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Reports & Research

August 18, 2011

Study Finds Many States Making Shortsighted Cuts to Education, Undermining Future Efforts to Create Jobs

A new study from the Center on Budget and Policy Priorities posits many states are taking a shortsighted approach to addressing budget shortfalls by relying on deep cuts to education and other areas in the coming fiscal year.

“These cuts will slow the nation’s economic recovery and undermine efforts to create jobs over the next year,” the report states.

The report calls the level of cuts unnecessary. While acknowledging some cuts are inevitable because of lower revenues, “(m)any states enacting deep cuts have failed to utilize other important tools in their budget-balancing toolkit, such as tapping reserves or raising new revenue to replace some of the revenue lost to the recession.”

The CBPP also noted some states have made the situation worse by reducing taxes, or in the case of California, allowing temporary revenues to expire, “an ineffective strategy for improving economic growth that likely will do more harm than good.”

The current situation was also made more challenging by the expiration of increased federal aid. “Combined with states’ reluctance to utilize reserves or make tax changes, the loss of this federal aid leaves states with fewer options, one of which is deeper spending cuts.”

Ironically, the report states that these shortsighted budget cuts are making recovery from the recession more difficult.

“Among other effects, the budget cuts are slowing the pace of economic recovery. Cutting state services not only harms vulnerable residents but also slows the economy’s recovery from recession by reducing overall economic activity. When states cut spending, they lay off employees, cancel contracts with vendors, reduce payments to businesses and nonprofits that provide services, and cut benefit payments to individuals. All of these steps remove demand from the economy.”

The CBPP study states these cuts are harmful in the short and long term.

“Moreover, many of the services being cut are important to states’ long-term economic strength. Research shows that in order to prosper, businesses require a well-educated, healthy workforce. Many of the state budget cuts described here will weaken that workforce in the future by diminishing the quality of elementary and high schools, making college less affordable, and reducing residents’ access to health care. In the long term, the savings from today’s cuts may cost states much more in diminished economic growth.”

The entire report can be accessed at www.cbpp.org.

Source:  Center for Budget and Policy Priorities