Steve Rose

Kansas revenue secretary offers rosy picture

Kansas Revenue Secretary Nick Jordan discusses Gov. Sam Brownback's tax proposals.
Kansas Revenue Secretary Nick Jordan discusses Gov. Sam Brownback's tax proposals. The Associated Press

Nick Jordan, longtime friend and Kansas secretary of revenue, and I often don’t see things the same way.

But I found he would not take my bet — because we agree — that there is a strong likelihood the Legislature, in an election year, won’t reach a consensus on how to plug the $290 million budget deficit. Rather, lawmakers will adjourn and let the governor make the unpopular cuts and other maneuvers, using his executive authority, to bring the budget into line.

Legislators have said they do not want to defer payments to the state’s retirement fund; do not want to bond future tobacco settlement revenue, which goes to children’s programs; do not want to rob any more from the highway fund, which would postpone projects; and do not want to cut spending on K-12 education with the Kansas Supreme Court looking over their shoulders. Nothing the governor has suggested is palatable.

The one idea that has been talked about in the Legislature — plugging the loophole in the exemption of some business owners and farmers who pay no income tax — appears to be dead. That would have added about $200 million to the treasury. As one state senator told me, “That idea may happen in the future, but it is not ready yet.” We shall see.

So, Jordan and I agree that the Legislature is likely to dump the mess on the governor.

We also agree that the dramatic income tax cuts of 2012 have left more money in the pockets of Kansans. This is true, particularly of the rich.

But I argue that gains for the poor were a mirage. Kansans have subsequently been slammed by a big sales tax increase, including on groceries, that hit the poor especially hard. Kansas now has one of the highest sales taxes on groceries in the nation. Furthermore, while Kansans have more in their pockets, programs like human services for the needy have seen sharp cutbacks.

Jordan is somewhat accurate when he states that tax revenue estimates, which always seem to be way off from the actual numbers, were only a tiny fraction off in 2015.

The estimating committee kept lowering its forecasts, until it finally got it almost right. It changed its forecasts four times, the highest projection being $6.05 billion. The forecasts steadily dwindled until the last forecast was $5.743 billion versus the final total of $5.717 billion.

Jordan is accurate when he claims that revenues in Kansas are sharply depressed because oil prices have plummeted, aircraft manufacturing in Wichita is way off and agricultural commodity prices shrank 10.8 percent below last year.

I would only say that things don’t always go smoothly in the real world. That’s when a rainy day fund comes into play. It is raining, and Kansas has no fund. The rainy-day reserves projected by the end of this fiscal year are a minus $137 million.

Jordan is also correct when he says revenues estimated for this year will be up over last year, from $5.7 billion last year to $5.8 billion this year, mostly from the sales tax increase. The reason the state is in a crunch, however, is because revenues back in 2013, before most of the impact of the tax cuts were felt, were $6.3 billion.

How has the problem been addressed? The reserves have been used up. Money has been transferred from the highway fund, as well as borrowing, particularly from the state’s retirement fund — all one-time fixes.

The number that Jordan is really proud of is the unemployment rate in Kansas, which is only 3.9 percent. But job growth in Kansas is well below the national average and in the last year has been in the bottom 10 in the nation.

On the overall view of the Kansas economy and the budget, Jordan and I sharply disagree. Even when we end up largely agreeing on the same set of facts, he presents a picture that is rosy, while I see things as bleak.

Steve Rose, longtime Johnson County columnist: srose@kc.rr.com.

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