October 16, 2016
A task force report on how to make Kansas revenue forecasts more accurate has produced consternation and disputes, with everyone agreeing the constant misses are a problem, but disagreeing sharply over solutions.
Everyone agrees revenue estimates have been off over the past two years. It is a simple fact that has continuing implications for the budget because Gov. Sam Brownback and lawmakers use the forecasts to set spending levels. And not only have they been inaccurate, they have been consistently too optimistic.
Everyone also agrees this is a problem. Inaccurate forecasts mean round after round of budget cuts during the fiscal year.
Everyone even agrees that tax policy changes have made accurately predicting revenue difficult.
“In our opinion, when there’s a significant tax policy change, the system breaks down, and that’s exactly what we’ve been through in the state of Kansas the last four years,” Sam Williams, chairman of the Brownback-appointed task force, said.
State budget director Shawn Sullivan wrote on Twitter that revenue forecasting “has historically missed the mark during times of tax policy and economic changes.”
A vocal critic of the 2012 tax policy, the Kansas Center for Economic Growth, said: “The 2012 tax plan caused a significant shock to our formerly stable revenue stream, making it more difficult to predict where revenues are going to show up.”
So far, everyone is saying pretty much the same thing. Everyone has acknowledged that tax policy changes are at least partly responsible for the state’s continued inability to meet revenue expectations.
The disagreement emerges in the solution. Everyone acknowledges tax policy changes have disrupted the accuracy of the revenue forecasts, but split on what should be on the table to fix it.
Brownback shows little interest in revisiting his signature 2012 tax policy that cut personal income tax rates and eliminated taxes for owners of limited liability companies.
“The one piece that is working, that we see increases in revenue to the state of Kansas, is personal income tax. That’s the one we cut. That’s the one where we put a pro-growth strategy: you’re not taxing the pass-through income of small business and we’re seeing nearly record private-sector employment,” Brownback said this week on the Joseph Ashby Show.
For Brownback, the answer rests in the task force’s recommendations: deploy new revenue modeling software, and increase the use of analysis and data sharing to boost the forecast accuracy.
Democrats and tax policy critics argue that if the tax policy has broken revenue forecasting, the answer is to change the tax policy.
“The Consensus Revenue Estimating group has been in existence since 1975, and that is through eight different gubernatorial administrations. Over that time, the estimates have been reliable and transparent,” Senate Minority Leader Anthony Hensley, D-Topeka, said.
Who wins the argument may come down to electoral politics. Democrats and moderate Republicans have campaigned on reversing the 2012 policies.
Even conservative Republicans, sensing the statewide anger directed at the governor, have not ruled out altering the tax policy. Both moderate and conservative Republican Senate candidates — 26 in all — signed on to a statement put out this week by Senate President Susan Wagle, R-Wichita, promising a fair tax policy and sustainable budget.
Those pushing for revenue forecasting changes argue the system is old. The Kansas GOP on social media said the problem wasn’t the tax policy, but budgets crafted using a process “older than the internet.”
Yet the left-learning Center for Budget and Policy Priorities said in 2014 Kansas uses a high number of best practices in revenue estimating, placing it in a top tier of states. An efficiency report of state government commissioned by the Republican-dominated Legislature also found that beside the past two years, the state’s historic forecasts had been generally accurate, though it said there may be room for improvement.
Sen. Laura Kelly, D-Topeka, wondered whether the task force’s recommendations would actually be able to provide a bulwark of forecasting accuracy against tax changes.
“I don’t see how what they’re proposing right now is going to change that,” Kelly said. “If we continue to make massive changes to the tax policy, won’t any system we put in place be thwarted?”
Read more from the Topeka Capital Journal here.