Challenges to Building Public and Policymaker Support for Education

1. Challenges to Building Public and Policymaker Support for Education Sharon Ward Education Policy Leadership Center Education Finance Symposium November 17, 2006

2. RISK OF A STRUCTURAL DEFICIT Number of Factors Contributing to Structural Gap 10 or 9 8 7 6 5 4 or 3 Alaska Alabama Arizona Connecticut Kansas Minnesota Arkansas Georgia California Delaware Louisiana Nebraska Colorado Kentucky Hawaii Illinois Maine New Jersey Florida Missouri Idaho Iowa Maryland North Dakota Nevada Rhode Island Indiana Massachusetts New York Vermont New Mexico South Dakota Michigan Montana Wisconsin Pennsylvania Washington Mississippi New Hampshire South Carolina Oklahoma North Carolina Tennessee Virginia Ohio Texas Oregon Wyoming Utah West Virginia Most at Risk Least at Risk

3. State Budget Risk Factors • Number of services taxed under the sales tax • Strength of the corporate income tax (in PA 50% of corporations who had income paid no CNIT) • Taxing of electronic commerce ($705 billion - $1.1 billion) • Tax preferences for the elderly • Progressivity of the personal income tax • Growth of expenditure needs; i.e. long-term care • Tax policy choices • TABOR or spending limits • Failure to delink from Federal tax changes • Other structural gaps Source: Iris J. Lav, Faulty Foundations, State Structural Budget Problems and How to Fix Them. Washington DC; Center on Budget and Policy Priorities (May, 2005).

4. One of the Terrible Ten: Most Regressive Tax Systems in the Nation

6. $2.7 Billion in Tax Cuts Proposed in 2005-06Bills Reported from House Finance Committee Bill NumberDescriptionFiscal Impact • HB 153                                               Organ/Bone Marrow T. C.         $6.3              • HB 220                                               Career Development T.C.                              $20.0 • HB 338                                               Repeal GRT (Cell Phones)                           $302.0 • HB 344                                               Sales Tax Exemption Fire Equipt          $83.7 • HB 472                                               Used Computer T.C.                                $12.2 • HB 504                                               Historic Preservation  T.C.                           $25.0 • HB 515                                               Business Tax Cut Plan                                  $53.1 • HB 529                                               P I T exemption 529 plans                             $0.16 • HB 600                                               Military Leave Tax Credit                             $34.0 • HB 650                                               Uncapping the NOL           $165.6 • HB 797                                               Reduction in CNIT Rate                              $288.2 • HB 906                                               Phase-out of Inheritance Tax              $936.0 • HB 1062                                             C-B Mental Retardation T.C.                      $30.0 • HB 1312                                             Rapid Phase out CSFT                 $334.3 • HB 1586                                             Reduction of the PIT to 2.80%                   $373.3 • HB 2038                                             Tax Credits for Internships                          $30.0 • HB 2096                                              Deductions for 529 Plans         $17.0 • HB 2374                                             Motorbus Excise and Franchise.                $10.0 • HB 2585                                              Increase in the EITC                                    $20.0 ______________________________________________________________________________ • Cumulative Fiscal Impact                          $2.736 billion

7. National Campaign to Restrict State Spending • Taxpayer Bill of Rights (TABOR) legislation modeled after law enacted in Colorado in 1994 • Creates permanent, mandatory limits on state spending • Limits state spending increases to a highly restrictive formula (inflation + population growth) • Could be accomplished via statute or constitutional amendment • Would lead to deep cuts in state spending. If spending limits were enacted in 2003, PA’s budget would be have been $1.5 billion in 2005-2006. • Spending limits proposed for state government, local governments and school districts • Grover Norquist: Americans for Tax Reform, Howard Rich (I kid you not)

9. Voters Don’t Like TABOR • Colorado voters took a time out in 2005: • After TABOR business boomed • Business leaders led anti-TABOR effort • Voter referenda in three states failed in 2006 • Maine: 46% to 54% • Nebraska: 30% to 70% • Oregon: 29% to 71% • TABOR leaders fared poorly at the polls Note: the 65% solution failed in Colorado (the antithesis of adequacy)

10. Talking About Education • Build on strong local ties to education • Education polls well continually • Link education to economic development • Lesson from emergency services payroll tax: • 52 letters is a crisis • Lesson from the infectious disease report • Focus on the overall problem, not the comparison

11. Pennsylvania Budget and Policy Center 412 North Third St. Harrisburg, PA 17101 Phone: 717-255-7181 Fax: 717-255-7193 E-mail: ward@pennbpc.org On the web: www.pennbpc.org