Kansas budget is running on fumes, and it could get worse

06/07/2014 11:00 AM

06/06/2014 10:52 PM

Ignore the political spin from Kansas politicians trying to downplay the state’s budget concerns. Focus on the numbers, because they matter more.

And they reveal the state’s finances are in a huge hole that could get a lot deeper. A state that already is shortchanging its schools, underpaying employees and running disgraceful waiting lists for disabled citizens who need services is likely to experience even more pain — unless elected officials repair bad decisions made the last two years.

The Star last week reviewed Kansas’ general fund receipts through May, the 11th month of the 2014 fiscal year that ends June 30. It also reviewed official projections for the 2015 fiscal year, which starts July 1.

The basic facts are troubling.

The state expected to have $5.37 billion in general fund receipts by May 31.

Instead, it had received $5.06 billion, a shortfall of $310 million.

Specifically, Kansas officials badly underestimated the negative effect of the individual income tax cuts that the Legislature passed and Gov. Sam Brownback signed in 2012.

With the current fiscal year almost over, those revenues are a shocking $282 million under projections, or 25 percent lower than in the previous year. The state had predicted only a 15 percent reduction.

Even if overall general revenues hit expectations in June, the state would still have a $310 million shortfall for the current fiscal year. To pay the bills, Brownback will have to cut services almost immediately or drain the state’s rainy day fund — which stands at around $690 million — to below $380 million.

But the situation could get even worse.

The Legislature recently approved a budget that calls for spending $6.3 billion in general revenues in the 2015 fiscal year. However, state officials project that revenues will reach only $6 billion. In short, the Legislature has cooked a $300 million shortfall into the budget. And even that required raiding the highway fund and other tricks.

The imprudent budget writing, combined with the recent unexpectedly low revenues, could leave Kansas with less than $80 million in reserves by the summer of 2015. That would be a reduction of almost 90 percent in the fund in two years.

Yet even that scenario could turn out to be overly rosy.

In predicting revenues of $6 billion for 2015, officials said the growth rate would be only 0.5 percent over 2014 collections.

However, the state is on pace to take in less than $5.7 billion this fiscal year. So revenues might have to rise closer to 6 percent in the 2015 fiscal year to reach $6 billion. Even state officials don’t think the Kansas economy will be that robust. Plus, income tax rates are on schedule to drop even more next year, which could depress revenues further.

Essentially, the predicted higher spending and lower-than-projected tax revenues could deliver a $600 million sucker-punch to the 2015 fiscal year budget. It would more than wipe out the state’s rainy day fund and force painful decisions on the governor and lawmakers who take office a couple of months after the November election.

Brownback needs to be candid with the public about how his administration will respond to the recent drastic drop in revenues, even if that means reducing spending and services during his re-election campaign.

Candidates for the governor’s office and legislative seats must acknowledge that the state is in a fiscal crisis, and talk about what they plan to do about it.

They should spare voters the platitudes about “shrinking government.” Kansas government is starving, and politicians are going to have to contemplate the unthinkable — a rollback of the draconian tax cuts that never should have been passed.

The numbers are bad and primed to get worse. No flowery campaign talk can change the dreadful mathematics.

Next week: Missouri’s budget problems also require action.

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