October 15, 2015
The late baseball icon Yogi Berra once said “It’s like déjà vu all over again”, playing on the French phrase meaning “already seen”. While he wasn’t prophetic and referring to shrinking state revenues at the time, as much could be said about monthly collections in Kansas following the unprecedented tax policy changes of 2012, 2013 and again in 2015. Since lowering the revenue estimates in April, Kansas has failed to surpass the monthly target. To keep our schools open, roads in good shape, and our communities safe and healthy, Kansas needs a predictable revenue stream to support a budget that provides reasonable, adequate support to these services that businesses and families alike rely upon.
The state income tax accounted for 50 percent of Kansas revenues when 2012 tax changes were enacted. It’s not surprising that setting Kansas on a path to eliminate personal income taxes resulted in an immediate and perpetual budget crisis. Month after month, Kansas fails to bring in as much revenue as originally planned. After exhausting a nearly $1 billion surplus in 2013 and 2014, lawmakers promised that the largest tax hike in Kansas history – enacted in 2015 – would finally stop the backsliding. Unfortunately, the same story continues to play out every four weeks. Three months into Fiscal Year 2016 and Kansas has yet to meet monthly revenue expectations.
In September, things got even worse. Revenue collections dipped $32 million below what we expected and built our budget around. This is significant for a state that already made $63 million in cuts, sweeps, and transfers less than two months earlier just to keep the budget from falling into the red.
Supporters of the tax plan continue to find new excuses for monthly misses, promising better performance over time. But after missing tax revenue estimates 11 times in the last 12 months, it’s starting to seem a bit like déjà vu all over again.
The truth is Kansas keeps missing the mark because the tax changes are so deep. The graph above shows clearly that this isn’t just a matter of tightening our belt until things get better – this is the unwelcome new normal.
The truth is Kansas keeps missing the mark because the tax changes are so deep. The graph above shows clearly that this isn’t just a matter of tightening our belt until things get better – this is the unwelcome new normal.
There’s plenty of room for some outside context, too. Kansas has been dealing with ongoing financial problems since the tax changes went into full effect, but how are other states doing?
The quick answer is that other states near us are doing just fine. The downward trend on the graph is natural as income tax revenues dipped from the Recession and climbed back during recovery. Kansas, on the other hand, was seeing income tax collections grow…and then the tax changes went into effect. Notice how the decline is steep and rapid – that’s the tax changes putting the state into financial jeopardy.
Until the underlying problem of deep, unaffordable and extreme tax changes are addressed, the unpredictable nature of revenues will likely remain. Even after additional changes were made this past legislative session, in an attempt to right the revenue ship, personal income taxes still aren’t recovering. Kansas is still in the red. And until the problem is fixed, we’ll see more problems crop up. Hospital closures because the state won’t chip in the small amount to expand Medicaid; negative credit warnings from credit ratings agencies who think the block grants to schools don’t work. Budget gimmicks to shake all of the loose change from the couch cushions to help offset damaging revenue losses from unaffordable tax changes.
While other states are afforded the opportunity to reinvest in their economic drivers – like workforce development through education, bridges and roads to support businesses moving inventory across the state – Kansas has continued to lurch from month to month, hoping the revenue miss won’t be that bad. That’s the heart of the matter, too. At the same time neighboring states get the opportunity to plan for the future, Kansas will continue to live out the same fiscal crisis month after month, leaving little predictability for the short or long term.
No comments:
Post a Comment