State Rundown 5/16: Tensions Remain High Over Budgets and School Finances in Several States

Tax and budget negotiations remain at standstills in Louisiana and Minnesota, as school funding debates and teacher protests again captured headlines in several states. Oregon lawmakers, for example, finally passed a mixed-bag tax package that won’t improve tax equity but will raise much-needed revenue for education. Meanwhile their counterparts in Nebraska continue to debate highly contentious property tax and school funding proposals, Texas legislators decided to keep discussing their own similar issues, and Nevada lawmakers look for ways to appease teachers who just voted to strike.

— MEG WIEHE, ITEP Deputy Director, @megwiehe

Major State Tax Proposals and Developments

• In the LOUISIANA legislature, a few proposals have met their end—including a bill to increase the state’s gas tax and to exempt diapers and menstrual products from the sales tax—while a bill to undo the sales tax increase passed last year to address a nearly $1 billion budget hole is just beginning to move in the House. Not surprisingly the proponents of the bill and the administration are on opposite sides of the issue. — LISA CHRISTENSEN GEE
• With only two weeks left to pass a state budget with simple majorities, ILLINOIS lawmakers are urging the House to take up bills to pass a graduated income tax, making clear that April’s revenue bump is not a long-term solution to the state’s fiscal challenges. — LISA CHRISTENSEN GEE
• A constitutional convention in MASSACHUSETTS last week approved a proposed constitutional amendment that would allow a graduated income tax and an additional 4 percent income tax surcharge. The Fair Share Amendment proposal is now able to move forward onto the ballot. — AIDAN DAVIS
• Budget negotiations in MINNESOTA have stalled, with major sticking points continuing to be the fate of the state’s medical provider tax and proposed increases to the gas tax. The session ends Monday, May 20. — LISA CHRISTENSEN GEE
• Teachers in the largest county in NEVADA have voted to strike over as-yet unfulfilled promises to improve class sizes and teacher pay. Lawmakers are looking at ways to deliver on those promises, including redirecting $120 million of cannabis tax revenue to schools instead of the state’s rainy day fund, allowing counties to levy local sales taxes, and major changes to how state school aid is distributed. — DYLAN GRUNDMAN
• After a long saga that included a study committee, many competing proposals, and lawmakers going into hiding to avoid a vote, OREGON lawmakers have finally passed a gross receipts tax and school funding package. The new tax will be a 0.57 percent rate on business receipts over $1 million, with a subtraction for labor and capital expenses, and will raise more than $1 billion for K-12 schools. Unfortunately, the bill also includes regressive and ill-targeted personal income tax cuts rather than enacting or increasing refundable credits to help low- and middle-income families who will be most affected by the new gross receipts tax. — DYLAN GRUNDMAN

State Roundup

• Lawmakers in ALASKA and ARIZONA continue to debate their operating budgets. In Alaska, despite work by a special committee on the budget, the amount of this year’s Permanent Fund Dividend has yet to be decided. Arizona lawmakers have extended their session well beyond its original 100-day schedule in debates over how to address tax changes from federal conformity.
• It’s been a time for adjustment in CALIFORNIA as May budget revisions reflect lowered expectations for marijuana revenues and the revised governor’s budget includes tax benefits aimed at benefiting families—including granting a $1,000 tax credit per family with young children and exempting diapers from the sales tax.
• A group of wealthy CONNECTICUT residents, known as Fair Share Connecticut, called on lawmakers to raise their taxes and use those resources to invest in the state.
• In other CONNECTICUT news, a complex proposal to enact a payroll tax and use it to replace most of the state’s personal income tax has surfaced late in session. However, while it is likely to continue to be studied, it has moved to the back burner for this legislative session.
• Recent tax talk in MICHIGAN includes efforts by some lawmakers to restore a tax credit for historic preservation projects (which was eliminated in 2011) and conversations on why the answer to adequately funding the state’s roads and bridges won’t be found in taxing cannabis.
• MISSISSIPPI lawmakers hope that a new tax deduction will encourage donations to charities that support children in the state’s foster care system. The new law will allow donors to deduct up to $800 in qualifying donations from their state income taxes.
• MISSOURI legislators ended a 27-hour filibuster and sent a business tax subsidy bill to Gov. Mike Parsons. The bill includes up to $50 million to encourage General Motors to expand a facility in the state.
• MONTANA governor and recent presidential hopeful Steve Bullock vetoed a bill that would have offered a five-year tax abatement for telecom companies installing high-speed internet in the state.
• With the main property tax and school funding bill in NEBRASKA having been sent back to the drawing board, lawmakers continue to prepare revisions and alternatives, one of which would include a smaller sales tax increase and progressive income tax component. The disagreement has now also stalled an effort to replace the state’s biggest business tax subsidy program, as rural advocates feel property tax reforms should take precedence over subsidies that emphasize urban business interests.
• Cannabis legalization remains touch and go in NEW YORK after failing to pass in NEW JERSEY so far this session.
• NEW JERSEY will deposit money into its rainy day fund this year for the first time in a decade thanks to revenues coming in ahead of projections this spring.
• SOUTH CAROLINA’s gas tax update is providing a boost to the state’s dilapidated roads and its economy as construction companies look to hire workers in large numbers.
• TEXAS’s House and Senate are still in conference debating school finance and property tax changes. The Senate passed an education funding bill that would decrease school property tax rates by 10 cents and implement a 2.5 percent rollback rate on local school property tax. An amendment introduced in the Senate would fund the proposal without a sales tax increase.
• Taxing questions in UTAH this week include whether Utahns would support a carbon tax (as ballot hopefuls hold required townhall meetings) and whether it’s realistic (and ideal) for the state legislature to take up major tax reform proposals during a special session this summer.
• Proposed legislation would provide a tax abatement for a small, Black-owned bookstore in WASHINGTON, D.C.’s rapidly gentrifying Shaw neighborhood. Sankofa Bookstore has occupied the space since 1993, but the rise in surrounding property value has ballooned the monthly property tax bill to more than $3,000.
• A recent audit in WISCONSIN found that the state’s economic development agency that awards and is supposed to monitor tax incentives including the infamous Foxconn deal continues to deal with a host of problems around tracking performance and the awards it gives out.

What We’re Reading

• The National Association of State Budget Officers identifies common issues states face when legalizing marijuana.
• Policy Matters Ohio released a policy brief that identifies the “good and the bad” in the recently released House tax plan. Findings show that while the reduction in the state’s business income deduction is good policy and a step in the right direction, there is more to be done for the state’s lowest-income families.
• A recent study by researchers at the University of Pennsylvania Perelman School of Medicine found that the Philadelphia soda tax cut consumption by 1.3 billion ounces after the tax was implemented in 2017.
• A Newsweek contributor speaks to the importance of the proposed elimination of the “tampon tax” in California, urging for elimination to be made permanent and enacted universally across the states.

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