October 7, 2016
A task force examining ways to make state tax revenue estimates more accurate offered some potentially good ideas. But it also made a horrible suggestion: Stop producing monthly reports comparing actual revenue collections with the estimates.
The task force seemed to be channeling a strategy of Gov. Sam Brownback: If you don’t like the information, keep it secret.
Brownback created the task force out of frustration that tax collections keep coming in less than the estimates. The state has missed every monthly estimate so far this fiscal year, and 11 of the past 13 months.
These misses matter because the state budget is based on the estimates. And because Brownback and the Legislature blew through the state’s ending balance, there are no reserve funds to absorb the shortfalls.
Thus, the state budget is already more than $60 million in the hole only three months into this fiscal year.
The task force, which was led by Wichitan Sam Williams, made several recommendations for improving the accuracy of the estimates, including bringing industry representatives into the estimating process, investing in new economic modeling software, and hiring a macro-economist to be part of both economic-outlook and revenue-forecasting meetings.
These could be good suggestions, though it is still unclear why the estimates, which are made twice a year, used to be much more accurate.
The Kansas Center for Economic Growth reported that from the inception of the consensus revenue estimating process in 1975 through 2013, actual revenue was about 0.2 percent more than the estimates – and that includes the sharp downturns after the Sept. 11, 2001, terrorist attacks and during the Great Recession.
But since Brownback’s tax cuts went into effect in January 2013, tax collections have fallen short of expectations 32 of 45 months – often by huge amounts.
Maybe what needs fixing is the state’s tax policies.
The task force also recommended disclosing information on the assumptions used to make the forecast, such as key economic indicators and statistical models. It said this would build greater transparency.
But the task force also wants to withhold information. Instead of continuing to release monthly revenue-versus-projection reports – as the state has done for decades – the task force recommended only reporting current revenue collections compared with the previous year’s collections.
That’s a terrible idea. Lawmakers and the public rely on these monthly reports to monitor whether the state is having budget problems.
The missed revenue estimates are embarrassing for Brownback, who promised during his re-election campaign that “the sun is shining in Kansas.” But the solution is better estimates (and an adequate reserve fund), not hiding the bad news.