States Open Fiscal Year on Shaky Ground

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As states limp into the new fiscal year, a recent report shows that at least 11 states made targeted cuts to K-12 education—an area that usually enjoys immunity from the budget knife—in their fiscal 2004 budgets.

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Read an executive summary of the report, "State Budget & Tax Actions 2003," from the National Conference of State Legislatures.

With a handful of states still hammering out their final budgets, the fiscal landscape for education, while austere in general, is far from uniform. Some states were able to keep funding levels consistent with last year's, while others will see substantial increases.

But fights to retain state school aid were tougher than in the past, a state budget analysis released July 23 by the National Conference of State Legislatures found.

Arturo Perez, a fiscal analyst with the Denver-based NCSL and one of the report's authors, said that lawmakers are loathe to trim precollegiate education aid. But, he added, rising costs in programs such as Medicaid, coupled with a tepid economy, leaves less room to maneuver. "The fact that K-12 education was not exempt from budget cutting spoke volumes in terms of the situation states were facing," he said.

The NCSL survey found that states have balanced their budgets through a mix of cost-cutting measures, increasing user fees, and tapping reserve funds. For the second time in nine years, states also had to raise taxes to generate revenue—17 states raised taxes by more than 1 percent.

At the time of the report's publication, 43 of the 49 states required to balance their budgets had done so. Vermont is the only state not constitutionally required to balance its budget, although as usual the state did so this year. Thirty-one states reported they cut spending to balance their budgets.

State fiscal officers, the report adds, predict that revenues will rebound in fiscal 2004, which began July 1 for most states. As evidence of that optimism, none of the states responding to the survey predicted a deficit for the end of this fiscal year.

Closing the Deal

Nationally, legislatures have been on a whirlwind ride as they've scrambled to complete state budgets. But few saw as much turmoil as Nevada.

In June, Silver State lawmakers agreed to a record- high $5 billion budget, but failed to agree on taxes to make it balance.

Later in the month, Gov. Kenny C. Guinn, a Republican, signed the entire state budget, except for the proposed $1.65 billion for K-12 education, which could not be funded without new taxes.

After the lower chamber defeated a plan to pass a stand-alone education budget, Gov. Guinn filed a lawsuit to force lawmakers to act.

The state supreme court ordered the legislature to pass a funding plan for education, and said it could do so with a simple majority, even if new taxes were included.

That decision sparked a new legal battle, as tax increases in Nevada typically require a two-thirds vote. Lawmakers appealed to a federal court in Nevada, which granted a temporary delay of the budget vote. But the legislators later lost when the court ruled that it lacked jurisdiction over the state supreme court.

Finally, on July 22, the legislature passed a tax increase and $1.65 billion for K-12 education, a slight increase over last year's amount. Though relieved, some school district officials noted that they delayed hiring and other spending pending a budget deal.

Next door, California just last week wrapped up a budget that closed most of the state's record $38 billion deficit after a 29-hour continuous session and weeks of partisan bickering.

The $100 billion spending plan, which relies heavily on borrowing, includes fee increases at the University of California and community colleges, but fully funds K-12 education at levels required by Proposition 98, a voter-approved measure that, with some exceptions, entitles the state's schools to the amount allocated the previous year. According to observers in California and local news reports late last week, Gov. Gray Davis, a Democrat, was expected to sign the budget over the weekend. The budget deal took on added significance because of an upcoming recall election on the governor. ("Calif. School Groups Denounce Davis Recall Election," this issue.)

Lean Times

Belt-tightening has hit states that have not seen budget cuts to elementary and secondary education in several years.

In Massachusetts, for example, a slumping economy and a 20 percent reduction in state aid to cities and towns, part of which goes to local schools, has led to teacher layoffs and other program reductions. School administrators in the 62,800-student Boston school system, the state's largest district, have been forced to lay off more than 800 teachers in the largest downsizing of staff in 20 years.

State funding to help provide tutors and other remedial services for students struggling to pass the Massachusetts Comprehensive Assessment System exam required of all students for graduation has also shrunk.

"As frustrated as we are and as angry as we are, you want to kick the nearest shin or slap the nearest wrist, but the only wrist we have to slap is the invisible hand of the economy," said Glenn Koocher, the executive director of the Massachusetts Association of School Committees.

In Oregon, meanwhile, budget problems were so bad that nearly 100 of the state's districts cut days from the last school year to save money. As of press time last week, Oregon had still not completed a state budget. Lawmakers last week passed a bill to keep the government functioning until Aug. 31.

Some lawmakers kept things from going from bad to worse.

In New York, Gov. George E. Pataki, a Republican, had proposed $1.2 billion in education cuts, including state aid for prekindergarten programs. ("N.Y. Governor Proposes Deep Cut in School Aid to Fill Big Budget Gap," Feb. 5, 2003.)

Legislators fought back.

They restored a record amount of school aid—$997 million—to the governor's budget and saved pre-K funding. "The legislature was genuinely heroic, but a cut is still a cut," said Robert Lowry, the associate director of the New York State Council of School Superintendents, referring to the 1 percent spending reduction from last year's level in the K-12 budget.

For many state legislators and school administrators, bare- bones budgets mean stretching their resources thin as more rigorous requirements from the federal "No Child Left Behind" Act of 2001 kick in.

During the annual meeting of the National Conference of State Legislatures in San Francisco last month, Sen. Thomas P. Gaffey, the Democratic chairman of Connecticut's joint education committee, summed up the challenges, at least as he sees them.

"This so-called landmark legislation has land-mine costs, and these costs will undoubtedly explode," he said. "This couldn't happen at a worse time."

Vol. 22, Issue 43, Pages 24, 29

Published in Print: August 6, 2003, as States Open Fiscal Year on Shaky Ground
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