Kansas conservatives own financial mess
The Kansas City Star
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.