By Bryan Lowry
November 6, 2015
Gov. Sam Brownback will pull money from the state’s highway fund and other sources after state economists projected a $118 million budget shortfall Friday.
Even after those adjustments, the state is projected to have a cash balance of $5.6 million at the end of June and to face a shortfall of $175.6 million for 2017, the economists said.
Asked whether the state is in the red, Budget Director Shawn Sullivan replied: “Depends on what you look at. We’re basically at zero right now, so yes.”
Senate Minority Leader Anthony Hensley, D-Topeka, said the Legislature would start the 2016 session “basically where we were at the beginning of the 2015 session,” facing the question of how to right the state’s finances.
Lawmakers ended a record-long session in June by increasing sales taxes to cover a budget deficit caused in large part by income tax cuts.
“The Legislature’s going to have to go back in and we’re going to have to once again have a tax debate and really determine how we can bring stability to our state’s budget,” Hensley said.
The latest shortfall comes after sales tax revenue fell short of projections. The state’s economists lowered the estimate for sales tax revenue by $91 million for the year while lowering the estimate for overall revenue by $159 million.
Sullivan could not say whether the sales tax increase had pushed some consumers to shop in nearby states, such as Missouri and Oklahoma, or to shop online.
Raney Gilliland, the director of the Legislative Research Department, said a slight uptick in unemployment in recent months could have contributed to people spending less.
Rep. Marvin Kleeb, R-Overland Park, said in an e-mail that Kansans were likely choosing to save money and pay down their debts, affecting sales tax revenue. Kleeb is the House Tax chair.
House Speaker Ray Merrick, R-Stilwell, blamed the national economy for the situation.
Planned cuts, sweeps
Brownback will make a combination of budget cuts and funding sweeps to balance the budget.
He will take $50 million from the Kansas Department of Transportation. Sullivan said this would not affect previously announced highway projects.
He also will take $9 million from the Children’s Initiative Fund, which goes to support early childhood programs such as Early Head Start.
Sullivan said this would not affect the programs’ funding for this year. But the advocacy group Kansas Action for Children said that this would affect long-term funding for children’s programs, which have been cut in recent years.
“While Budget Director Sullivan continues to suggest these decisions are without consequences for our state’s children, that is simply false,” the organization’s CEO, Shannon Cotsoradis, said in a statement.
Brownback will also sweep $5 million from the Kansas Bioscience Authority, a quasi-governmental agency meant to spur investment in the biotech sector. The Eagle reported in July that the KBA was already on the brink of collapse and halting new investment in the face of reduced state funding.
Sullivan said the agency has “probably outlived its usefulness.” Under the governor’s plan, the KBA will be left with $2 million for this fiscal year.
Medicaid caseloads will cost the state about $20 million more than expected this year, but Sullivan said that other cost savings in the Medicaid program would free up $25 million to offset that. He would not go into detail on Friday.
He also said that revised pension estimates will give the state $16 million in savings.
The governor made no cuts to education, but Scott Rothschild, spokesman for the Kansas Association of School Boards, said that the budget news was still a cause for concern for schools.
“The future doesn’t look good. We’re going to have to keep our eye on this,” he said. “Obviously, we have tax cuts that were implemented that have put us in a perpetual budget crisis.”
Controversial 2012 tax cuts
Brownback has faced national scrutiny on tax policy since ushering in tax cuts in 2012 and eliminating income taxes on pass-through business owners. Those cuts have been seen as the primary cause for the state’s budget woes in recent years.
Sullivan contended that national factors also played a role and said, “You can’t measure the tax cuts in a vacuum.”
He acknowledged the budget challenge but contended, “A tight budget in the last few years, in my opinion, has caused needed reforms within our K-12, Medicaid and KPERS (pensions) systems.”
Sen. Ty Masterson, R-Andover, the Senate’s budget chairman, said in a phone call that the Legislature could use this as an opportunity.
“When you’re flush with cash, you tend to focus on how do I spend it, but when you’re tight, it’s not a bad situation for the taxpayers for the state to be focused on … what’s the right way to spend it,” Masterson said.
The House Democratic leader took a different view.
“What we’ve seen with this administration is they pit children against retirees against home care-based care services against our highway plan,” said Minority Leader Tom Burroughs, D-Kansas City. “They’ve divided every entity in this state and put the blame on every national policy that they can, but what they haven’t done is take responsibility for a failed tax policy.”
Senate President Susan Wagle, R-Wichita, had pushed to put business owners back on the income tax rolls last session. Friday, she appeared to retreat from that position, saying in an e-mail that she was “confident we would be in far worse shape had the tax cuts never happened.”
Some Republican lawmakers were more eager to ditch the governor’s tax plan.
Rep. Stephanie Clayton, R-Overland Park, said in an e-mail that the state’s tax policies have “driven Kansas consumers over the border, decimated funding for transportation and economic development, and sent the signal nationwide that our state is in chaos.”