More higher ed funding cuts may be on the way

States' financial health, budgets remain uncertain

Public colleges and universities may need to brace for another round of state budget cuts. 

Tax revenues are falling short of projections, worrying many state officials, Reid Wilson reports for The Hill.

Such revenue grew by just over 2% in the 2016 fiscal year—which is less than the rate at which states' spending and obligations grew.

Generally, states expect a 5% growth rate in tax revenue every year, but preliminary data from the last fiscal year show overall general fund tax collections increased just 2.3%. Compare that with fiscal year 2015's growth rate of 5.2%.

"That's a red flag right there," says Lucy Dadayan, a budget analyst at the Rockefeller Institute of Government at the State University of New York.

"It is true that state revenues overall, adjusted for inflation even, have recovered," says Michael Leachman, director of state fiscal research at the left-leaning Center on Budget and Policy Priorities. But the rate at which they're growing "is not enough to keep up with increased enrollment in schools and more students in public colleges and long-term care and other Medicaid services."

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Actual tax revenue growth rates vary by state, as each uses different ways to collect revenue.

For example, North Dakota, Wyoming, and Alaska rely on natural resource extraction taxes. As prices for oil and natural gas fluctuate, so do revenues. 

New Mexico is expecting a shortfall of $150 million to $200 million caused by lower oil prices, according to experts.

Other states blame lower business tax collections.

Complicating the problem are long-term declines in revenues for tobacco taxes and gas taxes as smoking rates drop and vehicles become more fuel efficient. 

Louisiana economists warn of a possible $200 million shortfall, while Oregon may see a $1.3 billion shortfall. Last week, Pennsylvania took out a $400 million line of credit.

Even states with strong tax revenues are operating cautiously. California's tax revenues are up 66% from the bottom of the recession; it had a $3 billion surplus last fiscal year.

Still, state officials remain cautious.

"We remember very clearly the impact of the last recession. So we want to make sure we do not replicate the pain of the last downturn in the economy," says California Treasurer John Chiang (Wilson, The Hill, 8/18). 

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