Can Kansas legislators pull another rabbit out of their hats? Voila! The magic seems to never end.
Faced with a $350 million budget gap in this fiscal year ending June 30, it would take huge tax increases to raise enough revenue to balance the budget. No one will want to raise huge amounts of taxes — not conservative Republicans who hate tax increases; not newly elected moderate Republicans who fear losing in their next race if they vote to raise taxes; and not even newly elected Democrats who don’t want to be viewed as big tax-and-spenders.
Plugging loopholes, like eliminating the tax exemption on 330,000 small businesses, would do no good for this fiscal year. Although it would raise about $250 million, that money would not be realized until 2018, which is too late.
The alternative — without the rabbit — would appear to be slashing expenses.
The hole is so deep, however, and the time so short to the end of the fiscal year, it has been estimated that cuts would have to be 12 percent across the board. Nothing would escape the draconian 12 percent ax, not even K-12 schools.
Kansas Gov. Sam Brownback wants no part of either scenario. Instead, he has declared hands-off, letting the Legislature figure it out when lawmakers return in January. That gives them even less time to fix the crisis. It was a clever move by Brownback, who is tired of getting slammed.
But wait. There is a third alternative — the rabbit.
Legislators think they have found the key to unlock yet one more one-time fix. Indeed, they think they may even have a reserve second rabbit, should the Kansas Supreme Court mandate an increase in school funding.
The $350 million hole can be plugged by rabbit No. 1, sweeping the funds accumulated over a couple of decades in unclaimed property. It is estimated there is $360 million in liquid funds sitting in the state’s unclaimed property fund, earning interest and growing investments. These abandoned funds came from such things as checking accounts that were never claimed or bonds left in a safety deposit vault. Over time these really mount up.
But what if, on top of the deficit, the high court rules the Legislature must come up with, say, $500 million in additional funding for schools — not necessarily all at once but probably over several years.
That’s when legislators go for their grand finale.
Despite the inevitable outcry, they could sell off future proceeds from settlements by tobacco companies to Kansas. The roughly $60 million a year that is being paid to Kansas over time could be “securitized” and sold to financiers for a one-time payment of up to $500 million.
That money has been earmarked for early childhood programs. But there is no law that says that’s where the money has to go.
Instead, the Legislature could decide to allot a lesser amount to those programs. This is a tough one, because nobody likes to take funds from early childhood initiatives.
There is nothing here to celebrate. Who can rejoice over more one-time gimmicks to balance the budget? After this, the Legislature should tackle chronic deficits the hard way.
Steve Rose, longtime Johnson County columnist: email@example.com