Kansas conservatives own financial mess
Last Tuesday afternoon, while a distracted public awaited the day’s election results, a group of Kansas officials announced that the state was about to fall into a deep financial hole.
The numbers announced by the Consensus Estimating Group, while not unexpected, are shockingly bad. The state is projected to receive $707 million less in revenues next year than it is currently spending.
Part of that hole could be filled by spending down a reserve fund of $470 million, although extinguishing the reserve balance to meet routine expenses is a sure sign of a fiscally ill state. Even with that contingency, after factoring in some new budget assumptions, analysts anticipate the state’s leaders will have to find about $328 million in either cuts or new revenues to come up with a balanced spending plan for the fiscal year beginning July 1.
That number strikes fear in the hearts of school superintendents, university leaders, state workers and the people who care for the state’s disabled and vulnerable citizens. They have weathered cuts and shortages for years and face the prospect of more.
But not everyone was dismayed by the findings of the economists and state officials who analyze state finances. Giddy with election night victories, some conservative Republicans told reporters they’d like to cut taxes — and thus revenues — even more.
Talk about a state of denial.
Kansas’ financial wound is self-inflicted. Gov. Sam Brownback and conservatives in the Legislature this year sharply cut income tax rates, despite warnings that expected business growth could not make up for the lost revenue.
The income tax cuts will cost the state about $400 million in next year’s budget, and $4.5 billion over the next six years.
Compounding the immediate problem is the scheduled rollback of a one-cent sales tax increase that Brownback’s predecessor, Democratic Gov. Mark Parkinson, signed into law to get the state through the worst of the Great Recession. Unless the Legislature extends the sales tax, the state will lose $262 million a year beginning in July.
The obvious fix is for Brownback and lawmakers to raise income tax rates when the Legislature resumes in January. But that is virtually certain not to happen.
Apart from that, there are no good options. Here are some possibilities for what could be in store:
An extension of the entire one-cent sales tax. (Four-tenths will remain in any case, to fund highway projects.) Brownback has said he might recommend such a move, though many lawmakers are likely to object.
Leaving the tax in place might be preferable to gutting schools and services, but sales taxes disproportionately hurt the poor and middle-income households. Make no mistake, if the tax increase stays on the books, Brownback will own it. His legacy will be to lower income tax rates for wealthier Kansans while raising the costs of goods and services for all the state’s residents.
Spending the reserve fund down to zero. Unlike many states, Kansas has no constitutional requirement to maintain a “rainy day” fund. Using the $470 million currently in the bank would provide a temporary partial fix, but for one year only. Kansas’ structural budget imbalance won’t go away unless the state finds more permanent sources of revenue. Eventually the imbalance and absence of a reserve fund could affect the state’s bond rating.
Borrowing from designated accounts, such as state highway fund. This is another one-time fix, and another sign of a state’s desperation.
More cuts. Conservatives say it can be done. But schools have been laying off employees and cutting programs for years. Kansas state employees are among the lowest-paid in the nation. The number of developmentally disabled Kansans awaiting services is close to 5,000.
The state is failing to meet its responsibilities now. Lawmakers who think more cuts are possible either have no conscience or are operating in blissful ignorance. The state is in bad shape and without a show of courage it will quickly get worse.
Mark Hastert
6 months, 1 week agoHow many times does conservative economic theory have to fail?
Bernie Brennan
6 months, 1 week agoSo since Kansas was bleeding population being on of the most conservative states in America. Brownback’s answer was to make the state more conservative.
Meg McNelly Schimmels
6 months, 1 week agoIn addition to the fiscal mess we’re in, Kobach now doubles-down and tells us we should all leave if we don’t like the Republican Kansas “lifestyle”. Not only will the fiscal mess not attract new business, the Kansas “lifestyle” of poor school funding, homophobia, and anti-immigrantion will ensure that diverse businesses will never relocate here. What are these guys smoking?
JR Beillenhouser
6 months, 1 week ago“How many times does conservative economic theory have to fail?”
HAha. Where has liberal policy ever worked?
Conservative economic theory works every time. Let’s compare the most conservative states to the most liberal.
Texas vs California.
Which one is working? which one is going down the tubes?
Mark Hastert
6 months, 1 week ago“HAha. Where has liberal policy ever worked”
Actually JR you’re sitting in the middle of it. Contrast our economic stimulus efforts with the Eurozone austerity response. We came out of recessions and have been growing while Europe slid back into recession. Keynes worked, Hayek flopped.
Hoover failed, FDR succeeded. Bush failed, Obama succeeded. Reagan failed, Clinton succeeded.
Interesting (and surprising) that you’d bring up California. It was the conservative Jarvis’ Prop 13 that has caused their problems by making it impossible to raise revenues when needed. It’s yet another example of the failure of conservative theory. Texas too has only gotten by due to the increase in population. Adding tax payers (especially retirees) helps your bottom line.
JR Beillenhouser
6 months, 1 week agoMark -
Your talking short term. Of course austerity is going to cause short term problems, but long term is what matters. You have to get a grip…you can’t spend money you don’t have, at some point the system fails. If Greece does not stop spending, it will fold and them it won’t be a recession, it will be like Germany after WW2. You can’t spend your way into oblivion and expect to survive as a country, you can’t do it in your personal life either. True Keynes philosophy implies that you spend during the recessionary times and save during the good. We spend regardless.
For the record, FDR failed, he got out of the depression via WW2. Additionally, you have to look at the Congress, not just the president. In terms of Bush and Obama, it is too short of a time. But at this point, unless it changes, Obama will have added 12 trillion (a staggering 120%) to the debt before he is done. History will not look back fondly on him. Reagan took the country out of the second worst administration in history, defeated the Soviet Union, and created an economy that continued for years. Clinton was fortunate enough to be the recipient of his polices and major technological advances, before he handed Bush a major recession. You guys think that putting Clinton’s Tax structure now, because it worked in a different time, is somehow going help the economy, when there is no growth. You are living in a fantasy world.
If you really know anything about California, you’d know that businesses can’t get out of their fast enough. That state is going to implode. The Laffer curve theory is showing what occurs when you raise taxes too high and revenue drops. Recent tax increases have led to decreased revenue. You can’t squeeze blood out of a turnip.
You really are a person that doesn’t have any idea about simple economics.
Mark Robertson
6 months, 1 week agoAs JR pointed out, FDR was a disaster, he just continued the policies of Hoover, but to a worse degree. Obama’s 800 billion stimulus was a total failure, it made things worse. Government spending has never brought on a strong economy. The Bush tax cuts were hugely successful. 8 million jobs, and record Treasury revenue from 05-07, Conservative policies(supply side economics) has always worked. Across-the-board tax cuts in the 20s-60s-80s and early 2000s brought economic booms with a corresponding explosion in revenues. The Community Reinvestment Act of Carter and Clinton brought on the economic meltdown of 08. FDR and Obama brought on strong economies-that’s a good one. Good for a good laugh. Suggested reading: FDR’s Folly, by Jim Powell Thank you. Mark Robertson Independence
Mark Robertson
6 months, 1 week agoSam Brownback has been an outstanding governor. It can be hoped that he will bring about more across-the-borad tax rate reduction. Thank you. Mark Robertson Independence
Mark Hastert
6 months, 1 week ago“True Keynes philosophy implies that you spend during the recessionary times and save during the good. We spend regardless.”
On this we can agree.. Bush II squandered the Clinton era savings on unfunded wars (you do remember that he did it all off book?)and lavish tax cuts that mostly benefited the wealthy (the real takers in this economy). BTW, it’s been more that ten years now, it that long term enough for you? No? Your Laffer curve is debunked and defunct. It’s time to let go.
As for CA? it was the conservative Jarvis’ Prop 13 that’s at the root of CA’s problems. Now a Dem has taken the helm and with the help of the new revenues they voted in will right that ship. Currently California has the 8th largest economy in the world. Texas? not so much,14th. Lower per capita income too.
Now for FDR, His stimulus spending indeed DID improve the economy until in 1938 at the insistence of the conservatives he cut back and the economy receded. Europe should have learned before they “austered” themselves back into recession.
The American voter isn’t as stupid as you think they are. They have rejected you and your party’s defunct philosophy. The sooner the Tea Party is shoved back into it’s ugly hole the sooner the Republican party will renew itself.
JR Beillenhouser
6 months, 1 week agoYeah - the californians who pay no tax made sure to vote to increase the tax rate so that the ones that do pay, get to pay more. And those paying the taxes are going to be happy about it and not leave. Really, do you think this stuff through at all! Do you really believe this junk. LOLOL
http://www.nctimes.com/top-ten-reasons-why-companies-are-leaving-california/article_be130984-2fe2-52f1-b49e-3cc2e28fbe70.html
http://www.dailynews.com/business/ci_21628928/untitled
http://www.breitbart.com/Big-Government/2012/03/13/exodus-california-tax-revenue-plunges-by-22
http://www.cnbc.com/id/48120446
http://illinoispolicy.org/news/article.asp?ArticleSource=4576
I’m sure that these are all just figments of everyone elses imagination though and you are right instead. No proof will convince you.
George Hunsucker
Northland
6 months, 1 week agoWe can only hope that CA implodes and drags the public sector unions with it….