Kansas voters aren’t likely to have much definitive data ahead of next year’s elections on how well massive income tax cuts championed by Gov. Sam Brownback are stimulating the state’s economy.
Instead, they'll be forced to sort through competing claims from the Republican governor’s administration and its Democratic critics, gleaned from fiscal forecasts, monthly employment reports and short-term trends in tax collections. The picture of Brownback’s signature policy probably will remain fragmented.
Kansans got a taste of the coming election-year debate last week, when state officials issued a new fiscal forecast that included revenue projections through June 2015.
For Brownback and his GOP allies, the forecast was positive, suggesting that they won’t have to rethink major budget decisions made earlier this year. Democrats said the same forecast still shows that the tax cuts are reducing revenues enough that the state will be starving schools, social services and other programs.
Supporters argue that the income tax cuts, which took effect in January, already are fostering business investments that will ripple through the economy. But they also acknowledge that it will take a while – well past November 2014 – for the results to be obvious.
“Anytime you’re looking at companies looking to make decisions on when to move to Kansas or when to relocate from anywhere or when to expand, you know, that’s a one- to two- to three-year decision,” said Rep. Marvin Kleeb, an Overland Park Republican who serves on the House Appropriations and Taxation committees. “It'll be a couple of years to three years before we really have a feel for where things are going.”
Brownback’s goal with tax legislation in 2012 and 2013 was to put Kansas on the path of phasing out its personal income taxes.
The latest fiscal forecast shows the short-term effects of his policies on state revenues. It projects that Kansas will collect $5.86 billion in revenues during the current fiscal year, which began in July. That’s 7.6 percent less than the $6.34 billion collected during the past fiscal year – with personal income tax collections expected to decline 14.7 percent.
The forecast also projects that the state will collect $5.92 billion in revenues during the fiscal year that begins in July 2014, an overall increase of $61 million, or 1 percent.
The new forecast replaces one made in April and revised in June, after the Legislature ended its annual session. Predicting how tax changes will affect revenues can be tricky, and Jon Hummell, Brownback’s acting budget director, acknowledged after the forecast was released that he’d been nervous about the potential for a big downward revision.
State officials trimmed their projections for the current fiscal year by only $29 million, or 0.5 percent. And the new projection for the next fiscal year – the first official one – was close in total revenues to the rough, unofficial figures legislative researchers had used in the documents they’d provided lawmakers as they made budget decisions in the spring.
However, the legislative researchers’ documents also showed the state’s cash reserves melting away over the next few years and predicted that lawmakers will be dealing with at least a small budget shortfall during their 2018 session.
“It’s going to be a disaster on the state’s budget,” said Senate Minority Leader Anthony Hensley, a Topeka Democrat.
Democrats are likely to continue emphasizing that pessimistic long-term view of the tax cuts as their now-presumed nominee for governor, House Minority Leader Paul Davis, of Lawrence, seeks to unseat Brownback.
Davis said in a statement after the fiscal forecast was released, “And the jobs Governor Brownback promised would appear are still nowhere to be found.”
Of course Brownback and his administration argue that the tax cuts already are boosting the economy. And if state revenues grow annually by more than 3 percent, the state can avoid the legislative researchers’ long-term scenario.
The administration is watching employment statistics closely. This year, through August, the number of people holding private-sector, non-farm jobs has been 16,300 higher on average each month than for the same month in 2012, or growth of 1.5 percent.
“We’ve seen some jobs numbers come in recently that were pretty positive, and the governor will be speaking more about those things in the coming weeks,” Hummell told reporters during a news conference last week.
But, as Hummell acknowledged, it’s also hard to discern how much growth can be attributed to the tax cuts and how much to general growth in the national economy.
For example, in 2005, the third year of Democratic Gov. Kathleen Sebelius’ first term, the state saw an average increase in private-sector, non-farm employment of 11,600, or 1.1 percent, according to figures from the U.S. Bureau of Labor Statistics.
“A lot of economists have said that five years is really the time that it takes to have a full and accurate and complete understanding of the impact,” Hummell said.
Yet voters must pass judgment in a year’s time on the wisdom of Brownback’s fiscal policies and decide whether he deserves another four-year term as governor.