Gov. Sam Brownback’s tax plan, passed by the Legislature in 2012, is either surpassing expectations or setting the state on course for a crash. It all depends on who you ask.
The state released its revenue estimates for 2014 and 2015 on Thursday. Both Democrats and Republicans saw evidence to support their readings of the tax cuts’ success or failure.
The state is on pace to surpass November revenue estimates for 2014 by $103.3 million and for 2015 by another $74.3 million.
“That’s about as good news as you can possibly get. We have the resources we need to fund the budget that was passed last year,” interim budget director Jon Hummel said at a news conference Thursday.
“So we believe that the work that’s done here and all these numbers confirm that the governor’s priorities of growing the economy, controlling spending, continue to bear fruit,” he said.
But even with the increase in projections, the state is expected to take in $5.96 billion in 2014, a decrease of about $380 million or 6 percent compared with 2013.
The decrease is primarily caused by the tax cuts, said Raney Gilliland, interim director of the nonpartisan Kansas Legislative Research Department. The estimates are produced through a collaborative effort by the Department of Revenue, the Division of Budget and the research department.
Revenue from individual income taxes is projected to drop by 13.9 percent in 2014 and then stay flat in 2015. There were no projections for how the state would fare beyond 2015.
When Brownback pushed for income tax cuts in 2012, he promised that would boost the state’s economy. Reporters pressed Hummel on that point.
After the drop in 2014, total revenues are projected to increase by 0.5 percent in 2015.
“I wouldn’t say revenues are flat,” Hummel said. “Revenues went down. When you cut taxes, that’s how it works. But revenues are continuing to bounce back. That’s what we see here with a $177 million increase. That’s not flat. That’s an increase.”
Hummel said that other revenue sources have been offsetting the loss from the tax cuts and would increasingly do so.
“I guess what I’m saying here today is we’re moving in the right direction,” he said.
But Joan Wagnon, state chair of the Democratic Party and former Secretary of Revenue, said after briefly reviewing the revenue estimates that the revenue increases are largely unrelated to the Brownback tax plan.
One major area of growth is corporate income tax revenue, which increased by 30 percent in 2013 and is set for another 10 percent increase in 2014.
“If you’ll remember, the Brownback tax plan had absolutely nothing to do with corporate income taxes,” Wagnon said. “That’s not the growth that Brownback was promising, but that’s economic health.”
Wagnon said Brownback had promised that the tax cuts would cause people to spend more money and thus drive up sales tax revenue, but according to the April estimates, sales tax revenue will go down in 2014.
“The whole idea was, ‘We’re going to cut these rates and it’s going to be a shot of adrenaline to the economy and you’re going to see these individual taxes rebound and give us more money back because we cut them.’ And that isn’t happening. It just isn’t happening,” she said.
Part of the increase came from a one-time capital gains payment of $51 million to the Department of Revenue because of a court decision. Gilliland has said that can’t be factored into future estimates.
House Minority Leader Paul Davis, D-Lawrence, the likely Democratic nominee for governor, released a statement that accused the Brownback administration of sugarcoating the long-term outlook for the state’s revenue.
“Revenue has plummeted since the Brownback experiment began. No matter how his administration tries to sugarcoat it, our Kansas economy remains stagnant. Sam Brownback’s ‘experiment’ has failed,” Davis said in the statement.
But Hummel said the state is taking in enough money to cover its long-term expenses.
“It’s sustainable long term if you keep your spending under control,” he said. “I think we have it under control as of now. We’ll continue to keep it under control in the next two-year budget, I predict, and that will ensure the long-term stability. We always view ourselves in belt-tightening mode. We always are looking for saving.”
Hummel noted that the Division of Budget is working to find savings at the Department of Administration. And an e-mail sent out from the governor’s office at around the same time stated that the KanCare program would cost less than initially projected.