The Kochs Helped Slash State Taxes. Now Teachers Are in the Streets

(Bloomberg Businessweek) -- On May 16, at least 29 North Carolina public school districts serving 865,000 students closed their doors as teachers walked out. The complaints have become familiar: overcrowded classrooms, teachers forced to hold down two jobs, and textbooks so old that they call the internet new. Some classrooms haven’t had a certified teacher all year, says Mark Jewell, a fifth-grade teacher from Greensboro and head of the North Carolina Education Association.

“We have districts that are choosing between the light bill and toilet paper,” he says. “That’s not normal.”

A crowd of 19,000 marched through Raleigh, according to the city’s Downtown Alliance,  and interrupted a session of the state legislature. Their demands: that pay and education funding be brought up to the national average within four years; that a corporate tax cut be suspended until that happens; and that a $1.9 billion bond issue go on the ballot for school construction. At a press conference a day before, Senate President Phil Berger and House Speaker Tim Moore said they wouldn’t suspend tax cuts but would consider bonuses for high performing teachers. According to news reports, one protester carried a poster declaring, “My second job paid for this sign.”

The protest was the fifth large-scale demonstration in less than three months in states with Republican-led legislatures, most of them organized on the internet in places where unions are weak. They began in February in West Virginia and spread to Kentucky, Oklahoma, and Arizona; teachers in all those places have won raises or new funding. (There was also a local walkout in Colorado in April.) Many of the walkout states had spent the post-recession years pursuing the starve-the-beast policies advocated by Charles and David Koch, the Americans for Prosperity advocacy group they helped found, and the small-government Tea Party movement they funded. Teachers’ victories are the latest sign that the dogma of growth through tax cuts and austerity is losing appeal.

For almost a decade, state lawmakers nationwide cut back or slowed growth in education aid—their biggest expense—as fast-rising pension and health-care costs outpaced revenue growth. The Koch pitch: Tax and spending cuts would unleash the private economy. But in capitals where the Tea Party swept Republicans into office, cuts exacerbated stress. While economic health is based on many factors, only one of the 10 states that decreased taxes most significantly had compound annual growth exceeding the national average from 2011 to 2017, according to U.S. Commerce Department figures.

“There’s this promise,” says Meg Wiehe of the Institute on Taxation and Economic Policy. “ ‘We’re going to put more money in your pockets. We’re going to let your family decide how to use this money.’ But the trade-off is: Your school is unfunded, your teachers’ pay is frozen, your classrooms are crowded, your textbooks are 25 years old.”

In Arizona, teachers walked off the job on April 26, closing schools for more than 1 million kids. Elementary school pay in the state was the nation’s worst. Schools had leaking roofs, broken desks, no soap in the restrooms, and drastic teacher shortages. More than 2,000 classrooms were staffed by substitutes and an additional 3,000 by people who weren’t licensed teachers at all.

“People are fleeing the state not to be a part of it,” says Noah Karvelis, an elementary music teacher from suburban Phoenix who helped organize the strike.

In recent months, the coffers of many states have benefited from the federal tax cuts passed last year. Still, those that embraced the tax-cut dogma most fervently are retrenching. Kansas last year raised taxes mainly to fund schools. Oklahoma did the same in March, raising taxes for the first time in 28 years, despite opposition from Americans for Prosperity. Republican leaders said they’d taken the experiment too far.

The movement’s stumbles should surprise nobody, says Vanessa Williamson, who studies state budgets at the Brookings Institution in Washington. “The notion that cutting taxes is going to unlock this miraculous level of growth is one of the most thoroughly tested theories out there,” she says. “It doesn't work.”

Adherents aren’t dissuaded. Americans for Prosperity policy director Akash Chougule says struggling states didn’t trim fat from their budgets. “It’s not tax cuts that are the problem,” he said. “It’s irresponsible spending.”

The austerity era began in 2011 after Republicans flipped control of legislatures with help from the Tea Party. In 2010, Democrats controlled 27 legislatures and Republicans only 14, with eight split. (Nebraska has a unicameral statehouse.) The next year, Republicans had the majority in 25. Last year, they controlled 32.

The newcomers arrived with tax-cut fever. Governor Sam Brownback, a Republican, turned Kansas into a self-described laboratory for conservative policy, cutting income taxes in 2012 and 2013. The estimated annual revenue loss was $800 million. Oklahoma and Arizona piled new cuts atop older ones. In Oklahoma, the combined impact now stands at more than $1 billion a year, according to the Institute for Taxation and Economic Policy. The combined lost revenue from Arizona’s cuts was $4 billion a year by 2016, according to the Grand Canyon Institute in Phoenix. The North Carolina Budget and Tax Center says cuts that began in 2013 cost the state $2.6 billion annually—with an additional $900 million scheduled to take effect next year.

Much of the fiscal pain played out in the classroom. The walkout states are among 12 in which per-pupil formula funding, the primary form of spending on education, is still below the level of a decade ago, adjusted for inflation, according to the Center on Budget and Policy Priorities. Oklahoma’s per-pupil funding was down 28.2 percent, Kentucky’s down 15.8 percent, Arizona’s 13.6 percent, West Virginia’s 11.4 percent, and North Carolina’s 7.9 percent.

Oklahoma’s crisis was arguably the worst. The state boomed until 2014, when crashing oil prices combined with tax cuts to tank revenues. About 20 percent of public schools had to switch to a four-day week. Until their walkout this year, teachers hadn’t had a raise in 10 years and were earning the country’s third-lowest average salary, after Mississippi and South Dakota, according to the National Center for Education Statistics.

In Arizona, the rebellion began brewing last year. Lawmakers—who passed a $500 million corporate tax cut in 2011 and never replaced $1 billion in education funding cut during the recession—enacted a Koch-backed law creating the country’s biggest transfer of public dollars to private schools. It allowed parents to get tax money returned on prepaid debit cards for use on private tuition.

“That was the straw that broke the camel’s back, that tax dollars were being put on debit cards for people while the public schools were bleeding teachers,” says Dawn Penich-Thacker, who led a successful petition drive to kill the law. The strikes in other states galvanized public support.

So far, all the walkouts have ended with concessions to teachers. In Arizona, they’ll be getting a 20 percent pay raise over two years, although the state didn’t raise taxes to pay for it, to applause from Americans for Prosperity. Lawmakers are “making the decisions we want them to make,” says AFP’s Chougule.

Chougule says states that reversed earlier tax cuts to fund education aren’t good examples of fiscal policy. The model, he says, is a state that has cut taxes every year since 2013, created 300,000 jobs, and now has a revenue surplus, because it followed the AFP austerity gospel of keeping “the growth of spending under the growth of population plus inflation.”

That state is North Carolina.

To contact the editors responsible for this story: Jillian Goodman at jgoodman74@bloomberg.net, Stephen Merelman Flynn McRoberts

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