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Feeling The Pinch

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Some economists and fiscal analysts use the term "rolling recession'' to describe a slowing regional economy.

"A rolling recession doesn't show up on the national level,'' says Michael Kirst, a prominent education observer and analyst. But such a slowdown, he notes, can create "dangerous times'' for education programs in the regions it affects. "The halcyon days'' of the mid-1980's when the growth of state education budgets outpaced the rate of inflation "are gone,'' he says.

A recent survey conducted by the National Conference of State Legislatures confirms this assessment. Ac- cording to the report, The State Fiscal Outlook: 1990 and The Coming Decade, the recession in the Northeast may be poised to "roll'' southward.

New York, New Jersey, and every New England state except Connecticut now have deficits for the current fiscal year, which ends in June or July for most states. Additionally, almost a score of other states face possible deficits this year.

"The recession that has crippled budgets in the Northeastern states remains regional, but a slowing revenue stream is creating difficulties for most of the mid-Atlantic and Southern states as well,'' the report notes. The Midwest and the Far West appear to be more fiscally healthy, it says.

The slower-than-expected growth rates in many states have led to a shortfall in tax revenues. "Finding funds to meet increasing needs for public schools'' and other services is an increasingly challenging task in these states, the study says.

The NCSL report and state officials portray a grim fiscal scenario that bodes ill for education spending:

Massachusetts "suffers from the states' most spectacular problems,'' according to the NCSL. The state has already cut programs by some half a billion dollars, and must make another $500 million in cuts to balance this year's budget.

In addition, Gov. Michael Dukakis's fiscal year 1991 budget "is a very austere budget for education,'' says Nancy Richardson, his education adviser. It reduces education spending by 1.3 percent from this year's budget, which has been termed "disastrous'' by many educators in the state.

In New York, Gov. Mario Cuomo's budget office has repeatedly reduced its revenue estimates as the state's economy has slowed. The state comptroller fixed the current-year budget deficit at $1.5 billion last March.

Lawmakers admit the situation looks bleak. "I think we've got some down ways to go before we get better,'' says Assembly Speaker Mel Miller. The state's declining economy will probably have a negative impact on education funding for the next fiscal year, he adds.

"Static tax revenues'' in West Virginia led Gov. Gaston Caperton to propose an unusually austere 1991 budget. The spending plan did not include expected pay raises for the state's teachers, whose average salary ranks 49th in the nation.

In March, the West Virginia Education Association--which represents about 16,000 of the state's 22,000 teachers--called a statewide strike to protest the lack of funding for education in the budget; teachers in fivesixths of the state's counties walked off the job.

Gov. William O'Neill of Connecticut has ordered across-the-board reductions in state spending at least twice this year. The cuts came even though the state passed a record $900 million tax hike last year.

If the state economy worsens, a spokesman for O'Neill adds, the Governor may be forced to withhold a $500 million local-aid payment scheduled for this spring. Much of that money is used to fund schools.

Arizona avoided a deficit for the current fiscal year by postponing some expenditures until fiscal year 1991. "Without preventive action,'' the NCSL report states, "[Arizona] will have a 9 percent deficit in fiscal year 1991.''

To fund education adequately in the coming fiscal year, says Senator Jacque Steiner, chair of the education committee, the state must either raise taxes "or pass the costs on to the localities.'' Neither option is desirable, she adds.

A potential $250 million revenue shortfall in North Carolina may force budget cuts for many state services. The state legislature is scheduled to convene this month.

In a state newsletter, Superintendent of Public Instruction Bob Etheridge wrote that "it would be tragedy of the first order'' if lawmakers delayed pay raises to teachers because of the shortfall.

In Maine, Gov. John McKernan proposed cutting more than $30 million in local aid to help eradicate a $210 million midterm deficit. His suggestion, made in February, received a lukewarm reception from most educators.

The Governor was reluctant to cut into funding for schools, says spokesman Willis Lyford, but "we couldn't keep nibbling around the edges'' with such a large deficit.

In these states and in others in fiscal straits, says Gerald Miller, executive director of the National Association of State Budget Officers, lawmakers must "make some very difficult choices between raising taxes and cutting expenditures.''

In some instances, states have done both--and still face serious budgetary problems. Of the 26 financially troubled states cited in the NCSL survey, 19 raised taxes in 1989.

Some educators and lobbyists suggest that lawmakers must raise taxes even more to avoid further cuts in school spending.

"I've never seen a situation so bad,'' says Rosanne Bacon, president of the Massachusetts Teachers Association. The state instituted a temporary tax increase last year and has been cutting expenditures since last summer.

Bacon says state leaders should support a broader tax increase dedicated to education. MTA polls show the public would support such a tax, she says.

"What we need is for someone--the legislature, the Governor, any of the candidates for statewide office--to exhibit the political will to deal with this problem,'' she adds. "No one seems to have a plan. They say 'no new taxes' simply because it's the only thing they can think of to say.''

As of last March, state leaders still had not negotiated a way out of the budget gridlock. Governor Dukakis had proposed a tax-increase plan, but support for it was thin in the legislature.

According to the NCSL report, "the long-term outlook for this decade is tight budgets and hard fiscal choices.'' Sustaining educational reform in such an atmosphere will be difficult, many observers say.

"In '83, we had the best of both worlds,'' says Kirst, a professor of education at Stanford University. "The economy was recovering from a recession, and we had consensus on the ideas, on the conception of reform. Both of those are not here now.''

Kirst is also skeptical about the public's willingness to vote in a tax increase, even for education. "You can appeal to people's altruism,'' he notes, "but it's not clear that's going to sell.''

It didn't sell in Michigan and Washington State, where voters last fall rejected tax increases for education by wide margins. Local initiatives, some educators say, fare slightly better. In Massachusetts, for example, votes to increase local property taxes are successful about 40 percent of the time.

To explain the phenomenon, Kirst cites the "terrific mismatch'' between the electorate and those with children in school.

Generally, he notes, less than a quarter of those who vote have children in public schools.

The public's reluctance to raise taxes is not so remarkable, educators acknowledge. But that sentiment, coupled with a slowing economy and the unlikelihood that lawmakers will push through unpopular tax increases in an election year, has left many educators feeling glum.

"Not only is the money gone,'' says Bacon of Massachusetts, "but the belief [among teachers] that anyone really cares is being eroded away.''

Says Paul Brunelle, executive director of the Maine School Boards Association: "We could lose a lot of the progress we've made in the last four years.....I'd like to think that all the rhetoric accorded school reform over the last five years or so wasn't just a waste of time.''

--Michael Newman, Education Week

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