Teacher's Guide for The Kentucky State Budget Game
Back to The Kentucky State Budget Game page
This game teaches concepts applicable to at least two of the seven academic expectations for social studies: 2.15, which relates to the structure and function of political systems, and 2.18, which relates to the structure and function of economic systems.
Students will learn about the financial limitations state leaders face in deciding how to spend the state's money, and they will see that there are political implications to the budget decisions that state leaders make. In addition, this game may lead to a discussion of how political decisions are made, which groups influence those decisions, and what kinds of trade-offs voters are willing to make between taxes and services.
This game is a computer-based problem-solving exercise which requires creative thinking on the part of the students. They must fulfill their campaign promises to increase spending or cut taxes while still balancing the budget.
The Kentucky State Budget Game is part textbook, part simulation. As the game begins, players have just been nominated to run for governor. Players receive a budget overview, with a discussion of state revenues and expenditures over the past 20 years. The overview includes 16 full-color charts and a separate discussion of each of the major revenue sources (income tax, sales tax, etc.) and spending categories (education, health care, etc.) of the state budget. Next, players can see the potential budgetary effects of several different events, including a change in federal Medicaid policy or a recession.
Now it's time to run for governor. The players select one of four political platforms on which to run (improved primary and secondary education, improved higher education, improved health and safety, lower taxes), and then must fulfill these promises after the election. Players can make changes to the tax structure by raising or lowering the rates, adding or eliminating exemptions, even abolishing certain taxes altogether. Players can also make changes to state expenditures for several different functions of state government: police and corrections, primary and secondary education, higher education, health, and all other. Players can change the number of people covered by a function (for example, they may increase or decrease the number of people eligible for Medicaid) and they can change the amount of money spent on each person covered by a function.
Players receive a political score based on the taxing and spending decisions they have made. The object of the game is to receive a high political score. The political score rises if players fulfill their campaign promises and balance the budget. The score falls if they do not. Keeping the campaign promises while balancing the budget is tricky, because lower taxes or higher spending make the deficit bigger.
There are several random events that may occur beyond the control of the players: a change in federal Medicaid policy, a recession, and a Supreme Court decision that a tax is unconstitutional.
1. Divide the students into small groups, each of which will choose a different campaign platform on which to run. Have the groups which promised to increase spending (for higher education, primary and secondary education, or health and safety) fulfill their campaign promise and then balance the budget by just increasing taxes, without any cuts in spending for other functions. Have the group which promised to cut taxes fulfill its promise and then balance the budget by cutting spending in just one or two categories (try health and primary and secondary education). What happens to the groups' political ratings? Now try a more balanced approach, with spending cuts in different categories and moderate tax increases. Why are the political ratings so much higher?
2. Spending for police and corrections and for health and human services is growing rapidly. Meanwhile, spending for education is getting a smaller share of the budget. (There is more information on spending for these functions in the overview portion of the game and in the accompanying textbook, $5.8 Billion and Change.) Have the students write or discuss whether these shifts in spending reflect voter preferences or are the results of other factors. Are public safety and public health equally important to voters? Are they both more important than education?
3. Voters often say they want two things: lower taxes and better services. Are the two incompatible? Politicians promise both, often based on the claim that lower taxes will make the economy grow faster, thus providing more government revenue for increased spending. Is this realistic? Do politicians at the state level have more or less influence over the state economy than politicians at the national level have over the national economy? In the revenue overview section of the game, have the students look at what happened to the license and privilege taxes during and after the coal boom of the late 1970s and early 1980s.
4. In this game, as the sales tax is raised higher and higher, the amount of revenue growth gets smaller and smaller, until raising taxes actually causes revenue to fall. Why? What do people do with their money when certain goods become too expensive?
Language Arts
Science
Have the students examine spending for higher education to see how much money is spent on research and development at the state universities. How does that compare to other states? How does R&D spending at the University of Kentucky and the University of Louisville compare to individual schools in other states? Is R&D still important for the state economy when businesses can move across state and national boundaries fairly easily today?
Mathematics
Have the students design their own budget for Kentucky. How much do they expect spending for health care and corrections to grow over the next 10 years? How much will revenues grow? Will they need to raise taxes or cut spending in order to balance the budget? They can get demographic data from the Kentucky State Data Center at the University of Louisville, which has population projections through at least 2020. The Finance and Administration Cabinet has additional budget data. Have the students include alternative scenarios, such as a cut in federal support for the states or slow economic growth during a recession.
Practical Living
Have the students think about government services or equipment they use each day. Of course, they go to school five days a week, but have them think about other stuff the government pays for--sewers and traffic lights, for example, and less tangible things like environmental protection and economic development. How would their daily lives be affected if government significantly increased or decreased spending for these things?
The tax structure is the foundation of a solid fiscal system. Unless the revenue coming to the state is reliable and minimizes its interference with the economy, the state may be in a precarious financial situation. In order for students to get a high political rating, they must make sure that they have the tax system in order.
Students who select one of the three spending campaign promises will get a higher score if they 1) tax personal services; 2) lower the sales tax rate to about 5.4%; 3) adopt the federal adjusted gross income and federal deductions and exemptions; 4) raise the income tax rate to about 7.2%. On the expenditure side, students should attempt to balance the cuts among the various functions (except for the one they promised to increase, of course).
Students who promise to cut taxes should 1) tax personal services; 2) lower the sales tax rate to about 4.7%; 3) adopt the federal adjusted gross income and federal deductions and exemptions; 4) raise the income tax rate to about 6.9%. On the expenditure side, students should attempt to balance spending cuts equally among all functions.
The game is based upon a report from the Kentucky Long-Term Policy Research Center, entitled $5.8 Billion and Change: An Exploration of the Long-Term Budgetary Impact of Trends Affecting the Commonwealth. This text is available for classroom use. In addition, the Center has a website with plenty of articles and reports on a variety of topics.