KS Center for Economic Growth Blog on Senate Bill 463

High Danger Alert: SB 463

By Kansas Center for Economic Growth Senior Fellow Duane Goossen

Watch out! A very dangerous financial bill just surfaced in the Senate Ways and Means Committee, but it was promoted with language that hid the ultimate purpose and effect.

Senate Bill 463 permanently transfers more than $500 million annually from the highway fund to the general fund. The bill also abolishes the Kansas Endowment for Youth Fund (KEY), the Children's Initiative Fund (CIF), and the Economic Development Initiatives Fund (EDIF), placing all revenue that those funds now receive into the general fund.

The general fund is broke. Income tax revenue was cut so sharply in 2012 that recurring revenue does not begin to cover expenses, even though school funding has been converted to a block grant and many other spending cuts have been implemented, and even after sales tax rates were raised. Lawmakers have already used up general fund reserves. Kansas has no rainy day fund. The current budget barely survives by grabbing large one-time transfers from other funds.

In that situation, what happens in future fiscal years when highway money and children's money routes into the general fund? It all gets sucked up! It all gets put in service of paying off income tax cuts.

• Money designated for bridge repair and highway maintenance-gone.

• Funding dedicated for early childhood programs, Parents as Teachers, and family preservation-gone.

• Revenue set aside for economic development programs-gone.

 

Plus, this bill opens up the possibility of selling the KEY Fund revenue stream by repealing all of the statutes that promise this funding to children. Administration officials have been considering selling-pawning-the revenue stream for cents on the dollar, to obtain a one-time payment that would be yet another short-term plug for the budget crisis.

Proponents of SB 463 tried very hard to sound convincing. They claimed this bill was not something anyone needed to worry about, that the bill would not affect appropriations, but you better believe that it will.

The bill's fiscal note only vaguely outlines what may happen in the future, but includes this phrase about highways:  "it is likely that the scope of the T-WORKS Program would need to be reexamined." What an understatement! SB 463 permanently damages the highway plan, along with children's programs and economic development initiatives.

The bill is a set-up. Vote for this one lawmakers, and you have permanently raided the highway fund, sold off children's programs, and tied your hands on economic development. The governor's people say, "oh no, it doesn't do that," but if this passes, then next year and the year after that, you are going to find out that the fate of Kansas roads and early education programs was sealed with this bill.

This maneuver does not fix the problem caused by unaffordable income tax cuts, it just makes highways and children pay for it.

Game On group will start walking for Kansas schools on Friday

Game On group will start walking for Kansas schools on Friday

Starting Friday and continuing through the weekend, supporters of public education in Kansas will be walking to show their support of education and raise awareness of what they say are attacks by state leaders on schools, teachers and courts.

Game On for Kansas Schools will start its fourth walk to Topeka on Friday from various locations and will conduct a final event Monday that will culminate with a rally at the Statehouse.

“We never intended to do four walks, but we have been compelled to do so as we watch our legislators pit urban and rural, wealthy and poor, and large and small districts against each other rather than addressing the real needs of our students across the state,” Game On for Kansas Schools said in a statement.

The non-partisan group urges parents, teachers, students and community leaders to walk during the event, even if it is only for a short distance.
Walking routes will start in Merriam, Emporia and Manhattan. There will be rallies on Saturday in Eudora and Lawrence. At 9 a.m. Monday, participants will march from across the street from Topeka High School to the Statehouse.

Game On for Kansas has been critical of Gov. Sam Brownback and legislative leaders on numerous school issues, including the current school finance system that has been declared unconstitutional by the Kansas Supreme Court.

More details on Game On for Kansas’ event can be found below:
Here is information on the Merriam/Kansas City Walk:https://www.facebook.com/events/1706647776213977/
Manhattan Walk: https://www.facebook.com/events/1702379576705318/
Emporia Walk: https://www.facebook.com/events/1707081532882919/
Kickoff in Merriam: https://www.facebook.com/events/447073138817581/
Walk Kickoff in Manhattan: https://www.facebook.com/events/780892732044151/
Day 2 Start Rally and Walk in Eudora:https://www.facebook.com/events/898925733557136/
Rally in Lawrence hosted by Educate Lawrence:https://www.facebook.com/events/1133696103310012/
Crossing the Finish Line - Convening at the Capitol:https://www.facebook.com/events/982780118476911/
 

Kansas Center for Economic Growth Blog

Show Us the Money: Kansas' Income Growth Slowed After Tax Cuts

By Kansas Center for Economic Growth

Kansans looking at their paychecks couldn't be blamed for wondering when, if ever, the supposed windfall from state tax cuts is going to show up.

It's plain to see that Kansas' personal income growth has slowed since the tax cuts took place. Today, Kansas ranks near the bottom of the nation in that category. And that's no surprise, because the occupations that have added the most jobs since the tax cuts haven't seen much wage growth. In many cases, they don't pay enough to get a family of three above the federal poverty line.

One thing repeatedly mentioned by defenders of the tax cuts is that they would stimulate Kansas' economy and leave everyone's wallets fatter than before. Upon further investigation, though, that is simply not the case. In the three years before the tax cuts, Kansas' personal income growth was fifth in the region and was beating the nationwide growth average. Since the tax cuts, Kansas has dropped to sixth in the region and was overtaken by the U.S. average. You might say a drop from fifth to sixth isn't that dramatic, but keep in mind the tax cuts promised big gains, not small declines.

In fact, the dimensions of the decline can be seen more starkly by a national comparison. Kansas was 12th nationally in personal income growth before the tax cuts and is now 41st. That's not a small decline.

Disappointing income growth is related to the types of jobs Kansas is growing. Job growth is greatest in work that pays too little for families to make ends meet. Here are the facts:

This information shows what a bad job the tax cuts have done in delivering shared prosperity. Kansas' personal income has grown after the tax cuts, but is slow relative to the region and the nation. And whatever growth in income that is occurring sure isn't going to hard-working Kansans who struggle to make ends meet. So if you are waiting to see the economic boost from Kansas tax cuts in your pocket, it could be a while - a long while.

KS Association of School Boards on Reducing School District Balances

Committee to continue looking into proposal to reduce school district balances, but several members opposed to the idea

House Education Budget Committee Chairwoman Amanda Grosserode, R-Lenexa, on Thursday said the committee would continue looking into the issue of reducing school district cash carryover balances, but several committee members said they weren't inclined to support such a proposal because schools may face budget cuts.

The state's government efficiency consultant, Alvarez & Marsal, has said many school districts have "excess" cash balances and the state could reduce that amount by $193 million over five years to reduce state funding of schools.

Here is a link to KASB's response to the A&M recommendations.

At one point during the discussion, Grosserode said she was hesitant to move forward on this recommendation because schools may be looking at budget cuts because of the state's revenue problems. Total tax receipts to the state fell $54 million short of estimates, a 15 percent miss.

Vice Chairman William Sutton, R-Gardner, said he had a problem "punishing" school districts "for saving up for a rainy day. Guess what, it's raining."

And Rep. Jerry Henry, D-Atchison, warned that because of the revenue crunch, the recommendation to lower school district balances may come up at the end of the session and many legislators would be pressured to approve it.

Grosserode decided the committee would continue to seek more information about ending balances of school districts.

The committee also decided to continue looking into two more A&M recommendations and asked that preliminary language for legislation be drawn up for them.

Those include a recommendation that calls for more collaboration between school districts and the state in purchasing services and equipment and expanding participation of the school districts in a property and casualty pool.

KASB Report on State Revenue Collapse & Possible Additional School Cuts

State revenue collapse prompts higher ed cuts; talk of school cuts

Legislators reconvened the 2016 session today with the state budget in disarray.

Gov. Sam Brownback on Tuesday cut appropriations to Kansas public universities by 3 percent, or $17 million in the current fiscal year, and a key legislative leader called for an across-the-board cut, which would affect public schools.

Brownback’s action came after February tax receipts fell $54 million, or 15 percent, below already lowered estimates.

Brownback also vowed opposition to attempts to increase taxes on small businesses. Some legislators have called for an end to the tax break for owners of certain kinds of businesses, such as LLCs, that were part of huge income tax cuts implemented by Brownback.

In response to the bad fiscal news, Senate President Susan Wagle, R-Wichita, called for an across-the-board reduction in state spending.

“We cannot continue to address ongoing revenue shortfalls with budget maneuvers, accelerated borrowing and sweeping fees and reserves. The time has come to cut every government funded entity. The reduction will be small when equitably spread across the board. Taxpayers are not in the mood for another tax increase. We must further reduce spending,” Wagle said.

Since K-12 funding makes up approximately half of the state budget, such a cut would impact schools.

State Rep. Ron Ryckman, R-Olathe, who is chairman of the House Appropriations Committee, has said his committee will try to find savings based on the recommendations of the consulting firm of Alvarez & Marsal, which did a government efficiency study.

One of the top recommendations in the A&M report is reducing the cash balances of school districts in order to deduct future state funding. A&M says districts are carrying $193 million in "excess" cash balances.

The consultants say this amount could be drawn down over five years but add that a prerequisite to doing this would be stability of funding for the school districts by the state.

KASB has testified that state funding to schools has not been as stable as some claim.

Since 2009, school districts have faced mid-year reductions in funding in 2009, 2010 and 2015, and reduced funding from the prior years in 2010, 2011 and 2012.

Also, KASB believes local school boards know better than the state how much their district should hold in reserve for cash-flow, contingency, special projects and other purposes.

Democrats and moderate Republicans have said the revenue drop-off is further evidence of Brownback's failed tax policies and has endangered the state.

“Our schools, our infrastructure, our safety — the very future of our state is at stake,” said House Minority Leader Tom Burroughs, D-Kansas City.

But Brownback blamed the economy.

“These numbers reflect a declining national and regional economy. There has not been a single year of national GDP growth above 2.5 percent since 2006, and in the final quarter of 2015 the U.S. economy grew less than 1 percent. Across the Midwest, states are being affected by falling commodity prices, contracting sales growth and declining agricultural exports," he said.

“In balancing the budget, I will not support or call for a tax increase on small business in Kansas. My focus is on managing spending, not on raising taxes. Our goal is not to fund the growth of state government; it is to help the Kansas economy grow," he said.

Legislators reconvene the session today after a week-long break following the midway point.

Legislators adopted a budget before they left town, but it is likely they will have to change the spending plan because of the revenue shortfall. In addition to the immediate budget issue, the Legislature and Brownback have yet to address last month’s Kansas Supreme Court ruling that the school finance system is unconstitutional because it shortchanges equalization funding meant to help poor districts.