Relief for Kansas’ endless fiscal struggles is in plain sight

The failure of Kansas’ political leaders to do the right thing and fix the state’s chronic budget imbalance continues to create paralyzing uncertainty for schools, services and businesses in the state.

School districts should be working on next year’s budgets and employee agreements. Instead they are waiting to see how the Legislature will respond to a Kansas Supreme Court order that found the state was not funding its districts equitably.

If lawmakers can’t resolve the issue to the court’s satisfaction by the end of June, justices have said the schools won’t open in August.

At least one proposed remedy would take money from wealthier school districts and give it to poorer districts. But that is kicking the can down the road.

The underlying problem is lack of money for public education overall. The Legislature last year reneged on an earlier agreement with the Supreme Court by shorting its equalization formula by $54 million.

Funding for early childhood programs is also threatened. For years the state has used revenues from a 1998 legal settlement with tobacco manufacturers to assist a thriving network of programs that educate and nourish the youngest Kansans. Some lawmakers are pushing to have that money go directly into the state’s general fund.

Even worse, Gov. Sam Brownback has been holding private conversations with bankers about selling the state’s share of the tobacco settlement monies on the bond market to secure an influx of cash.

Kansas would lose money overall in such a transaction. The state’s future tobacco settlement payments are worth about $600 million, but the state would gain only $400 million by selling off the proceeds now. And there is no reason to believe assurances from the Brownback administration that children’s programs would continue to receive funding.

Such a move would extend a long string of bad decisions by the Legislature and Brownback since they essentially bankrupted the state with reckless income tax cuts in 2012. To cope with endless deficits, they have raised sales and cigarette taxes, moved money around, canceled essential investments and borrowed from the highway fund.

Lawmakers currently are contemplating diverting highway money to the general fund on a permanent basis. And legislators are feuding with Brownback over unilateral moves he has attempted regarding bonding.

All of these gyrations are taking place with relief in plain sight. It is apparent to everyone except Brownback and a dwindling number of legislators that the state must revoke the tax exemption it awarded to more than 300,000 limited liability corporations and other business that are structured to pass income through to their owners.

At a legislative committee hearing on Tuesday, several small business owners who benefit from the tax break asked lawmakers to revoke it, citing the struggles of their schools and communities.

Fortunately, Republican lawmakers are now taking the lead in legislation to repeal the exemption. Of two bills being considered, the one working its way through the Senate is preferable. The money that would be recouped, at least $250 million a year, would go into the state general fund and help to relieve the fiscal crisis.

A bill in the House would revoke the exemption, but lower the sales tax on food, so there would be no net revenue gain for the state.

At 6.5 percent, Kansas’ food tax is another shameful legacy of Brownback’s failed supply-side experiment. Kansans pay a higher tax on food than any state except Mississippi.

But the money that would be gained from revoking the business tax exemption is needed to stop the perennial budget shortfalls. Lawmakers should deal with the crisis first, restore stability and then lower the food tax.

This story was originally published March 15, 2016 at 5:14 PM with the headline "Relief for Kansas’ endless fiscal struggles is in plain sight."