June 1, 2015
Failure, apparently, is an option.
Duane Goossen, former Kansas budget director under governors of both political parties, said Monday in Hutchinson that failure by the Legislature to adequately fund next year’s budget is “not an impossible scenario.”
A Legislature that faced an $800 million revenue gap shifted about $150 million in highway dollars to the general fund, gave the go-ahead for $1 billion in pension obligation bonds and took one-time money maneuvers to shrink the gap to $400 million-plus.
Completely closing the gap, however, has bogged down lawmakers.
The Legislature makes modern history today, when it begins its 103rd day on June 2. Records dating back through 1969 reveal only one year – 2013 – when the wrap-up session went beyond June 1.
“If a bill is not passed before midnight Saturday, June 6, the state will not have the authority to distribute funds. That could result in the furlough of non-essential state employees,” said Eileen Hawley, communications director/press secretary for Gov. Sam Brownback, Monday.
“State agencies are reviewing existing Continuity of Operations plan to identify essential employees in the event of a furlough,” Hawley said in an email. “The Department of Administration would issue furlough notices to non-essential personnel if that became necessary.”
A “self-imposed decision” to slash corporate income taxes brought Kansas to this point, according to Goossen, senior fellow with the Kansas Center for Economic Growth. Goossen and the center’s executive director, Annie McKay, addressed the Hutchinson Rotary Club lunch at the Atrium Hotel and Conference Center, 1400 N. Lorraine St.
McKay and Goossen said other states in the country experienced plunging revenues when a recession hit around 2008-2009. Revenues in other states rebounded. Not here, they said.
“It’s going down. It’s on a decline,” said Goossen, showing the revenue line on a graph.
Goossen called it the “Kansas phenomena.”
Sweeping 2012 income tax cuts created the problem, he and McKay noted. About 333,000 entities benefit from the income tax exemption for business. McKay said original estimates projected the number of beneficiaries at 191,000.
“So we missed the mark,” she said.
Because of the financial squeeze, Kansas did not fulfill an earlier promise to reduce the state sales tax. Counties, meanwhile, raised property taxes and Kansas trails the region in private job growth, McKay pointed out.
Anyone talking about 2018? Hutchinson USD 308 Superintendent Shelly Kiblinger asked.
“No,” McKay said.
The top income tax rate is slated to drop from 4.6 percent to 3.9 percent in 2018, as the state continues Gov. Sam Brownback’s plan to march toward zero income taxes.
“This cliff is not unknown,” McKay said.
Jerry Kahn, working in investments and attending the Rotary lunch, said when the recession hit, local businesses responded by reducing spending.
If the legislative process implodes and the budget submitted to the governor does not contain enough revenue, it will be up to Brownback to “unilaterally cut to bring expenses down,” Goossen said.
The areas that could suffer if the governor had to cut spending include K-through-12 schools and higher education, Goossen said.
“I don’t know that it’s likely,” Goossen said afterward about the prospect of the Legislature failing to find a tax plan to fund the budget.
But he said it’s possible.
Read more from The Hutchinson News here.