Education Funding

Reluctant to Tax, States Turn To Fees for Quick Cash

By Joetta L. Sack — October 01, 2003 4 min read
  • Save to favorites
  • Print

Tired of cutting budgets and wary of hiking taxes, many states instead are raising fees to help make up revenue shortfalls in their budgets. In some cases, schools will see at least a portion of the proceeds.

A recent report by the National Conference of State Legislatures shows that 34 of 47 states have raised fees, for a total of $2.8 billion, for fiscal 2004. Massachusetts led the way with $500 million in new fees.

The three states not included in the report are California, Connecticut, and Pennsylvania.

New fees have been tacked on to a variety of areas, from vehicle licenses to bar exams to riverboat gambling. Most state colleges and universities also have raised tuition and fees to overcome budget woes.

Net State Revenue Changes (in millions) for Fiscal 2004

With 47 states reporting, the figures below represent increased revenues that states anticipate collecting in fiscal 2004 to help shore up budget shortfalls.

Taxes $7,730.7
Fees 2,853.0
*Accelerations 305.6
Other 866.8

Total $11,756.1
* Reflects accelerated collection of taxes
SOURCE: National Conference of State Legislatures

States have turned to higher fees because there is little appetite in most legislatures for raising taxes, said Corinna Eckl, a fiscal analyst with the Denver-based NCSL. And while last year many states increased taxes on cigarettes and other tobacco products to pay for schools, those efforts have waned considerably, she said.

“States are reluctant to raise taxes,” she continued. Instead, “they’re looking to nibble around the edges.”

Some of the revenue from the fee increases is simply going back into the states’ general funds, or to plug the holes left by budget shortfalls.

New Jersey, for instance, raised fees for nursing homes, hotel lodging, and casinos in order to boost general-fund revenue.

But some of the money is targeted to specific programs, including education.

Illinois, for example, has imposed new riverboat-gambling taxes and fees and will allot a portion of the proceeds to education. In another instance, Ms. Eckl said, Minnesota has allowed bars to pay a fee to stay open for an extra hour. The revenue will be used to pay for 50 new state troopers.

It All Helps

In most cases, the revenue from the higher fees that will go to education will be small. Nonetheless, educators are grateful to see the new funding sources, given the grim budget situations many schools are facing, some observers say.

“Most of the time, [the fee increases] are not going to make or break funding for education, but they’ve certainly been helpful,” said Kathy Christie, a policy analyst with the Education Commission of the States, located in Denver. “Obviously, everyone wants every dollar they can get for education, so nobody is complaining.”

David A. Ritchey, the director of public affairs and government relations for the Association of School Business Officers International, said his members were reporting one of the worst years they’d ever seen—and were looking for relief anywhere they could find it.

“They’re all facing real financial problems,” he said from the group’s Reston, Va., headquarters.

But others say the increased fees are not fair.

Pete Sepp, a spokesman for the National Taxpayers Union, an Arlington, Va.-based group that advocates lower taxes and what it sees as more responsible government spending, says that much of the funding from the new fee increases is being used for projects that have nothing to do with the purposes of the fees.

“More often than not, these fees only bear a tenuous relationship with services provided, and in those cases they are indistinguishable from tax increases,” Mr. Sepp said.

Further, some lawmakers and other critics argue that the fee increases will have a regressive effect because the lowest-income residents will bear the brunt. Mr. Sepp noted that most states’ residents have no choice but to pay increased vehicle licensure fees because they must rely on their cars for transportation.

Higher education has been a prime subject of fee hikes. Practically every state has raised tuition and fees at public institutions this year, according to the NCSL.

Higher Ed. Fees

An analysis by the National Association of State Universities and Land-Grant Colleges, or NASULGC, shows similar findings.

For instance, at the University of Arizona, an 8 percent cut in state funding has translated into a 39 percent rise in in-state tuition this year, from $2,593 to $3,593. California’s university systems raised in-state tuition 30 percent this year to an average of about $5,400 after the state made midyear cuts, and was also forced this past summer to make significant budget reductions for fiscal 2004.

And nearly every other state college or university is seeing double-digit percentage increases in their tuition and fee scales.

“It’s certainly a year of much larger tuition increases than we’ve seen probably in the last decade,” said Cheryl Fields, the director of public affairs for NASULGC, based in Washington. At the same time, the tight budget situations mean states have not been able to offer increases in financial aid for students. But the situation could be much worse, Ms. Fields added. Many state universities had capped tuition and fees in the 1990s, so while the increases may be significant, they are the first that many institutions have put in place in several years.

Still, many institutions are worried that the higher cost of attending college could translate into less access to their programs, particularly for low-income students, Ms. Fields said. Her group is trying to emphasize that financial aid and loans are still available. “We’re hopeful that people won’t decide that they can’t afford to go,” she said.

Related Tags:

Events

This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Sponsor
Assessment Webinar
Reflections on Evidence-Based Grading Practices: What We Learned for Next Year
Get real insights on evidence-based grading from K-12 leaders.
Content provided by Otus
This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Sponsor
Student Well-Being Webinar
Creating Resilient Schools with a Trauma-Responsive MTSS
Join us to learn how school leaders are building a trauma-responsive MTSS to support students & improve school outcomes.
School & District Management Live Online Discussion A Seat at the Table: We Can’t Engage Students If They Aren’t Here: Strategies to Address the Absenteeism Conundrum
Absenteeism rates are growing fast. Join Peter DeWitt and experts to learn how to re-engage students & families.

EdWeek Top School Jobs

Teacher Jobs
Search over ten thousand teaching jobs nationwide — elementary, middle, high school and more.
View Jobs
Principal Jobs
Find hundreds of jobs for principals, assistant principals, and other school leadership roles.
View Jobs
Administrator Jobs
Over a thousand district-level jobs: superintendents, directors, more.
View Jobs
Support Staff Jobs
Search thousands of jobs, from paraprofessionals to counselors and more.
View Jobs

Read Next

Education Funding States Get Antsy as Education Department Layoffs Delay Millions for Schools
Reimbursements for federal education aid are weeks late, according to state chiefs.
7 min read
Illustration of a clock and it's shadow is an hourglass with the symbol of money in the sand.
DigitalVision Vectors
Education Funding What the Latest Federal Funding Law Means for Schools
The new federal spending resolution leaves the door open for continued disruption to federal education funding.
6 min read
Broken and repaired: 3D symbol of a Dollar.
Education Week and Getty
Education Funding Trump Admin. Ordered to Temporarily Restore Teacher-Prep Grants in 8 States
A federal judge chided the Trump administration for offering what amounted to "no explanation at all" for terminating the grants.
4 min read
California Attorney General Rob Bonta speaks at a press conference to announce a lawsuit against the Trump administration over budget cuts to teaching training funds, at the Ronald Reagan Federal Building on Thursday, March 6, 2025, in Los Angeles.
California Attorney General Rob Bonta announces a lawsuit against the Trump administration over the cancellation of teacher-training grants on March 6, 2025, in Los Angeles. A judge on March 10 ordered the temporary reinstatement of the funds in California and seven other states.
Juliana Yamada/Los Angeles Times via TNS
Education Funding Trump Axed $400M in Funds for Columbia. Could a School District Be Next?
One legal expert described the move as arbitrary: “How can you predict what arbitrary punishment may come your way?"
7 min read
Student protesters gather inside their encampment on Columbia University campus on April 29, 2024.
Student protesters gather inside an encampment on the Columbia University campus on April 29, 2024. The federal government has terminated $400 million in funds to the Ivy League university although investigations into alleged antisemitic harassment are continuing.
Stefan Jeremiah/AP