State Rundown 6/13: Budget Crunch Time Sets in as State Fiscal Years Come to Close

With many state fiscal years ending June 30^th, budget negotiations were completed recently in California, Illinois, Michigan, and North Carolina. New Jersey remains a state to watch as a government shutdown looms but leaders continue to disagree about a proposed millionaires tax, corporate taxes, and school funding. In other states looking to wealthy individuals and large corporations for needed revenues, Arizona‘s teacher pay crisis could be solved with a tax on its highest-income residents and a similar proposal in Massachusetts is polling well, but Seattle’s new “head tax” could be on the chopping block.

— Meg Wiehe, ITEP Deputy Director, @megwiehe

Major State Tax Proposals/Developments:

• California lawmakers reached a budget deal last week that includes expanding the state’s EITC to young adult workers and seniors, but a proposal to extend the credit to undocumented immigrants was not included.
• Illinois Bruce Rauner signed his first full budget since starting as governor in 2015.
• Louisiana‘s second special session collapsed last week with lawmakers passing a sparse budget but no tax deal; however, an increase of the state’s EITC from 3.5% to 5% was approved. The governor has called a third special session to address the state’s sales tax and some limited budget items. The lawmakers who will be the ultimate deciders as to any tax reform this session are currently in talks in advance of the June 18 start date.
• Michigan lawmakers signed off on a budget this week that boosts funding for K-12 education and road projects. It’s expected to receive quick support from Gov. Rick Snyder who worked with republican leaders in both chambers to craft the budget.
• North Carolina legislators overrode Gov. Roy Cooper’s veto of the state’s closed-door budget agreement. The budget, which allows $900 million of scheduled personal and corporate income tax cuts to go into place next year, will go into effect on July 1^st.
• With three weeks left before the end of its fiscal year and a possible government shutdown looming, New Jersey‘s budget remains a work in progress. Gov. Phil Murphy’s proposal, which includes reversing Chris Christie’s expensive sales tax cut and instituting a millionaires tax, hasn’t won over all legislative leaders. Some of those leaders are believed to be behind a leaked alternative plan that uses temporary corporate tax increases and a tax amnesty period to plug the budget hole for now but does not represent a sustainable long-term solution to the state’s budget woes. Meanwhile, schools could be forced to raise $615 million in property tax if the state opts to balance its budget by cutting their funding.

Further State Fiscal News:

• Well that didn’t last long. The Seattle, Washington, City Council is met yesterday and repealed the “Amazon tax” it passed a month ago. Among the “takeaway lessons” from the apparent reversal is the fact that the city continues to suffer from a homelessness and housing crisis for which solutions remain undefined.
• Momentum for higher taxes on the states’ wealthiest continues in Arizona as teachers work to build support for a potential ballot initiative while a recent poll showed support of 65 percent of surveyed Arizona voters. The initiative would add a tax surcharge of 3.46 percent on income over $250,000 (single)/$500,000 (married) and 4.46% on income over $500,000 (single)/$1,000,000 (married).
• Polling in Massachusetts also shows strong support for a potential ballot initiative that would add a 4 percent surcharge on income over $1 million. Seventy-seven percent of Massachusetts voters surveyed favored the millionaires tax. In that same poll, support remained high for reducing the state’s sales tax.
• Transit taxes are a hot topic in California right now. Last week voters approved a proposition that would earmark new revenue from transportation taxes for transportation projects only; and efforts to repeal last year’s gas tax increases are heating up, driving republican voter turnout at recent primary elections and resulting in the unseating of a democratic senator based on his gas tax vote.
• From Oregon: a proposal to shield groceries from taxation may have far reaching impacts, critics warn; a proposed constitutional amendment to equalize tax rates across business types has been approved for a draft ballot title; Comcast and the state have reached a settlement agreement, ending a nine-year legal dispute over the company’s property tax liability; and while the state’s economic and revenue performance continues to be stellar, some warn it won’t last for long.
• New Missouri Mike Parson has signaled his support for a gas tax increase to repair and improve the state’s infrastructure, on which residents will vote in November.
• Mississippi, on the other hand, is finding out just how bad roads and bridges can get when lawmakers continually refuse to find revenue solutions to fund needed repairs.

What We’re Reading…

• The New York Times summarizes the trend this year of years of state tax cuts and underfunded education systems culminating in teacher strikes and protests.
• A new report in Arkansas explores the connections between wealth and health. Among the recommendations for improving health outcomes by reducing poverty is enacting a state EITC.
• Connecticut Voices for Children released a report that summarizes legislative changes and identifies the impact of the budget adjustments on the state’s children and families.
• The Commonwealth Institute explains that adopting the provisions of the federal tax-cut bill that affect Virginia would help raise needed revenues and keep filing simple for state residents.

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 [email protected]. Click here to sign up to receive the Rundown via email.

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