There is some good news and some bad news regarding state taxes.
The good news – for state tax collectors, anyway – is that the Great Recession, which led to massive job losses fed by depression within housing and financial sectors, is long past. State tax revenue rose 6 percent last year, according to Bloomberg News, which was the third consecutive year-on-year increase, based on U.S. Census Bureau data. In all, states collected $846 billion last year, or $140 billion more than in 2010, the peak of the recession, and nearly 9 percent more than their pre-recession peak. Increases in state tax revenue are good for residents, too, because it generally means less of them are out of work than before.
The bad news is for colleges and universities that rely on state funding. They aren’t reaping the rewards of increased state tax revenues, and that’s a negative when you consider that higher education in all its forms is necessary for the health of civil society. Plus, where states are electing to spend their additional tax revenue is disturbing.
First, some data. In response the recession-induced revenue drops in 2009 and 2010, state lawmakers took to balancing budgets, in part, by cutting funding to higher education. The drop was substantial: Funding for higher education stood at $79 billion in 2008 but was cut to $71 billion two years later. “That made some sense,” Bloomberg reported. “It’s easier to strip money from colleges than prisons, elementary schools or Medicaid.”
But then, after education funding leveled off again in 2011, it dropped a further 7 percent the next year. And though it got a small bump in 2013, state spending on higher education remains 13 percent lower than it was in 2008.
The tax revenue came back, but the funding for higher education did not.
Now, you might think that since college isn’t for everyone, it isn’t a big deal that state spending on higher education has been cut. But some of these funds that were cut would have helped finance training at one- and two-year technical schools – not a formal education, but enough to provide recipients with a life-long tradecraft and the opportunity to make a decent living.
And the other half of that coin is this: Higher education funding has steadily been stripped from state budgets for years before the Great Recession and shunted instead to welfare-related assistance and healthcare programs – and prisons.
So in other words, states are increasing funding to programs that do nothing to contribute to the stability of civil society but in fact are results of, and contributors to, its breakdown.
Welfare-related programs have skyrocketed in cost since the Great Recession, perhaps necessarily. While these expected increases came in response to a true financial crisis – one that was facilitated, in large part, by government policy – such increases should have been temporary. But they have not been temporary; in fact, because government policy (think Obamacare, especially), job and industry growth has remained flat, thereby increasing the need for more spending for state- and federal government assistance.
At the same time, the U.S. prison population has been increasing on the federal level (while actually decreasing a bit on the state level). Overall, however, it remains, per capita, one of the highest in the developed world. And with every government enterprise, you know there are all sorts of rules and requirements, each of which costs taxpayers.
Some states have begun to see the light. They are beginning to implement new policies aimed at reducing their prison populations. Some, like California, have had to arbitrarily reduce populations in response to U.S. Supreme Court orders, but others, like Texas, have done so by reducing mandatory sentences and using parole and treatment for non-violent offenders (think drug-use crimes). In this way, they’ve been able to reduce their prison expenses; building more prisons for mass incarceration – a trend that began in the 1970s – may be a strategy that is on its way out.
That’s as it should be. The next step is reduce government interference in the free market so as to reduce the need for so many Americans to remain on the public dole. Both measures would help strengthen the civil society and, interestingly enough, bolster state and federal tax collection.
Which could then be used to bolster funding for higher education.
When a state must spend more to incarcerate and/or take care of its citizens than to educate them, there is something inherently wrong with the system. That is an equation that is not conducive to the sustainability of a great nation.