If you don’t know what to believe about the Kansas economy these days, this is very understandable.
Gov. Sam Brownback has his facts. He boasts about the low unemployment rate. And he brags about a record number of new businesses.
To use his words: “The Kansas economy is strong, and it is growing.” He credits his tax policies for these “successes.”
That picture is the opposite of the one painted by his many critics, who offer their own facts, showing Kansas economic growth has lagged national averages and those of surrounding states, where similar tax cuts have not been imposed. They say Brownback’s tax policies have been a total bust.
No matter what you believe to be true of the Kansas economy, consider this: The numbers can be sliced and diced to make a positive or negative picture, but it is undeniable that Kansas government itself is virtually bankrupt, and Brownback’s tax policies are responsible.
I sat down with state Sen. Jim Denning of Overland Park to get his analysis. Denning, a conservative Republican, is the vice chair of the Senate Ways and Means Committee. He chairs the Johnson County delegation.
Denning said: “The governor rolled the dice on the most aggressive tax cut policy in history, and things just did not turn out the way he expected.”
Denning pointed to several factors: The depression in agricultural prices, the decline of aviation manufacturing in Wichita, the loss of severance tax revenue from collapsed oil and gas prices, the underprojected revenue from the sales tax because of higher than anyone could have predicted movement to Internet sales, and the pass-through tax loophole.
“Our revenues do not match our expenses. We just are not collecting enough revenue to pay for core functions of government,” Denning said.
“I’m personally fatigued from mopping up the mess. We have gone after one-time revenues to keep us going but now we have run out of places to go.”
Denning has been a consistent critic of the pass-through tax exemption for 300,000 Kansas business owners. He calls it the LLC loophole.
“We should have closed the loophole last year,” he said. “We had the votes but the governor threatened to veto any change to his signature business exemption tax policy. If we would have closed the loophole, we would have brought in an additional $200 million, and the governor would have been a hero.”
Denning said the $34 million in projected rainy-day reserves will be reduced to just a few million dollars when the budget is passed with the ongoing revenue shortfall. Denning said that leaves the state with about eight hours of operating cash. “When the Legislature adjourns, it will be up to the governor to address any future budget shortfall,” he said.
Asked what the governor might do, Denning speculated that he may withhold a $100 million quarterly payment to Kansas Employee Retirement System. Denning said the governor has the authority if the state’s checking account goes below zero. This will not affect retirees getting their monthly checks, though it does reduce the progress the state has made on KPERS’ overall financial health.
Denning said there are only a few areas where the governor can come up with the needed funds.
“The Legislature has controlled spending to the lowest levels on record,” Denning said. “The three biggest drivers of expenses are K-12 education, KPERS and Medicaid. These big expense drivers crowd out all other core government expenditure needs. Our constituents wanted us to reduce spending, and we did. The tax revenues just are not enough to even support that reduced spending level.”
Denning’s candor in this crisis should leave no doubt where things stand.
Steve Rose, longtime Johnson County columnist: email@example.com