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“A Juicy Target For Budget Cutters”: To Balance Budgets, Governors Seek Higher Education Cuts

Governors in nearly a half-dozen states want to cut state spending on colleges and universities to help close budget shortfalls, often sparking vehement opposition among state lawmakers of both parties.

Republican governors in Arizona, Kansas, Louisiana, and Wisconsin, and Connecticut’s Democratic governor have proposed higher education cuts for the coming fiscal year. Higher education spending traditionally is a juicy target for budget cutters because schools can make up the lost revenue by raising tuition.

But students and their families already are being squeezed by steadily rising college costs. In fiscal year 2013, schools got about 47 percent of their revenue from tuition, up from about 24 percent in fiscal year 1988, according to the State Higher Education Executive Officers Association. Democratic Governor Dannel Malloy of Connecticut has suggested a tuition hike to compensate for the cuts, but the Republican governors are urging the schools in their states to find the necessary savings by trimming bureaucracy and consolidating campuses.

University officials argue that past budget cuts have pushed them to the breaking point, forcing them, for example, to rely heavily on adjunct professors and teaching assistants instead of full professors. During the recession, 48 states cut higher education spending. Alaska and North Dakota didn’t. They are the only two states spending as much or more on higher education than they did before the recession, when the numbers are adjusted for inflation, according to the Center on Budget and Policy Priorities (CBPP), a Washington, D.C.-based research group.

Some critics have urged the Republican governors to roll back recent tax cuts to spare the colleges and universities. But so far the governors have balked, arguing that lower taxes have helped working families and attracted businesses.

Nowhere is the controversy greater than in Louisiana, which has a complicated higher education system and a Republican governor who is considering running for president.

Governor Bobby Jindal proposed a budget that would reduce higher education spending by $141 million in fiscal 2016. In recent weeks, he has proposed offsetting some of the cuts by getting rid of some refundable business tax credits, which have a total value of $526 million. But the business community is strongly opposing that idea. That leaves the Republican-dominated legislature in a bind, forcing members to choose between education and low taxes, two priorities they generally support.

State Senator Conrad Appel, a Republican, said in an interview that if the higher education cuts Jindal proposed all go into effect “it would be really serious” and a big blow to colleges and universities. He said he wants to scale back the proposed cuts, but wasn’t prepared to say exactly how.

“If we vote to replenish, some of the cuts will be mitigated to some extent,” he said. But, he noted that the Louisiana public university system has “structural inefficiencies” that will mean more budget cuts in the future. He said he told college administrators last week that they should take steps to cut their budgets, whether that means consolidation of campuses or other methods.

“What I don’t recommend is for higher education to ignore the opportunity to fix the problem,” he said. “Either they are going to fix it or we are going to fix it for them and they won’t like it.”

Robert Scott, president of the Public Affairs Research Council of Louisiana, said that since Jindal became governor in 2008, the number of full-time employees at state colleges and universities has decreased 23 percent due to budget cuts, and that schools have been raising tuition along the way. But now, he said, “they are about to price themselves out of the market.” He said the flagship school, Louisiana State University, “still has some headroom” to continue tuition increases, but most of the small schools in the state system don’t have that luxury.

John Griswold, a fine arts professor at McNeese State University in Lake Charles, said his state is a test case for cuts to higher education.

“The conditions in Louisiana were perfect for testing an assault on state-funded higher education,” Griswold said. He noted the state has a conservative governor, legislative rules that preclude cuts in most spending except for higher education and health care, and an economic downturn prompted by the drop in oil prices.

“Similar conditions exist in other states, so conservative politicians elsewhere can also demand deep cuts to higher ed, based on populist appeals to ‘good business’ and an end to ‘welfare mentality,’” he said.

Republican Wisconsin Governor Scott Walker, a potential presidential candidate who has cut state income and property taxes by $541 million during his tenure, has proposed cutting $300 million from the University of Wisconsin system.

According to Walker, that amounts to a 2.5 percent cut, but other analysts have put the figure as high as 13 percent. The fact-checking service PolitiFact split the difference, assessing the reduction at about 6 percent. The cut would be exacerbated by the fact that there is a tuition freeze in place.

“Through flexibility and empowering current leaders from across the system, (University of Wisconsin) System and campus leadership will have the tools necessary to deliver a high quality education in a strategic manner while saving taxpayers $150 million a year,” Walker’s spokeswoman, Laurel Patrick, said.

Meanwhile, two Republican state lawmakers have called for changes in the governor’s budget that would lessen the cut, including raising out-of-state tuition and requiring the university to spend down reserve funds.

“We will work toward a smaller, more manageable cut instead of the $300 million cut proposed in the governor’s budget,” the two, Reps. Dean Knudson and John Nygren, said in a press release last week.

In Illinois, Republican Governor Bruce Rauner recommended a reduction of nearly 6 percent in direct spending on state colleges and universities. Despite the cut, Rauner argues that “this budget proposal continues to offer state support to our public universities” through contributions to the universities’ retirement system and insurance benefits for university employees.

But Rauner faces strong opposition from the Democratic-controlled legislature and from the state’s universities.

Senate President John Cullerton said on his Facebook page that the governor’s budget cuts will “undermine access to health services, child care, affordable college and retirement security for working- and middle-class families” and vowed that the legislature will amend it. While Rauner has proposed cuts in a range of areas, the education chunk is drawing the most attention.

In Arizona, the Republican-led legislature went further than Republican Governor Doug Ducey in cutting higher education, agreeing to a $99 million cut, down from an earlier legislative proposal of $104 million. Ducey had proposed a $75 million reduction as a way to pay for business tax cuts. Universities and proponents of higher education fought the governor’s cuts so doggedly that they prompted a backlash in the legislature, which upped them.

Arizona State University President Michael Crow called the action a “drastic remedy to the state’s budget troubles” and one that will come back to haunt the state when it has fewer college graduates contributing to the state’s economy.

In Connecticut, Democratic Governor Dannel Malloy proposed cutting $10.6 million from the University of Connecticut system and an additional $20.6 million from the state’s regional universities. Malloy has expressed support for tuition hikes, after several years of urging that tuition merely keep pace with inflation.

In Kansas, Republican Governor Sam Brownback since 2011 has pushed through a 25 percent reduction in the state’s top income tax rate, lowered sales taxes and eliminated a tax on small-business income. As a result, state revenue has declined by $685 million. Brownback now is looking to make cuts in education and elsewhere in an effort to balance the books.

Walter McMahon, professor emeritus of economics and education at the University of Illinois said cutting higher education to close budget gaps is “very, very shortsighted.”

“Spending on education is really an investment,” McMahon said. “As money is invested in human capital formation, each graduate is in the labor force for over 45 years and contributes increased earnings and tax revenue to state coffers.”

He added that statistics show that more educated people live longer, healthier lives and commit fewer crimes, allowing states to spend less on health care and prison costs.

 

By: Elaine S. Povich, The National Memo, March 30, 2015

March 31, 2015 Posted by | Governors, Higher Education, State Budgets | , , , , , , , , | Leave a comment

Tax Hike Prevention Act of 2010: How It Affects You

Now that President Obama has signed the Tax Hike Prevention Act of 2010, taxpayers will have some certainty about their tax situation, if only for the next 24 months.

The new law contains a bevy of tax breaks — new and extended — and emergency help for the jobless. Its cost over 10 years is estimated at $858 billion.

Here’s a rundown of some of the biggest ticket items that will affect individuals. (Except where noted, all provisions are for 2011 and 2012).

Extended income tax rates: $207.5 billion. The six federal income tax rates will remain at the same levels they are today: 10%, 15%, 25%, 28%, 33% and 35%. In addition, itemized deductions will continue to be allowed in full for high-income taxpayers.

AMT fix: $147 billion. More than 20 million tax filers will be protected from having to pay the so-called “wealth tax,” otherwise known as the Alternative Minimum Tax. For tax year 2010, the bill will raise the amount of income that is exempt from the reach of the AMT to $47,450 for individuals and to $72,450 for couples filing jointly. In 2011, those exemption amounts will increase to $48,450 and $74,450 respectively. In addition, the bill will allow taxpayers to apply nonrefundable credits (which reduce one’s tax bill dollar for dollar) to their tax liability — whether under the AMT or the regular tax code.

Social Security tax break: $112 billion. Workers will get a 2 percentage-point break on their payroll tax for one year. Instead of paying 6.2% on wages up to $106,800, they will only have to pay 4.2% in 2011. This tax break replaces the Making Work Pay credit, which expires this year. Unlike Making Work Pay, which was limited to workers making less than $75,000 ($150,000 for couples), the payroll tax holiday will be available to everyone who pays into Social Security.

Expanded child tax credit: $90 billion. The bill will retain the $1,000 child tax credit (up from $500 before the Bush tax cuts). It also will retain the reduced-earnings threshold, which allows more people to claim the credit as refundable. A refundable tax credit is one paid to a tax filer even if the value of the credit exceeds his tax liability. So if a filer doesn’t owe any federal income tax but qualifies for the credit, it is paid to him in the form of a refund.

Smaller estate tax: $68 billion. Barring any changes, the estate tax in 2011 and 2012 will be reinstated at an exemption level of $1 million and a top rate of 55%. But under the bill, the exemption level will be raised to $5 million and the top rate lowered to 35%. The legislation will also reinstate the so-called “step up in basis” for beneficiaries of those who die in 2010, 2011 or 2012. A stepped-up basis means that when someone sells an inherited asset, his capital gains tax bill will be based on the asset’s price the day he inherited it, rather than when the decedent originally bought it. Practically speaking that means the beneficiaries of those who died in 2010 will be allowed to choose which estate tax rules to follow — those of 2011 or those of 2010. Under 2010 rules, there is no estate tax but also no step-up rules; there is only an option to exempt $1.3 million worth of capital gains from tax.

Help for the jobless: $57 billion. The unemployed will get a 13-month extension of the deadline to file for additional unemployment benefits — which go as high as 99 weeks in states hit hardest by job loss.

Extended investment tax rates: $53 billion. Everybody will get to keep their low investment tax rates for the next two years. For most people, that means their qualified capital gains and dividends will continue to be taxed at 15%. Low-income tax filers (those in the 10% and 15% brackets), however, will continue to enjoy a 0% tax rate on their capital gains or dividends.

Marriage penalty relief: $27 billion. Marriage will still be hard (sorry), but not because less-than-wealthy two-earner couples will owe more to the IRS than they did when they were single. The bill continues to ensure that the standard deduction for couples is exactly twice that for single filers. It also maintains an expanded 15% tax bracket so that the amount of income in that bracket for joint filers is exactly double that for single filers.

Expanded college credit: $18 billion. Paying for college tuition in 2011 and 2012 will be made a bit easier with the retention of the American Opportunity tax credit, which is an expansion of the HOPE tax credit. The Opportunity credit is worth up to $2,500 (up to 100% of the first $2,000 spent and up to 25% of the next $2,500), and it may be claimed for four years’ worth of college. Eligibility to take the credit is limited to those with modified adjusted gross income below $90,000 ($180,000 for couples filing jointly).

Individual tax break extensions: Costs vary. The legislation will extend a number of tax breaks that have been introduced in the past few years such as the option to deduct on one’s federal return state and local sales tax instead of state and local income tax — at a cost of $6 billion. Also, it will extend a deduction for qualified tuition and other education-related expenses at a cost of $1.2 billion. Less pricey extensions include a break for teachers to deduct up to $250 in classroom expenses (just under $400 million).

By: Jeanne Sahadi, Senior Writer-CNNMoney.com, December 17, 2010

December 17, 2010 Posted by | Tax Hike Prevention Act 2010 | , , , , , , , , , , , , , , , | Leave a comment

   

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