State Rundown 1/18: Revenue Woes Piling Up Faster Than Solutions

This week we continue to track revenue shortfalls, governors’ budget proposals, and other tax news around the country, finding most proposals to be focused on slashing taxes and reducing public investments despite public opinion and economic research showing the benefits of well-funded state services and progressive tax policies.

— Meg Wiehe, ITEP State Policy Director, @megwiehe 

Revenue Shortfalls Abound…

• Missouri joins the growing list of states staring down major revenue shortfalls – in this case a $456 million gap in the upcoming budget and $146 million of cuts just announced to balance the current budget, largely through higher education cuts. The state may be in better shape than others to handle the issue though, thanks to a tax study commission that heard helpful suggestions throughout the summer and a menu of options provided by the Missouri Budget Project.
  
• In Oklahoma revenue receipts miss targets again, marking the ninth month of missed goals in 2016. Will the state consider a higher gas tax?
  
• As West Virginia lawmakers wait to hear details of the Governor’s plan to address the state’s budget woes, they consider the idea of increasing their tax on sugary drinks.
  
• With an eye on the state’s growing pension debt, S&P reduced Kentucky‘s credit outlook from “stable” to “negative”, increasing the chance of a rating downgrade over the next two years.
• The Illinois Senate is working to push through a two-year stalemate that has left the state without a regular budget, advancing legislation for an income tax increase among other measures known collectively as the “grand bargain.” Whether the measures will pass muster with House Speaker Mike Madigan or Gov. Rauner remains to be seen.
• The Louisiana Legislature is expected to be called into another special session to address a mid-year budget deficit of $313 million. There is talk of a constitutional convention if lawmakers are unable to address the state’s ongoing fiscal challenges this legislative session. 

As Some States Consider Tax Proposals…

• A recent poll conducted in Maryland confirms that Marylanders support investments in education and “closing corporate loopholes and raising income taxes on the state’s highest earners” to make that possible.
• A Wyoming lawmaker is proposing legislation that would prohibit lawmakers from covering more than half of any budget shortfall with the use of reserve funds. The state is currently one of two without rules in place to govern how savings are spent.
  
• Rhode Island‘s Gov. Gina Raimondo proposed cutting the state’s car tax. Her proposal would cost $55 million rather than the $215 million elimination over five years proposed by House Speaker Nicholas Mattiello.
  
• Nevada lawmakers are considering ending or fixing the state’s property tax cap, put in place 2005 to slow property tax growth but now causing big issues for local budgets.
  
• Kansas Gov. Sam Brownback has indicated a willingness to reconsider the LLC exemption, suggesting he may be open to a partial repeal.
  
• Arkansas Gov. Hutchinson has dropped some of the competition to his $50 million tax cut with the promise of a Blue Ribbon Panel on Tax Reform.
  
• The debate over state solutions to untaxed online purchases is heating up around the nation, most recently in Mississippi and South Carolina.
  
• An Arizona lawmaker pitched a dime a gallon gas tax increase for the 2018 ballot. The tax would increase the state’s current 18 cent per gallon gas tax that was last increased over 25 years ago. 

Budget Watch

• Nebraska Gov. Ricketts released details of his budget and tax-cut proposal along with his State of the State address. His proposal holds back state school aid growth and makes cuts to higher education and health funding while focusing spending growth on the state’s overcrowded prisons. He also proposed changing the way agricultural land is valued and instituting a flawed tax-cut “trigger” that will guarantee income tax cuts for the highest-income Nebraskans.
  
• Gov. Andrew Cuomo’s state budget would, among other things, extend New York‘s millionaires’ tax surcharge on the wealthy and continue with a “middle-class” tax cut enacted last year.
  
• Nevada Gov. Sandoval released the last budget proposal of his term this week. The mixed-bag proposal includes increased investments in higher education, $60 million for a private school voucher program, and a 10-percent excise tax on marijuana, which voters legalized for recreational use in November. 

Governors’ State of the State Addresses

• In the past week, Governors Hickenlooper of Colorado, Deal of Georgia, Holcomb of Indiana, Snyder of Michigan, Bryant of Mississippi, Greitens of Missouri, Ricketts of Nebraska, Sandoval of Nevada, Martinez of New Mexico, Raimando of Rhode Island, Haley of South Carolina, McAuliffe of Virginia, Inslee of Washington, Justice of West Virginia, and Mead of Wyoming delivered their State of the State addresses.
  
• States with addresses scheduled through the end of next week are: Alaska today; Hawaii and Minnesota Monday; and Massachusetts and Montana Tuesday. 

What We’re Reading…

• A National Public Radio story featuring ITEP’s Carl Davis predicts a possible “wave of state tax hikes on gasoline and diesel” as so many states face infrastructure problems and out-of-date gas taxes.
  
• According to a new study by Oxfam, just eight men have the same wealth as world’s poorest half.
  
• The Associated Press shows how recent state experiences with misguided budget-sinking tax cuts should give Congress pause when considering repeating these mistakes at the federal level.
  
• Connecticut Voices for Children released a new report citing ITEP data that explores revenue options available to tackle the state’s budget shortfall.
  
• Protect West Virginia Campaign is fighting against deeper budget cuts in the state. Read more about their work and mission here.
  
• A study by a South Carolina economist supports raising the state’s gas tax to rebuild its infrastructure, pointing out that “taxes deployed to purchase more or better-quality public services positively affect economic outcomes.”

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Meg Wiehe at meg@itep.org. Click here to sign up to receive the Rundown via email.