Kansas' Never-Ending Budget Mess
The state is short of money yet again, thanks in part to a tax cut its governor won’t touch.
Kansas is short on cash—again.
The state’s fiscal woes have been a recurring theme during the two-term tenure of Governor Sam Brownback, who ushered in a series of deep tax cuts after taking office and has been watching them blow a hole in the budget ever since. The latest bad news came on Wednesday, when the Kansas budget office reported that because of missed tax revenue projections, the state now faces a shortfall of more than $290 million over the next 15 months. Brownback, a conservative Republican, responded in the same way he did when confronted with a similar budget gap last year: by refusing to revisit the generous tax breaks he won five years ago, even in the face of a Republican revolt.
“I do not believe it would be useful to have a debate about raising taxes on small businesses or anyone else,” Brownback said. “Instead, we will focus our support and attention on controlling government spending more efficiently.”
The statement was aimed at blunting momentum in the GOP-controlled legislature for reversing an exemption for 330,000 small-business owners who file their taxes as individuals. Instead, Brownback’s budget director laid out three options, all focused on the spending side of the ledger. The first, and the one preferred by the administration, would involve the transfer of $185 million over two years from the state’s highway fund and the sale of the state’s right to a future tobacco settlement for a one-time payment of $158 million. Under the second option, the state would transfer money from the highway fund, delay payments to the state pension fund, and make $25 million in other cuts. And the final option would simply be to slash spending across all state agencies by 3 to 5 percent.
None of the choices are fiscally responsible, said Annie McKay, the executive director of the Kansas Center for Economic Growth, who noted the “irony” in Brownback’s proposals during a month he proclaimed as Financial Literacy Month. “We’re refusing to address the problem,” McKay said. “They’re all short, one-time fixes.”
In 2015, the legislature spent nearly a third of the year bickering over tax hikes and spending cuts in a record-long, 113-day budget session. Ultimately, lawmakers approved increases in sales and cigarette taxes, but left income taxes alone. The budget that lawmakers passed goes through the current year, and it’s an open question whether they will act this year at all. Technically, they don’t have to: The legislature has already given the governor authority to make cuts when the state’s coffers dip below $100 million. “They’ve passed a budget. So they could walk out and let the governor fix this,” McKay said.
The state transportation department has already announced plans to delay 25 major highway projects scheduled to begin this year, and the governor’s office said state universities would also face funding cuts. “There’s a prevailing mood among Republicans that he’s got to own this,” said state Senator Anthony Hensley, the Democratic minority leader. He called the options laid out by the budget director “Robin Hood in reverse.”
Yet while plenty of Republicans in Kansas have already broken with Brownback, there are doubts that they would actually join with Democrats to raise taxes over his likely veto. Right-leaning groups, like the state Chamber of Commerce and the Kansas affiliate of the Koch-backed Americans for Prosperity, staunchly oppose any move to reverse the tax cuts of 2011 and 2012. Dave Trabert, the president of the conservative Kansas Policy Institute, acknowledged that public opinion had moved strongly against Brownback’s economic policy, but he said the real problem was that the tax cuts were never pared with structural spending reforms. “Most people don’t understand that spending set another new record last year,” Trabert told me. “You can’t have a conservative tax policy and a liberal spending policy.”
Even so, Trabert was not a fan of the across-the-board spending cuts that comprised one of the government’s options. The solution was not simply to cut programs, he said, but to cut the cost of programs. “It simply comes down to how much you choose to spend to provide your services,” Trabert said. “Kansas needs to go from being morbidly inefficient to just being grossly inefficient.”
In the middle of an election year, major structural changes are unlikely, and in the meantime, Kansas is once again confronted with a series of choices that nobody likes. McKay said that of the three options the governor’s office presented, the one Brownback preferred—securitizing the tobacco settlement—was “the most frightening.” The annual payments from the settlement are used for children’s programs, and the state would be giving up $300 million to $500 million in funds over several years in exchange for a one-time payment, she said. “We’re selling off a guaranteed revenue stream that’s coming into the state for pennies on the dollar to plug a hole in a crisis we face right now, in lieu of going back and talking about the problem that brought us here,” McKay said. At least funding cuts could be restored when the fiscal outlook improved, she noted. “When you’re talking about selling off a future revenue stream, you can’t undo that,” McKay said.
The budget director, Shawn Sullivan, blamed the downturn in the oil and gas market and other key sectors for the fiscal woes, and he acknowledged the “downside” of it being a one-time infusion. “It does not structurally fix the budget in the long term but does provide a bridge to future fiscal years,” he told reporters, according to The Topeka Capital-Journal.
For Kansas Republicans, that has been the story of the last few years—a budget mess that continues to grow, and a political culture unable to reckon with it.