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.