget for fiscal 2003 by using one- time revenues and trimming state spending by 3.5 percent, though K-12 education was spared.

Fiscal 2003 state revenues are about $600 million below estimates, out of a total budget of $52.6 billion, according to state data. Various estimates have put Illinois’ projected shortfall for fiscal 2004 at $2 billion. This year, schools across the state are already coping with cuts of $176 million, or 4 percent, to K-12 programs—out of a total K-12 budget of $8.3 billion. State leaders fear several districts this year may announce they are on the brink of financial insolvency.

The Hoosier State is looking at an $860 million deficit out of total expenditures of $10.8 billion for fiscal 2003. Last spring, the $7.64 billion biennial budget for K-12 education was slashed by $481.5 million through cuts and delayed payments as the state struggled to head off what had been projected as a $1.3 billion deficit. During a special session in the spring, the state passed a tax-restructuring and economic-development plan that education officials hope will balance the budget and ensure that the current level of funding for K-12 education is at least maintained in the 2004-2005 biennial budget.

A slight increase in per-student funding was the only good news Iowa schools received in fiscal 2003. It took two special sessions for the legislature and Gov. Tom Vilsack to resolve the Hawkeye State’s $220 million shortfall in its $4.4 billion budget. And while education was largely spared, the $5.7 million technology budget was scrapped.

Desperate to plug a $310 million deficit in a fiscal 2003 budget of $9.2 billion, Kansas legislators mandated across-the-board cuts in all areas of state government except K-12 education, but finally reduced per-pupil spending from $3,863 to $3,836. The move ensured the state will finish fiscal 2003 in the black, while spending $2.7 billion on education.

Gov. Paul E. Patton warned school officials in December to prepare for a 2.6 percent cut in state revenue for the current school year. Based on current revenue estimates, the cuts would be twice that large in the 2003-04 school year—the second year in Kentucky’s biennial budget cycle. The education department estimates that about 1,800 educators will be laid off if the cuts aren't restored by the legislature.

Gov. Mike Foster in September issued an executive order freezing $75 million in the $16.3 billion state budget, including about $8.3 million from the $2.69 billion allotted for K-12 education. Most of the cuts targeted the state’s school accountability initiatives. Louisiana last fall dipped into its rainy-day fund to the tune of $86 million to stave off more reductions. State revenue officials planned to meet again in January. Further cuts are possible based on their conclusions.

The legislature held a special session in November to approve $10 million in cuts to education proposed in July, decreasing the total education budget to $721 million. Maine was saved from more severe cuts because low interest rates led to savings in school construction. Incoming Gov. John Baldacci, who takes office Jan. 8, has suggested no increases for next year.

The education department has cut its administrative budget by 4.9 percent and ordered a hiring freeze. But school districts haven't been directly affected by Maryland's projected shortfall of $344 million in its $22 billion fiscal 2003 budget.

Education has been spared in recent budget cuts by outgoing Gov. Jane Swift, who has had to chip away at a projected state budget deficit of $297 million, out of a total budget of $22 billion. The administration of incoming Gov. Mitt Romney forecasts a structural deficit of some $2 billion for fiscal 2004, which may delay state aid to school districts.

In early December, the legislature slashed $460 million from its new $36 billion fiscal 2003 budget to bring it into balance. Michigan's minimum aid to school districts— $6,700 per pupil–survived cuts that affected much of the rest of the budget, including spending on the education department. First- year Gov. Jennifer Granholm, whose budget plan is due in March, is expected to face at least a $1 billion shortfall at the state's current discretionary- spending level of $9 billion.

The state’s fiscal 2003 spending deficit of $356 million, out of a total budget of $13.9 billion, is projected to grow to $4.2 billion in 2004. Details of incoming Gov. Tim Pawlenty’s budget plan aren’t expected until mid- February, but he has expressed an interest in offering the legislature a proposal for dealing with the 2003 crunch sometime in January. Whether education will take a hit remains to be seen, but Minnesota recently passed a law that shifted nearly the entire cost of basic education from local property taxes to the state.

The $1.69 billion K-12 education budget was spared from most midyear cuts to close a $79 million shortfall in the state’s $3.5 billion budget for fiscal 2003. For fiscal 2004, Gov. Ronnie Musgrove has proposed a $230 million increase for education, borrowing money from Medicaid. But while the state used early corporate-tax collections last year to avoid more severe cuts, it can't rely on that extra money this year.

The state is $152 million behind this fiscal year in balancing its $18.9 billion budget, and the state faces at least a $500 million shortfall for fiscal 2004. Gov. Bob Holden already has reduced the core budget by almost $900 million in the past two years, cutting 1,000 jobs. So far, education has been protected from cuts.

To date, Montana is facing only a $5 million deficit out of a $1.2 billion budget for fiscal 2003. The legislature is expected to balance the budget with money from unused accounts. Lawmakers held a special session in August to address budget problems. The 2003 K-12 education budget was then cut by $6 million, to $449 million. State education officials anticipate that falling revenues will significantly affect the process of crafting the two- year budget for fiscal 2004 and 2005.

The Cornhusker State has a $673 million budget gap out of a state budget of $2.6 billion despite $521 million in budget cutbacks and transfers, as well as tax increases, over the past year. Even with the added revenue, state fiscal analysts predict Nebraska will continue to face substantial shortfalls. Consequently, Gov. Mike Johanns no longer invokes his “no new taxes” slogan, nor says schools would be spared the budget ax. At almost $800 million a year, school funding constitutes nearly 30 percent of the state budget.

Even with a possible deficit of $100 million in the state’s fiscal 2003 budget of $1.9 billion, local schools are unlikely to feel the pinch immediately. Districts are virtually guaranteed their $624 million share of the $654 million education budget. The legislature is expected to ensure funding with a supplemental appropriation, while the education department has a $44 million safety net from last year's local taxes. Nevada, meanwhile, has instituted a 3 percent cut in state government spending, frozen hiring for state-financed positions, and frozen nearly $10 million in planned school technology funds.

Once buffered from the economic downturn, the Granite State faces an $80 million shortfall in its biennial, $4 billion budget for the 2002 and 2003 fiscal years. To head off a deficit, the state is turning to its $35 million rainy-day fund, established under outgoing Gov. Jeanne Shaheen. Ms. Shaheen also approved a 3 percent cut in state government spending and froze hiring, out-of-state travel, and purchasing by the state. But state aid to schools was largely protected from any budget cuts.

The state’s $23.4 billion fiscal 2003 budget held K-12 education spending at the same level as in the previous year: about $6 billion. But by December, the treasury department had reported that revenues were $77.2 million short of projections. Officials were analyzing where freezes might be imposed to avoid a deficit.

One of the few states whose budgets have remained stable, New Mexico is not expecting a shortfall in the current fiscal year and has not had to make any cuts to education.

Even as the state faces a projected deficit of some $2 billion for fiscal 2003, K-12 spending has not been put on the chopping block. A record $14.6 billion out of a total state budget of $89.6 billion goes to public schools, a 3 percent increase from the previous year. To help close the budget gap, Gov. George E. Pataki wants to borrow $4 billion against the $12 billion the state has coming from a settlement with tobacco companies.

State officials report that spending is in line with the $14.4 billion overall state budget for fiscal 2003. But they will know more when revenues are collected in January. After a shortfall of more than $1 billion in the first year of the fiscal 2002 and 2003 budget, state agencies were asked to make drastic cuts, which continued into fiscal 2003. The $6 billion education budget took the lightest hit, however, and North Carolina was able to protect money targeted directly to instruction.

Despite a projected revenue shortfall of more than $43 million, Gov. John Hoeven has proposed a 6 percent increase for education in his $5 billion, two-year budget for fiscal 2003 and 2004. The $921 million education budget includes $31 million for teacher raises, as well as $1 million to encourage school district consolidation and cost-sharing.

Lawmakers avoided a severe education funding crunch for fiscal 2003 by using nonrecurring funds to balance the budget. A clearer picture of the budget for fiscal 2004 and 2005 should emerge once Gov. Bob Taft introduces his two-year budget in January. The primary and secondary education budget of $7.8 billion took a $30 million cut for fiscal 2003. To avoid steeper cuts, the legislature hiked the state cigarette tax.

To make up for a 10.8 percent, or $512.6 million shortfall in Oklahoma’s $5.3 billion budget for fiscal 2003, legislators made across-the- board cuts of 4.75 percent in September. Those cuts increased to 6.5 percent in December. The education department, though, experienced a 9.2 percent reduction in its $2.03 billion budget for fiscal 2003 because it receives funding from sources that other state agencies do not. Officials in the state revenue office predict that the state budget for fiscal 2004 will be 7.4 percent, or $396.6 million, less than this year's budget. The education department expects its budget for fiscal 2004 to decrease by 10 percent compared with this year's.

Legislators cut $600 million from the state’s $12 billion budget for fiscal 2003 because of lower-than-expected revenues. Incoming Gov. Ted Kulongoski may ax another $112 million in January. If that happens, $46 million of that amount would come from school aid. Voters will decide Jan. 28 whether to approve Measure 28, a three-year income-tax increase. If the measure fails, the legislature must lop off another $310 million in state spending, including $95 million from education.

The Keystone State’s $4.1 billion precollegiate budget for fiscal 2003 contained 3.2 percent more than in fiscal 2002. But by December, the budget office was projecting a $433 million revenue shortfall by the end of fiscal 2003. The state avoided a 2003 deficit by borrowing from its rainy- day fund and making across-the-board cuts in department budgets.

The current budget appears close to being balanced, in part because of last year's tapping of tobacco-settlement funds. But incoming Gov. Donald L. Carcieri, who pledges to be a fiscal watchdog, takes over as some forecasts show—based on current spending and revenue estimates–a $130 million deficit out of an estimated fiscal 2004 state budget of $2.7 billion.

Facing a deficit of $246 million out of a budget of $5.4 billion, South Carolina balanced the budget in part by trimming $96.8 million from K-12 education. More sacrifices could come, as the state is projecting a revenue shortfall of $300 million or more in fiscal 2004. Lawmakers might be forced to make more cuts, or find new revenue in the coming year. Incoming Gov. Mark Sanford has proposed slight increases in cigarette and gasoline taxes, and wants to make state government more efficient.

The state’s projected $54 million revenue shortfall in fiscal 2004, and its weak economic conditions, will make it hard for the new governor, Mike Rounds, to draft a balanced budget that fulfills his campaign pledge to increase school funding above the rate of inflation. Another casualty of the economy is $7 million for schools from the state’s tobacco- settlement that will be delayed for at least a year.

Legislators approved a half-cent increase in the sales tax in July in a desperate attempt to patch up the state's severe budget problems. Tennessee officials are keeping their fingers crossed that there will be enough sales-tax revenue this year to avoid further cuts in education and other programs. No special sessions of the legislature are planned.

The state is facing at least a $5 billion shortfall in its upcoming two- year budget; that amount may grow after the legislative session begins on Jan. 14 if tax revenues are lower than expected. The two-year state budget for fiscal 2002 and 2003 was $113.8 billion. So far, no cuts have been made, nor has emergency action been taken to address the expected shortfall.

Lawmakers met in December for their fourth special session to deal with budget shortfalls. On Dec. 18, they cut $117 million from the state’s $7.3 billion budget for fiscal 2003. K-12 education was largely spared in the latest round of cuts; however, previous sessions cut some $52 million out of the state’s $1.6 billion in spending on public schools. Gov. Michael O. Leavitt has proposed a modest, $60 million increase in spending for K-12 education, but there appear to be no guarantees from legislators that the schools will be spared any cuts that may be necessary in the fiscal 2004 budget.

In making cuts last summer to plug a projected shortfall of $38 million in Vermont's $890 million fiscal 2003 general-fund budget, the legislature protected aid to school districts, including a legally required increase for inflation. But the education department took about a 3 percent hit in its $13.8 million budget–its second cut in two years. The incoming administration of Gov. James H. Douglas has warned that a deficit for the new fiscal year could be as large as $40 million. The new governor nonetheless intends to propose that K-12 state aid take no cuts and again include an inflation factor.

After dealing with a $3.8 billion deficit in Virginia’s two- year budget for fiscal 2003 and 2004, the legislature faces a $1.5 billion shortfall in the state’s $24.7 billion budget for fiscal 2003. Still, recently announced budget recommendations from Gov. Mark Warner included a $65 million increase in spending on education.

K-12 education’s protection from state budget cuts seems about to end, under Gov. Gary Locke’s proposal to avert a $2 billion shortfall in the state’s two-year, $23 billion budget for the 2004 and 2005 fiscal years. His plan would take $545 million from K-12 education by canceling a cost-of-living adjustment for teachers and a scheduled reduction in class sizes. It would also reduce programs to equalize levy funds among school districts and to provide block grants for schools.

The Mountain State faces a shortfall of up to $250 million for fiscal 2004. Meanwhile, revenues for fiscal 2003 are coming in lower than expected, though education has been somewhat insulated from the hard times. Gov. Bob Wise ordered all state agencies, except K-12 public education, to reduce spending by an additional 3.4 percent this fiscal year.

The state is contending with a $185 million deficit in fiscal 2003, out of a state budget of $11 billion, yet cuts to K-12 education were avoided during a special session set up to deal with the situation.

The state has a $202 million budget surplus for the two-year budget that covers fiscal 2003 and 2004. The good news is attributed to record-high sales-tax receipts, mostly because of construction and mineral development, as well as natural-gas revenues. In late November, outgoing Gov. Jim Geringer asked the legislature to spend an additional $235 million in fiscal 2004. That includes $55 million for the state’s capital school construction program and $2 million for high-speed Internet service for all public schools. Lawmakers are scheduled to consider the budget request in January.

Vol. 22, Issue 16, Pages 18-19

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