Kansas needs to brace for a rough economy

Emily Fetsch
March 20
(Cross posted from the Kansas Center for Economic Growth)

With the spread of COVID-19 taking place in Kansas, across the country, and across the world, we have seen the economy take a massive hit. Huge dips in the stock market, massive layoffs, and underemployment and unemployment as businesses close to respond to the health crisis.

The country is due for a recession, and the COVID-19 pandemic might be the catalyst for bringing it on. Unfortunately, most states are not fully prepared for the next recession. According to a new report from the Center on Budget and Policy Priorities, states vary widely in their preparedness for the next recession. The report states:

“…people in states with inadequate budget reserves, weak unemployment insurance systems, relatively inaccessible Medicaid programs, and/or expensive higher education systems are particularly likely to struggle during the next recession if they lose their jobs or enter the recession looking for work with few family resources to support them.” 

So, how does Kansas stack up? And what can Kansas do to better prepare for a recession?

Adequate reserves

In 2018, an amendment was added to the budget that clarifies how Kansas will make deposits into the state’s Budget Stabilization Fund (or “Rainy Day Fund”). This was a fiscally responsible step that helped ensure essential state services will not be jeopardized during economic downturns. However, no money is currently in the Budget Stabilization Fund.

The new report recommends that states should have reserves equaling 15 percent or more of their budgets. Only 14 states meet that standard, not including Kansas, which has a reserve of 9 percent (determined as the total balance as a percentage of the State General Fund expenditures from Fiscal Year 2020).

As our organization has long advocated, policymakers must continue to prioritize the Budget Stabilization Fund, by placing monies into the fund to ensure that the state is prepared for economic challenges. But that funding shouldn’t be done at the expense of supporting needed programs known to help alleviate the consequences of economic downturns.

Strong unemployment insurance systems

Unemployment insurance (UI) helps families keep food on the table, a roof over their heads, and  continued enrollment in health insurance. Recent events have led to discussions about changes to UI, both at the state and federal levels. This week, Kansas legislators extended the length of UI to 26 weeks, the maximum allowed federally. This change is a step in the right direction, but more can be done.

Currently, only one-in-five (19%) people who are unemployed receive UI. For those that receive UI, the Kansas average weekly benefit is 44 percent of the average weekly wage. Policymakers can do more to ensure that those who are eligible are receiving UI, while working to make sure that the benefit sufficiently meets the need.

Accessible Medicaid programs

The stress of a recession will have tangible physical and mental health effects, so access to health care will be critical for the overall health of the state. As the report shares:

“During an economic decline, more people lose their jobs, which often means they lose job-based health coverage. Even people without job-based coverage going into a recession may experience an income decline that makes new coverage options available to them and their families. Some people might newly qualify for premium tax credits to purchase coverage on the health insurance marketplaces, and the lowest-income households could become eligible for Medicaid or (for children and youth) CHIP.”

The report suggests the following four policies to help eligible people who need coverage enroll:

  1. Expanded Medicaid eligibility
  2. Streamlined eligibility and enrollment systems
  3. Automated renewals
  4. Twelve-month continuous eligibility for children in Medicaid and CHIP

In addition, the report stressed that states should reject 1) work requirements and 2) premiums, while minimizing cost sharing. Both of these things are difficult for families suffering from recession consequences, like lost income and unemployment. 

To be in line with the above guidance, Kansas should expand Medicaid, without any attachment of work requirements or premiums/cost sharing. In addition, Kansas should work to streamline eligibility and enrollment systems.

Kansas policymakers have powerful tools at their disposal. By acting as soon as possible, they can ensure the next recession will be less destructive to Kansas residents and the state economy.

Emily Fetsch is Kansas Action for Children’s director of policy and research.

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