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The State of the States

by Steven Hayward
Sunday, March 1, 1998

Low Profiles in Courage

In the most recent battles over the financing of public schools, state supreme courts in both Ohio and New Hampshire have ruled their states’ educational funding structure unequal and therefore unconstitutional. Because wealthier districts get to spend more money on schools than poor ones, the courts held, the use of local property taxes to fund education violates state constitutions as long as it results in wide disparities in funding.

The education establishment craves these court orders to equalize school funding because they typically result in higher spending and tighter control of schools by state bureaucrats. Now state legislators in both Ohio and New Hampshire must grapple with the financing of local public schools to try to appease the courts. Their solutions reveal the inadequacies of today’s education-reform debate.

Courts have now ruled that school systems in 18 states are unconstitutional because of such unequal per-pupil spending, even though numerous studies have found no positive correlation between funding levels and student achievement. In fact, in Ohio the correlation is negative, with high-spending districts producing worse results than school districts whose spending is near the median. Ohio, nevertheless, is following the path of other states, where school funding controversies lead to endless handwringing, little imagination, and tax increases.

The legislature will fail to meet the Ohio Supreme Court’s March 1998 deadline for remedying the funding disparities. Republicans, who control both houses of the Ohio legislature, are badly split over the issue. Last year, the legislature considered and narrowly rejected a one-cent, $1.1-billion increase in the sales tax (proposed by Republican governor George Voinovich), and in early February the state House of Representatives fell two votes short of passing the fallback proposal, a half-cent increase. Legislative leaders now say they may try to revive the full one-cent increase later this year. A study of the Ohio economy by the Beacon Hill Institute concluded that a half-cent sales tax increase would result in the loss of 100,000 jobs and $8 billion in private investment.

There is a conservative alternative to raising taxes, however: school choice. One way to equalize funding would be to replace the existing property-tax funds for schools with state funds spent directly on each student, that is, a "money-follows-child" policy. Students would be free to take their state grant to any school they wish. This idea would not only have the virtue of satisfying the courts, but would also be a significant step toward education reform by introducing competition to public schools.

While this idea might seem obvious to conservative education reformers, it has met with great resistance from many of Ohio's Republicans, who fear the teachers unions more than they fear a tax increase, and who worry, not insensibly, that school choice offers little for their suburban constituents. The lack of enthusiasm for the idea shows how far school-choice advocates still have to go to gain wider acceptance of the idea. The Buckeye Institute's Sam Staley says that several Republican legislators have warned him against urging school choice as a solution. Nevertheless, state treasurer Ken Blackwell and other Republicans remain committed to a "money-follows-child" policy.

In addition to its support for school choice, the Buckeye Institute argues that Ohio could find the additional money without a tax increase. Ohio’s state budget, the institute notes, has been growing faster than inflation and the state’s population since the early 1980s. On top of an expected $800-million surplus in the state’s budget this year, a few cuts in existing state spending could easily yield another $1 billion or more for schools.

In New Hampshire, the school-funding debate has just begun. It’s a debate that may shake New Hampshire’s political system to its core, as New Hampshire remains the only state without broad-based state taxes. Here, it is the Democrats who are divided among themselves. Governor Jeanne Shaheen has proposed that property taxes used to fund public schools should be made uniform statewide, and has pledged to veto any statewide sales or income taxes. Democrats (and a few Republicans) in the legislature, on the other hand, have proposed a full range of income, business, and excise taxes. Judy Reardon, Shaheen’s legal counsel, candidly admitted to the Boston Globe that "clearly there are a number of people in the Democratic Party who view the lawsuit as an opportunity for an income tax."

What will happen in New Hampshire remains to be seen. But if previous controversies in New Jersey, Texas, and Kentucky provide any insight, the court system and state legislature will engage in a prolonged period of rejected solutions followed by eventual compromise. The result will be higher taxes on wealthy districts to pay for increased spending in poorer ones, and little change in educational performance without more substantive reforms.

Devolution for Missile Defense?

Perhaps, if Alaska has its way. The Alaska legislature has passed a resolution, sponsored by state Senator Robin Taylor, calling on Congress to build missile defenses to protect western states that are within range of North Korean ballistic missiles. The latest National Intelligence Estimate, an annual report on military and security vulnerabilities of the United States, curiously left out Alaska and Hawaii in its discussion of missile threats, yet a quarter of U.S. oil reserves, located on the North Slope, are vulnerable to missile attack. The Claremont Institute has been conferring with Alaska legislators on the issue and will soon publish a paper, "The Threat to Alaska and the West."

Conservatism Goes Local

Four of North Carolina’s five largest cities elected Republican mayors in 1997. Republican Jack Cavanaugh ousted incumbent Martha Wood in Winston-Salem after heading the opposition to a school-bond issuance; he is the first Republican mayor of Winston-Salem in 84 years. "The trend toward more conservative city leadership, already evident nationwide in such cities as New York and Los Angeles, seems to be taking hold here," says John Hood of the John Locke Foundation.

Piling Up Budget Surpluses

Like the federal government, many states are enjoying an unexpected surge in tax revenues that is yielding large surpluses. As of the end of the 1997 fiscal year last June, 44 states had reported a cumulative surplus of $14.7 billion; the surplus for this year should be substantially larger. "Tax cut fever is once again sweeping the land," reports the New York Times, with governors or legislative leaders in 26 states calling for tax cuts. Twenty-seven states cut taxes last year, but only by a cumulative total of $2.5 billion—far less than the surplus. Colorado, Connecticut, Delaware, and New Mexico are considering income-tax cuts, while Minnesota, Missouri, and South Dakota ponder property-tax cuts.

Pennsylvania governor Tom Ridge proposes a small spending reduction in his 1999 state budget and a cut in the state’s taxes on capital stock and franchises. Pennsylvanians already enjoy a low (2.8 percent) flat-rate income tax. Meanwhile, governors or candidates for the statehouse in several states are jumping on Virginia governor Jim Gilmore’s "no car tax" crusade. South Carolina governor David Beasley favors phasing out the car tax, and Guy Millner, a Republican candidate for governor in Georgia, has made cutting car taxes a centerpiece of his campaign.

The devil is in the details of these tax-cut plans, though. The battle in many states will be over "targeted" tax cuts versus broad-based rate reductions; there will also be strong pressure to spend the extra money on education and "for the children." The bottom line: Look for many states to spend most of the new revenue.

Abstaining from Abstinence

There are growing concerns that some states are flouting the intent of the federal abstinence-education grants provided under the terms of the welfare-reform law enacted in 1996. With $50 million already disbursed to the states, the abstinence-education program is supposed to fund activities that promote premarital abstinence, marriage, and other traditional virtues. But Washington, Rhode Island, Idaho, Maine, Indiana, and West Virginia make no mention of marriage in their plans, while several state programs refer students to other "health programs" such as birth control.

Congressman Bill Archer, the chairman of the House Ways and Means Committee, has protested to the Clinton administration. The National Coalition for Abstinence Education says the best programs are in the Southeast: South Carolina, Arkansas, Alabama, Louisiana, and Oklahoma.

State Roundup

An alleged computer glitch delayed the start of electricity deregulation in California, originally scheduled for January 1. The delay costs consumers more than $400,000 a day. Watch for utilities in other states to plead for delay, citing the year 2000 computer bug.

Petition gatherers in Washington state have turned in more than 250,000 signatures for a ballot initiative modeled after California’s Proposition 209, the California Civil Rights Initiative, which abolished the use of racial and gender preferences by the state government. The measure seems likely to qualify for the November ballot. Meanwhile, opinion polls show strong support for an initiative to end bilingual education that will be on the California ballot in June.

Virginia will begin issuing annual report cards on the performance of every public school in the state. Thirty-five states have similar reports, but Virginia is the first state to include statistics on drug use and violence as well as academic performance. School districts in Northern Virginia (the suburbs of Washington, D.C.) complain that the report will simply add to school costs.

Thirty-one states now have "concealed carry" laws allowing citizens to carry guns, up from nine in 1986. Morgan Reynolds and Sterling Burnett of the National Center for Policy Analysis have reviewed the data, and conclude that states with concealed carry laws have reduced crime more than states without such laws.