Kansas budget improving, thanks to 2017 comprehensive tax reform package

Heidi Holliday
July 13, 2018

On July 1, 2018, Kansas celebrated its “fiscal new year” – and for the second year in a row, this occasion is something to celebrate. Our state’s budget is recovering after five years of failed tax policy, and with that, our ability to invest in our state’s core services. We’re including a quick guide to five signs that the Kansas budget’s health is improving, as well as a pocket guide to the failed 2012 tax plan.

1. Kansas ended the fiscal year with a positive balance of $318 million – a sharp departure from four years of budget shortfalls. The infographic below shows what happened when the 2012 tax plan went into effect. The state’s revenue dropped $700 million in the first year alone, resulting in nine rounds of budget cuts, two sales tax increases, four years of budget shortfalls, and three credit rating downgrades.

2. Lawmakers passed a budget that reinvests in our state’s essential services. After years of cuts, state services were reeling from disinvestment. As we’ve previously said, this year “both chambers passed a budget that begins to reinvest in our state’s essential services, enhancing funding for K12 education, early childhood and higher education, infrastructure, and state services, as well as shoring up our state’s pension system, KPERS. More work remains – but this is a good start. As Kansas’ budget recovers, lawmakers should continue to reinvest in our state’s core services – education, affordable health care, infrastructure, and thriving communities.”

3. Our state’s budget health allows lawmakers to think ahead, rather than react. The new investments made this year in early education are investments in our state’s future. A growing body of research shows that investment in early education, for instance, has a 13 percent ROI (return on investment) over time, including better performance in K12 education, higher rates of high school graduation, and better social outcomes.

4. Within two days of the passage of comprehensive tax reform, credit rating agency Moody’s revised Kansas’ outlook from negative to stable. Similarly, the S&P revised Kansas’ outlook from negative to stable in May of this year. These are votes of confidence in our state’s recovery after three credit rating downgrades during the Brownback tax plan years.

5. This year, the state finance council decreased the amount the state borrowed by $300 million – meaning the state is better able to pay our bills now than we have been in years past. This certificate of indebtedness is used to make payments when cash is low. Another notable sign of our state’s fiscal health is the inclusion in the budget of a mechanism for deposits into the budget stabilization fund. Currently, 50 percent of the money included in the Budget Stabilization Fund (or rainy day fund) goes toward paying off Kansas’ debts, and 50 percent goes into the fund to protect the state against future economic downturns.

We encourage all Kansans to remember where Kansas has been and how long our state’s path to recovery will be.

Heidi Holliday is the Kansas Center for Economic Growth’s executive director.

ClayKansas budget improving, thanks to 2017 comprehensive tax reform package