A No Confidence Budget By Kansas Center for Economic Growth Senior Fellow Duane Goossen

A No Confidence Budget

By Kansas Center for Economic Growth Senior Fellow Duane Goossen

Kansas lawmakers just passed a revised budget that covers the remainder of this fiscal year, but they showed little confidence that their budget would actually work. To hedge, they added provisions allowing the governor to "delay" the final retirement system (KPERS) payment, or simply cut appropriations at the last minute in order for Kansas to escape financially from FY 2016.

The KPERS provision allows the governor to make only three quarterly payments into the retirement system this fiscal year, if money runs out. The fourth payment must still be made, but not until next year, and then with eight percent interest tacked on. That means three payments in FY 2016, but five in FY 2017. In other words, the KPERS payment gets put on the credit card. The state slides by now, but pays big time next year.

Alternatively, or in addition, the governor can unilaterally make cuts to almost any part of the budget before the end of the fiscal year. Not enough money to pay expenses? Just don't pay.

These provisions have a "trigger mechanism" that has already triggered. The governor receives the authority to delay the KPERS payment or cut spending when the general fund balance falls below $100 million, a mark hit long ago.

Lawmakers gave the governor this authority knowing the unlikelihood of the state having enough money to meet budgeted expenses. These extraordinary provisions allow lawmakers to dump the situation back on the governor and leave town without addressing the real problem-a large structural budget imbalance caused by unaffordable income tax cuts.

Consider expenses. The revised budget sets general fund expenses at $6.298 billion. That budget already imposes many spending cuts, leaves school funding with inequities, accepts operational problems up and down state government, and shifts $106 million of school transportation costs to the highway fund for payment.

But Kansas will not receive enough revenue to meet that conservative set of expenses. Even though sales tax rates were raised to record levels, the official revenue estimate only forecasts $5.972 billion in recurring revenue, but Kansas is not currently on pace to garner that. To get the rest of the way, lawmakers have agreed to transfer more than $300 million from other funds. And when that's not enough, the governor can delay the last KPERS payment, or cut programs some more. 

Uncertainty prevails. Agencies and schools do not have assurance that they can count on their appropriations. Kansas lives day-to-day on the financial margin.

The fallout from the income tax cuts is exacting a high toll on Kansas finances, a crippling problem that will continue until lawmakers face the mistake that has been made.

A look at equitable tax levies for school districts in Kansas

Tuesday, February 16, 2016 by Dr. John Heim - Executive Director of the Kansas Association of School Boards

McFly Looks at Equity

I love me some history. Having taught the subject to teenagers, I know that my enthusiasm isn’t shared by all. We have all heard some variation of the axiom “Those who forget the past are doomed to repeat it.” Goodreads website attributes various permutations of this wisdom to folks ranging from George Santayana to Lemony Snicket to Jesse “The Body” Ventura. The ever-cynical Kurt Vonnegut offered an admonishment saying, “I’ve got news for Mr. Santayana: We’re doomed to repeat the past no matter what.”

Let’s see if we can’t change Kurt’s mind. First, I will attempt to make history interesting by making this lesson about something near and dear to everyone: your money. Next I will outline the dangers of falling into the trap of time as a flat circle.

It is time to get started, so crank up the DeLorean and fire up the flux capacitor: We are headed for 1988. Ronald Reagan is president and a Bush is running for president. (Check that dial again: 1988? This seems like déjà vu.) Denver lost the Superbowl. OK, that’s good. Bono and U2 are at the top of the charts and “Rain Man” is playing at the Cineplex. An Islamic woman prime minister is serving in Pakistan.

Locally, Danny and the Miracles will win the National Championship. That’s the good news. The bad news is that if you live in the Spring Hill School District your General Fund school mill levy is 119.3 mills. But the good news is that if you live in the Burlington School District your local mill levy is 6.9 mills. That’s right, the range of mills necessary to support local schools ranged from 6.9 to 119 mills. The median mill levy was 53 mills.

In 1988, the highest five mill levies in Kansas were:

District	1988 GF Mills	2016 GF Mills
Spring Hill	119.3	20
Blue Valley	93.4	20
Olathe	92.9	20
Desoto	91.2	20
Topeka	87.5	20

When equity was finally addressed in the 1992 law, all General Fund mill levies were set at 35 mills. The law also included assistance for low valuation districts in their bond and interest funds. For all but about 20 districts, the shift to 35 mills represented a huge decrease in local property taxes. The property tax decrease – and resulting revenue dip - was compensated for by increases in sales and income taxes.

Over the next few years, as the state’s economy improved, the General Fund mill levy was decreased a few more times until it reached the current 20 mill levy indicated above. The question of why the legislature passed the 1992 school finance bill is subject to some debate, but it cannot be denied that tax equity was a big part of the equation.

But why is tax equity such an important factor in a school finance case? The courts have held that a child’s education cannot be a function of his or her address. Because the taxpayers in the highest taxed districts were paying 17 times what those in the lowest were paying, issues of equity come into play. It is harder to raise the revenue in a high tax district than it is in a low tax district.

Without proper equity provisions in a school finance system, Kansas runs the risk of falling back into the trap of some districts paying significantly more locally than others. We don’t want to go back to Biff’s future where up is down and down is up.

How can we avoid this? That’s the topic for next week’s blog.

Save the Kansas Children's Initiatives Fund

Kansas Center for Economic Growth Blog on KS Slow Job Growth

Kansas' Slow Job Growth - Excuses, Excuses

By Kansas Center for Economic Growth

When proponents of the unaffordable tax cuts start talking about why Kansas' job growth hasn't taken off, it seems there is a different reason every time. The latest explanation offered for Kansas' anemic job growth: Kansas' low unemployment rate. Apparently, if fewer people are looking for jobs, then job growth will slow down. But, like the other reasons given for the tax plans failure to stimulate the economy, it doesn't add up.

An analysis of other states with lower unemployment rates than Kansas shows that this is false. In fact, of the eleven states with a lower or similar unemployment rate, most beat Kansas in job growth, whether you count total jobs or only private sector jobs.

 

What's more, all but two of these states started with lower unemployment rates than Kansas over the same 36-month span - meaning they had even less slack in their labor market.

Kansas' current low unemployment rate is not unprecedented either - it could be possible that low unemployment does equate to less robust job growth in the state. So, let's go back to the 36-month span between January 1997 and December 1999, where the unemployment rate was similar to the present - even slightly lower. This means we should expect even lower job growth than the present period.

What we see is the complete opposite of the story currently being told about Kansas' slow job growth: the growth in total and private sector jobs during the late 1990s is double that of what we're seeing today.

 

 

Also, we've previously noted that Kansas' unemployment rate isn't really much to brag about as we've been lower than the nation and on par with our neighbors for the past 25 years.

Instead of generating new reasons to try and explain away the tax cuts' failure to boost job growth, Kansans need to see solutions that address the stagnant economy. When Kansas last enjoyed a low unemployment rate and high private job growth, the state was making investments in the things that are proven to create a solid base for job growth - schools, safe and healthy communities, roads - and that keep and attract people and businesses to the Sunflower State.