NCSL Survey Highlights Tax Policy and K-12 Education as Key Issues for Fiscal Analysts

LOUISVILLE, Ky. — Tax policy, K-12 education funding, and housing have emerged as pivotal issues this year, according to state fiscal analysts.

These topics, along with state economic conditions and long-term liabilities, are priorities for legislative fiscal offices, said Eric Syverson, a senior policy analyst with the National Conference of State Legislatures (NCSL). The upcoming NCSL report will outline these findings, derived from a newly compiled database.

In 2024, property tax relief has been the most implemented tax policy across states, Syverson said. Fifteen states have introduced property tax cuts, mainly in the form of homestead exemptions. For instance, Kansas exempted the first $75,000 of home value from property tax bills.

Income tax cuts continue at a historic pace, though fewer states enacted new cuts this year compared to last year. Business incentives and tax benefits for families, particularly addressing child care costs, have also gained traction, with Georgia, Kansas, and Wisconsin enhancing those benefits. Federal action on child tax credits is anticipated in 2025.

Sales tax exemptions were implemented by six states for businesses and by seven states for specific goods and services.

Michael D’Arcy, director of U.S. public finance for Fitch Ratings, provided insights on fiscal concerns, highlighting declining revenues, economic uncertainty, demographic changes, structural deficits, and state credit ratings. Revenue decline, a significant issue, affected 16 states last fiscal year, driven partly by enacted tax cuts.

While economic concerns exist, D’Arcy noted skepticism regarding some recession indicators, citing the recent rise in unemployment as a statistical anomaly due to an influx of young, unskilled immigrant workers. Nonetheless, Fitch maintains no negative outlooks on states’ credit ratings, with no immediate downgrades anticipated.

Regarding structural deficits, D’Arcy mentioned no immediate concerns unless the economy faces a severe recession.

Michelle Exstrom, director of NCSL’s education program, flagged unprecedented growth in teacher salaries as a major K-12 education funding issue. Teacher compensation has kept pace with the private sector for the first time in years.

Lawmakers focused heavily on special student populations in 2023 and 2024, introducing 191 bills, including those targeting homeless students. Ensuring that allocated funds reach the intended at-risk groups remains a challenge.

Other key education funding issues for 2024 include reducing property tax dependency, reforming funding formulas, and considering innovative schooling methods, such as voucher programs and community schools.

Fatima Yousofi from Pew Charitable Trusts noted that state and local governments had reported $3 trillion in long-term debt as of 2021. Progress has been made in funding pension liabilities. Infrastructure maintenance costs, estimated between $1 trillion to $2 trillion, are exacerbated by climate change impacts.

Heather Wilson, a senior policy specialist at NCSL, highlighted four primary strategies states are employing to combat housing shortages: stability measures, easing zoning restrictions, development incentives, and promoting home ownership. So far, 1,913 housing-related bills have been introduced this year, with 336 passing.

A report by the Joint Center for Housing Studies showed a shortfall of 1.5 million housing units, with no state meeting the affordable rental housing demand.