News
'We're Desperate and Looking for Help!'

As state budget woes increase, NEA and its state affiliates lobby for $50 billion in direct fiscal relief from Washington.

Missouri NEA members have had every reason to feel secure about school funding during this, the worst round of budget deficits to hit states since World War II.

The governor these teachers and support professionals helped elect, public education advocate Bob Holden, has shielded schools while trimming other state expenditures.

But the Show-Me State is headed for a fiscal showdown. Missouri doesn't have the $300 million it needs to pay all of its public education bills by June 30, and it faces a general revenue shortfall of $1 billion in Fiscal Year 2004.

After Governor Holden rakes up some short-term "revenue enhancements" and "cuts almost every social program to the bone, there will be nothing left to cut," shudders Missouri NEA President Greg Jung. "Education will have to be next--we're desperate and looking for help!"

Many other NEA state affiliates face a similar dilemma. In the latest survey conducted by the National Council of State Legislatures (NCSL), two-thirds of the states reported that they must reduce their budgets by a total of $26 billion between now and June 30 (the end of Fiscal Year 2003 in most states). And NCSL expects state legislatures to face a total budget shortfall of at least $68.5 billion in FY 2004.

There's more behind these mounting deficits than an economic downturn, sinking stock prices, homeland security demands, and soaring public health care costs. AFL-CIO economists report that federal tax changes in 2001 and 2002 "negatively affected states' bottom line, as most states link their estate tax and bonus depreciation rules to the federal rules, both of which have been changed to reduce taxes."

And NCSL expects yet more fiscal pain linked to federal policy. NCSL President Angela Monson, a state senator from Oklahoma, says that state budget planners are concerned that President Bush's proposed FY 2004 federal budget "does not meet the costs of mandates for the No Child Left Behind Act, special education, and election reform."

Needed: 'Unrestricted Federal Relief'
Worse yet, this spending plan, described by the Bush administration as an "economic growth and job creation" package, would provide no money for state and local governmental fiscal relief--while freezing, reducing, or eliminating funding for a broad array of federal education programs (compared with FY 2002 levels). The plan would, however, allocate $75 million for a private voucher "demonstration" program.

Among tax changes in the proposed budget is a provision exempting stock dividends from individual taxation. In a preliminary analysis, the nonprofit, non-partisan Center on Budget and Policy Priorities (www.cbpp.org) projects that this provision would mean an annual revenue loss of $4.1 billion for the 37 states (and the District of Columbia) that link their tax systems to the federal taxation of dividends.

And, if enacted, the dividend "exclusion" provision could force school districts to boost interest rates on tax-free construction/renovation bonds to make them competitive with tax-free stock dividends.

"There is no question" that this plan would cost states more and drive investors "away from bonds that broadly benefit the public at a time that we have enormous infrastructure needs," California state Treasurer Phil Angelides told the New York Times.

"States and local districts are already struggling with budget shortfalls, forcing them to cut back on school hours, school days, and school programs," says NEA President Reg Weaver. "It will be impossible for them to meet new federal mandates with a new round of program cuts and freezes.

"To be more than rhetoric, this federal budget should include direct, unrestricted aid to states in an economic stimulus package designed to help ease this burden."

To that end, NEA and its state affiliates are now engaged in an intensive, coordinated campaign to lobby for $50 billion in federal relief to the states in the FY 2004 budget, a sum that's right in the ballpark of other "fiscal recovery" plans--both Democratic and bipartisan--now pending in Congress.

"We need to make noise with members of Congress and get them to understand this is a high priority," stresses NEA Executive Director John Wilson. "If they could bail out the savings and loan industry they could do the same for state and local governments. It would stimulate the economy and be a win-win situation for everyone."

--Dave Winans

For more on NEA's lobbying priorities in the 108th Congress, go to www.nea.org and click on "Legislative Action Center."

Big Arguments for a Bigger Federal Outlay for Education

As Congress labors to write a Fiscal Year 2004 budget resolution by early spring, NEA and its state affiliates will be working equally hard to ensure that this document includes $50 billion in desperately needed federal aid to the states.

With NEA assistance, state affiliate leaders and staff will be lobbying members of Congress, meeting governors, urging state legislators to pass resolutions supporting federal aid, and educating the public on the funding crisis that has engulfed public education.

Among the arguments state and local officials can expect to hear from educators:

• The crisis in public education funding is real. "In 'back-home' meetings with educators, members of Congress need to see how budget shortfalls affect their states and districts," says Missouri NEA President Greg Jung, a fifth-grade teacher from the Ritenour district. "Teachers lose jobs, students are packed into classrooms, programs are cut, and social services disappear."
• Congress must fund its own mandates. "In Missouri, much of the money to fund special education programs comes from the state and local districts. The federal government never lived up to its promise to pay a 40 percent share," Jung points out. "And now our state, which cut back funding for student testing, must 'fill in' math testing gaps in our current assessments to meet the mandates of the Elementary and Secondary Education Act (ESEA).
  "President Bush wholeheartedly supported ESEA, but his budget doesn't support the programs for which he advocated," Jung adds.
• Federal aid makes a big difference in tough times. "Unlike states, the federal government can deficit-spend," notes Michael Butera, executive director of the Wisconsin Education Association Council (WEAC). "The federal government has the power and fiscal capacity to help states put their economic house in order.
  "Remember, the airline industry was decimated after September 11 and, within weeks, the federal government created a program with a large cash layout to help carriers come out of the doldrums," Butera points out. Now states are facing similar circumstances."
• There are fiscal priorities. In his budget, President Bush proposes $1.5 trillion in tax cuts over the next 10 years. Just 3 percent of that amount would help states prevent cuts in education and health care services.
  Jung reminds the Bush administration that "just like at mealtime at home, the federal government must set priorities. You've got to feed the kids and take care of basics before you buy a new car."
• There's no better time to invest in education. It's bad policy to disinvest in public schools at a time when the U.S. Bureau of Labor Statistics is projecting a shortage of 10 million, well-trained, skilled workers by 2010.
  "States need the money to invest in [pre-K to graduate education] to grow the economy and come out of the downturn," says Butera. "It's not a matter alone of dollars for education. It's also about job creation and economic development."
• The health care system must be fixed. The soaring cost of health coverage and the upsurge in numbers of uninsured Americans--now at 41 million--means that public/employee health care competes directly with education in state budgets. "Health care costs are rising faster than education," notes Butera. "The federal government must rethink its Medicare/Medicaid reimbursement formula to states and must focus attention on the nationwide problem of rising health costs."

--D.W.

[Your Dues Did It]
NEA Releases Study on Property Tax Handouts

While public education's tin cup gets federal aid by the drip, its bottom leaks property tax revenue in streams to property tax abatements or "tax increment financing" schemes (TIFs) granted to corporations in all 50 states. And few local school boards have any real say in this decision, often made behind closed doors.

That's the conclusion of Protecting Public Education From Tax Giveaways to Corporations, a 50-state study commissioned by NEA and released to the national media at a January press conference.

Researchers analyzed state statutes, surveyed state school board association officials, and looked in-depth at five states. The final report concludes that only two states shield public school funding from property tax abatements and TIFs--defined as "an exemption of the value of real property improvements" over a set number of years--and that just two states give school boards full input into decisions about these subsidies.

Respondents in 32 states reported that one or both of these tax gimmicks divert funding from their public schools. But it was impossible to determine an exact sum, because many states don't have adequate corporate disclosure requirements--making it difficult to monitor property tax breaks made in the name of "economic development."

But at NEA's press conference, school board member Sharon Patchak-Layman of Illinois District 97, Oak Park, could put an exact dollar amount on school funding lost to a TIF. She reported that "we're facing a $3 million shortfall this year" and pointed out that repeal of the TIF "would give us $1.7 million in additional resources."

And Ohio Education Association Research Director Fritz Fekete told reporters that Ohio lost $102 million to tax abatements and TIFs in 1999, and has lost "an increasing amount since then--even though our state is in the midst of a school funding crisis."

The NEA study, carried out by Good Jobs First--a nonpartisan, nonprofit corporate accountability project--calls for improved disclosure of tax subsidies, a "formal say" for school boards in subsidy decisions, and state government action to protect school revenues from the effects of tax abatements and TIFs.

The report stresses that the local supply of skilled labor is increasingly rated as the top factor in business relocation or expansion decisions, not tax breaks. "We believe abatement programs can have merit, but not when they choke off funding that is the key to economic development--local public schools," Illinois Education Association-NEA President Anne Davis told a wire service after the press conference.

"Good public schools attract corporations and are essential in the economic development of communities," agreed NEA President Reg Weaver. "This report tells us that our state and local officials need to protect this long-term investment by ensuring that tax incentives are used wisely and responsibly."

"Tax abatements and TIFs may be new to the vocabulary of some educators," Weaver concluded, "but we need to sharpen our knowledge of them--so that we can point out where resources can be found when people ask where additional money can come from to fund public education."

--D.W.

To read NEA's study on tax abatements and TIFs, go to www.nea.org/presscenter/images/protectingpubliceducationfullreport.pdf. And for background on this report, go to www.nea.org/neatoday/0204/news16.html.