Long
before the failed tax-cut policy of the recent past, Kansas made a wise
financial decision by twice-yearly working out a reasonable estimate of how
much revenue the state expects to take in. It's not hard to see how that would
help to better plan for meeting public needs and assessing the ability to react
to an economic downturn. Though the revenue estimates have been off in the past
couple years, it's not because of the estimating process but rather because revenue
loss from the tax cuts were so extensive that it was difficult to make an
accurate estimate.
These
estimates are done by the Consensus Revenue Estimating (CRE) group which
consists of experts from the Kansas Division of the Budget, Department of Revenue,
and the Legislative Research Department, as well as an economist each from
University of Kansas, Kansas State University, and Wichita State University.
The
CRE's track record is pretty good. On average, from their start in 1975 to 2013
- the year before the full impact of the tax cuts - actual revenue came in
about 0.2% above the estimates. In budget year 2014, when the tax cuts were in
full effect, revenue came in 5.6% below what was expected - the biggest miss
ever.
Though some say there is room to improve the estimating process,
the CRE's past performance speaks for itself. Even through the worst of the
Great Recession, the CRE group largely anticipated the resulting loss of
revenue. Its final estimates were only a little over 2% off. It's clear
that the tax cuts, which caused such a sharp drop in actual revenues, are why
the CRE group's estimates in 2014 missed the mark by so much. When the tax cuts
went into effect, we lost over $700 million in revenue. The CRE group did
estimate that revenue would drop in the budget year that began July 1, 2013,
but its estimates didn't come close to the actual loss in revenue. Why? Because
the revenue loss from the tax cuts was so large that it was difficult to
forecast it accurately.
This puts Kansas into a constant state of budget crisis. It's forced the state
into making short-sighted decisions when we should be making the long-term
investments in education, public health and safety, and transportation that
create jobs and build a strong economy. Instead, we're using dollars that were meant to support the needs of
Kansas kids to back-fill our budget gap .
Our
revenue estimating process is a sound way to plan for the future. The
estimates can give us a good picture of how the state's ability to serve the
public will shape up in the next year. But those estimates can easily be thrown
off by drastic changes in tax policy - changes that have not come close to
delivering the huge benefits that were promised.
Read all
of KCEG's latest research & analysis, including briefs, infographics and
other blogs, on our website.
You’re welcome to reprint the blog post, if you need our staff to send you image files please let us know.
Annie McKay
Executive Director
No comments:
Post a Comment