There’s a $350 million elephant in the room, and it’s time to acknowledge it.
Kansas is suffering a record $350 million shortfall — and growing. I’ve received numerous visits, calls and emails from constituents asking: How did we get here?
At the end of the last legislative session, legislators left town believing we had a balanced budget. Unfortunately, there was a sharp downturn in the state’s revenue stream, oil prices decreased dramatically, and Kansas has not been able to overcome a persistent decade-long rural recession. Coupled with expensive and overreaching federal regulations, the state has had a difficult time bouncing back, which has resulted in a budget shortfall of $350 million for fiscal year 2017 and $580 million for 2018.
It wasn’t until days after the November election that we — both legislators and the public — were informed of the massive revenue shortfall. Gov. Sam Brownback chose to defer the responsibility of making difficult budget cuts to a brand new Legislature that did not gavel in until early January.
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To put this in perspective, the state has experienced similar possibilities of negative ending balances nine times in its history. Every one of those times, former governors on both sides of the aisle have used his or her executive authority to make the necessary budget adjustments to ensure legislators are able to walk into session with a balanced budget, so they can focus on other policy priorities.
Brownback presented a budget proposal to the Legislature in January that borrows $317 million and cashes out large sums — over $1 billion — of one-time money and uses creative gimmicks to “balance the budget.”
The governor’s plan, as presented, is neither structurally sound nor fiscally conservative. Instead, it:
▪ Depletes the state’s assets. The governor wants the Legislature to sell the state’s future proceeds from the Master Settlement Agreement from tobacco companies for reduced cash now. Much of this money currently funds early childhood development programs.
▪ Neglects to pay scheduled KPERs retirement payments in fiscal year 2017, fiscal year 2018 and fiscal year 2019 to the tune of $540 million and adds $6 billion to the state’s unfunded liability.
▪ Continues to allow certain business owners to skirt income taxes. This loophole was an unintended consequence of the 2012 tax rewrite.
▪ Raises tobacco and liquor taxes, giving Kansans an incentive to cross the state line to make these purchases, driving down taxable revenue in Kansas and shifting these tax revenues to bordering states.
While projections from the governor’s office show that his plan will produce a positive ending balance in the next few fiscal years, the state’s finances quickly begin to tank in fiscal year 2020. Projections provided to my office by the Kansas Legislative Research Department estimate that in fiscal year 2021 (coincidentally, shortly after his term as governor ends), the state will once again be faced with a negative ending balance — should we start paying our bills, including highway funds and KPERS payments — putting us right back where we started.
The Senate has put all non-budget-related legislative activity on hold until we concoct a structurally balanced budget that has enough votes to pass the Senate. As soon as we can do that, we’ll begin work on a new school finance formula.
I will be the first to admit that this is not an easy process, nor is it a pretty one. There’s a chance that the Legislature will debate a handful of solutions before one sticks. They call it “making sausage,” and that’s pretty ugly. Still, I remain confident that this Legislature can and will produce a stable, long-term budget solution that Kansans can be proud of.
The Kansas Senate will not kick this can down the road any longer.
Wichita Republican Susan Wagle is Kansas Senate president.