Published Online: December 8, 2006
Published in Print: December 13, 2006, as Lawmakers See Schools as Top Priority, Despite Fiscal Jitters

Lawmakers See Schools as Top Priority, Despite Fiscal Jitters

Most states report that funding for public schools will be their top priority—and their most significant source of long-term financial pressure—in 2007, according to a 50-state survey released here this week by the Denver-based National Conference of State Legislatures.

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Further information on the related state revenues survey is available from the National Conference of State Legislatures.

The group’s fifth annual survey also found that although states’ tax collections are mostly on target and spending is within budgeted levels, policymakers are less optimistic than they were a year ago about their financial situations.

“These are the perennial issues that are driving spending growth,” Corina Eckl, the NCSL’s fiscal-program director, said of K-12 spending growth. Overall, she said, “we’re pretty solid right now, but some hairline fractures are starting to develop.”

Fiscal Barometer

The survey, conducted in November, serves as a barometer of states’ financial health and helps outline spending priorities for the upcoming legislative sessions.

The fiscal health of the states will determine how legislators shape their budgets. Most legislatures will craft new budgets starting in 2007, and K-12 education is one of the top line items in those spending plans. On average, states report that elementary and secondary education takes up 33.4 percent of their general-fund budgets, according to the survey. That’s inched up slightly since 1999, when K-12 spending took up 31.6 percent of state budgets, on average.

This year’s survey shows that legislative fiscal directors across the country are starting to worry.

A year ago, 22 states reported that they were optimistic about their budget conditions. This year, that optimism dropped to 16 states.

Compared with last year, fewer states are reporting that their revenue collections are above forecast, but more states say their taxes are coming in on target. Three states are struggling with revenues coming in below forecast: Maryland, Michigan, and Tennessee.

Another reason for concern: declining year-end cash balances in states’ general funds. At the end of the last budget year, states reported having nearly 10 percent of their general-fund expenses in reserves. At the end of the current budget year, that’s expected to drop to 6.5 percent.

Adding to the complexity of the 2007 budget-writing sessions are the newly elected leaders who will want a hand in shaping spending priorities. The 36 governors’ races in November resulted in 11 new faces; in state legislatures, 12 legislative chambers switched party control in a Democratic wave. Twenty-three legislatures are now controlled by Democrats, 15 by Republicans, and 11 are split. Nebraska’s unicameral legislature is nonpartisan.

Budget Pressures

In Massachusetts, “the need to reinvest in higher education” will be a big issue, said Sen. Richard T. Moore, who serves on the higher education committee in that state’s upper chamber. Funding for higher education suffered across the country earlier in the decade as states reduced support to public universities so they could try to stave off cuts in other programs, such as K-12 education.

The precollegiate issues facing states vary, Ms. Eckl said, but the overall issue will dominate the 2007 sessions. Some states are dealing with constitutional school funding issues, while others are working to improve school facilities and raise teacher salaries. Ms. Eckl said a few face shortfalls in their teacher-pension systems.

There’s no way to tell whether the slight deterioration in states’ fiscal health is a blip, Ms. Eckl said, or the start of a long-term trend.

Depending on the state, Ms. Eckl said, several factors are straining budgets: The Medicaid health program is eating up more money in some states, prison spending is over budget in others, and in some areas, corporate income-tax collections are down.

And, she said, the top priorities for legislatures, notably K-12 education, come with big, and growing, price tags.

Vol. 26, Issue 15, Page 17

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