TOPEKA – Kansas legislators open a critical annual session Monday that will require them to wade through massive budget shortfalls and deal with a court mandate to boost spending on public schools.
The shortfalls, totaling more than $710 million in the current budget and the budget for the fiscal year beginning in July, arose after aggressive personal income tax cuts were enacted at Gov. Sam Brownback’s urging.
The budget situation was further complicated when a Shawnee County District Court panel declared last month that the current level of education funding is “inadequate from any rational perspective of the evidence.” The decision, which could lead to funding increases of more than $550 million a year, is expected to be appealed to the Kansas Supreme Court.
But even if the GOP-dominated Legislature isn’t forced to address education this session because of the appeals process, several Republican leaders said lawmakers must make significant spending cuts to shrink the shortfalls. Key senators said they want to avoid measures – such as reversing cuts in income tax rates or raising the sales tax rate – that clearly can be labeled as tax increases.
House Speaker Ray Merrick, a Stilwell Republican, said in a written statement Friday that “Kansas families need to keep more of their money.”
Tax proposals from senators include delaying future promised cuts in personal income tax rates and accelerating the elimination of income tax deductions already set to be phased out as rates drop.
“The concern I have is, how we are going to make up for this revenue shortfall without cutting K-12 and higher education and public safety and all the things the general fund is responsible for,” Senate Minority Leader Anthony Hensley, from Topeka, said. “I don’t know how Sam Brownback is going to be able to pull that off.”
Jon Hummel, Brownback’s chief of staff, told the Wichita Eagle that proposals to raise tax revenue will be part of the governor’s plan to plug the budget hole and that education spending won’t remain untouched. No details were offered. Brownback spokeswoman Eileen Hawley said in a written statement Friday that the budget proposals for fiscal years 2016 and 2017 would be “structurally balanced.”
The governor will deliver his State of the State address Thursday night and offer his spending plan Friday.
Brownback, who narrowly won his re-election bid against Democrat Paul Davis in November, has seen support from within his own party eroding since he announced late last year his plan to plug this year’s $279 million budget gap mainly through transfers from other state funds.
His proposal suggested diverting funds for highway projects and state pensions to general government programs, but analysts said that could increase a shortfall currently projected at $436 million to $648 million for fiscal 2016, which begins July 1.
The plan doesn’t “appear to significantly address the mismatch between recurring revenues and expenditures,” bond-rating company Standard & Poor’s said Friday, stressing it was “concerned about the one-time nature of most of the budget fixes.” The release noted that Kansas has been spending down reserves and said that “indicates credit stress.”
S&P downgraded Kansas’ credit rating in August to AA from AA+, and gave it a one in three chance of having its rating downgraded further within two years. S&P analyst David Hitchcock said the rating could be re-evaluated as quickly as this legislative session because Brownback’s plan for a midyear budget-fix calls for refinancing some of the state’s debt and taking the savings upfront in 2015.
“What we are looking for in terms of maintaining the rating is movement toward structural budget balance, which means ongoing revenues meeting ongoing expenditures,” he said, adding, “If they don’t take any midyear corrective actions, that would be a concern.”
Adding to the governor’s woes, a federal grand jury has ordered the state’s ethics chief to testify next week as part of its investigation into loans made to Brownback’s re-election campaign. The only loans listed on the governor’s campaign disclosure reports are one from Brownback and some from Lt. Gov. Jeff Colyer.