CORRECTION: A previous version of this post mislabeled a graph. It was of state spending on transportation, not infrastructure. It has been removed.
Tax less and spend more on education and infrastructure — that seems to be the emerging theme from governors’ state of the state addresses so far this year, according to an analysis from credit rating agency Moody’s.
In Connecticut, the address was focused on jobs; in New Hampshire it was on infrastructure and the economy. In Idaho and Washington, education got top billing. The 37 speeches so far offer a preview of the priorities for each state executive. And they reflect more optimism than in years past, thanks to rebounding economies and greater demand for spending. But don’t take it as a broad sign of ambition among governors.
“Education, infrastructure and tax reform are core state functions, and the governors are not proposing major new initiatives outside of these areas,” Moody’s reports. “Having just emerged from a period of sustained austerity, most states are reluctant to commit to new multi-year spending obligations. But neither are most states prioritizing building reserves with their surpluses.”
Education: 28 mentions
Education was the most common theme across the state of the state addresses so far, with 28 of 37 governors recommending more funding or better performance through reforms.
In Missouri, the governor proposed increasing education spending by 14 percent. In Alabama, New Jersey and New York, they proposed expanding pre-K programs and increasing the time students spend in school. K-12 funding or reform was mentioned in 25 state addresses, while 16 mentioned higher education funding or reform.
But increases in funding could prove painful if revenues don’t continue their rebound. The good news is that they already have: Year-over-year revenue growth for the quarter that ended in June 2013 was 6.8 percent, a big increase over the average 1 percent growth from fiscal 2007 through fiscal 2012. But education spending is often the largest part of a state’s spending — approaching half on average. So even a small change could have a big impact.
“For all states, a sharp increase in education funding could pressure budgets if the strong fiscal 2013 revenue growth is not sustained through fiscal 2015,” the authors of the Moody’s report write.
Infrastructure: 17 mentions
The next most-common theme was infrastructure investment. Governors have been especially hamstrung in recent years by state debt limits tied to revenue. With the economy faring so poorly, people were earning less and thus paying less in taxes. As the economy turns around, the opposite will be true.
“As revenue and economic growth continue, these debt limits will begin to ease, and states will have more flexibility to invest in infrastructure,” the report’s authors write.
Tax reform: 16 mentions
This one may not come as much of a surprise. Tax reform typically means at least some cuts. And in an election year for 29 governors — seven more will be termed out — at a time when anti-tax sentiment is high, tax cuts are an obvious policy proposal.
Governors in Idaho, New York and Wisconsin mentioned cutting income taxes, following in the footsteps of Kansas, North Carolina and Ohio. In Colorado, the governor proposed expanding business tax credits, while Hawaii’s governor proposed cutting taxes for seniors.
What wasn’t said
There’s good news it was left unsaid, too, Moody’s notes. There have been fewer mentions of cutting debt and reforming pensions than in years past. The same goes for the idea of creating new revenue streams through things like legalizing gaming or widening to what the sales tax can apply.