Paycheck to Paycheck: Why July 31st Matters for Kansas

Paycheck to Paycheck

By Annie McKay
July 31, 2015

July 31st is probably not a particularly noteworthy day for most Kansans. They’re going to work, taking their kids shopping for new school supplies, and making family plans for the few remaining days of summer.

But for those who have been closely following the story of Kansas’ self-imposed fiscal crisis, July 31st greets us with an unusually high level of anxiety. The monthly tally for what Kansas collected in revenue will be made public for the first time in the current budget year (July 1, 2015 – June 30, 2016).

Managing state finances is not unlike what Kansas families do every month around their dining room tables with calculators and checkbooks. At the end of every month numbers are released that tell us how much money the state collected, how that compares to what we expected, and what it means for the remainder of the budget year. Just as with Kansas families, it’s only noteworthy if the numbers don’t add up.

While July’s actual revenue numbers are only the first glimpse of how Kansas’ economy is doing, they carry broader implications for families, schools, businesses, and the overall health of our state.

Here’s why:

  • The Month: The new fiscal year, along with the largest tax hike in state history, took effect one month ago. With new tax revenue coming in, the state budget should show at least some signs of stabilizing. Yet Gov. Brownback’s budget director announced $63 million more in cuts (to an already bare-bones budget) less than 24-hours ago.  July budget allotments haven’t been made in Kansas since 2009 – when every state in the nation was coping with a global economic downturn. Spending cuts made as the ink is still drying on a newly passed budget are never a good sign, regardless of whether July receipts come in high or low.

 

  • The Math: In June lawmakers approved a $430 million tax increase to fill an $800 million hole. The second half of the budget gap is being filled by approximately $300 million worth of “sweeps.” This means the state is dipping into a variety of funds that were already allocated to something else. The problem now is that Kansas doesn’t have $300 million left to sweep in the future. Where will that revenue come from in the next budget cycle? Even after making dramatic cuts to schools and public investments, we’re spending – at minimum – $300 million more than we’re taking in.

 

  • The Margin for Error: Kansas builds its annual budget based on monthly revenue projections. When unaffordable and unprecedented tax changes passed in 2012 and signed by Gov. Brownback, proponents disregarded warnings of revenue loss. As a result, Kansas’ incoming revenue has repeatedly failed to match projections. Now Kansas must meet or exceed monthly projections every single month until the end of the fiscal year just to break even. There is absolutely no margin for error, yet state revenue came in below estimates in eight of 12 months last year.

Kansas’ fiscal volatility is particularly troubling when held up against the backdrop of a nationally growing economy. It begs the question: how did this happen?

All of our financial woes point to a 2012 plan giving a massive tax break to 330,000 small businesses that has failed to produce results, and income tax cuts that won’t grow our economy. When this ill-advised plan passed, income tax revenue comprised nearly 50 percent of our general fund. It still accounts for well over 40 percent. That’s why we’re experiencing repeated crises even though we’re barely underway on the “march to zero”. Kansas’ nearly billion-dollar budget surplus cratered into an $800 million budget hole, Kansans are paying more for everything they buy, and our state is essentially living “paycheck to paycheck.” And we’re just getting started.

Kansans don’t provide for their families by giving up their income, spending down their savings accounts, taking out payday loans, and crossing their fingers that it will all work out. It’s time for state lawmakers to learn from the people they represent.

# # #

ClayPaycheck to Paycheck: Why July 31st Matters for Kansas