KEPC UPDATE: State borrowing; Jordan: Revenue drop in June; Fiscal Cliff/Capital Gains; Medicaid expansion

  • State borrowing nearing Great Recession level
  • Jordan says revenue will drop again in June
  • Memo hints revenue drop was not all fiscal cliff/ capital gains
  • Medicaid expansion with a Kansas twist

 

State borrowing nearing Great Recession level

Former Kansas Budget Director Duane Goossen told a meeting of the Newton Area Chamber of Commerce last Friday that the internal borrowing recently authorized by the Kansas Finance Council is nearing the same level as during the Great Recession.

The comments came a day after Governor Brownback and legislative leaders approved $675 million in borrowing from idle funds over the 2015 fiscal year to help the state by expected tight times caused by lower than predicted revenues.

Internal borrowing in the 2009 fiscal year was $775 million. Last year it was $300 million.

Goossen, now the VP for Fiscal and Health Policy at the Kansas Health Institute says the increased borrowing is a signal that the state is entering a period of “defensive budgeting.”

Governor Brownback and Republican legislative leaders are taking strong exception to some of the reporting on the revenue drops and the borrowing.

You can get a flavor for the debate by listing to a story by Stephen Koranda of Kansas Public Radio at the University of Kansas.  Listen to the audio report on the State Fiscal Council meeting last week where the idle fund borrowing was authorized.

 

Jordan says revenue will drop again in June

Kansas Secretary of Revenue told the Topeka Capital-Journal this week that he expects state revenues collections to fall about $10 to $20 million below official estimates for June, following a drop of $310 million below estimates in April and May.

The Administration has attributed the drop to investor fears about federal tax changes that caused a surge in investment sales to take advantage of lower capital gains taxes. Officials pointed to a report by the Rockefeller Institute of Government to support their claims.

However, as we reported on June 7, Rockefeller Institute economist Lucy Dadayan told the Wichita Eagle her research was misrepresented by those administration claims.

“The large declines in Delaware, Kansas, and North Dakota are mostly attributable to the legislative changes that cut income tax rates as well as restructured tax brackets,” she said.

Dadayan also said in that story that Kansas might have to make budget cuts in the near future.

Memo hints revenue drop was not all fiscal cliff/capital gains

A memo to the Kansas Legislative Budget Committee dated Monday, June 9th, has a slightly different analysis regarding what caused the $310 million drop in estimated revenues coming in to the State of Kansas.

Funds flowing into the state’s treasury in April and May were $310 million less than the official estimates published in mid-April.

The biggest piece of the estimate that went askew concerned individual income taxes. They were $282 million less than expected, or 12.3 percent, according to Legislative Research.

The memo agrees in part with what the Administration says caused the difference.

“The reduction in individual income tax receipts was believed to be at least partly attributable to a taxpayer behavioral adjustment that occurred late in 2012. This development was known but the impact had been underestimated in Kansas and a number of other states.”

The memo goes on to say:

“In addition to the aforementioned Fiscal Cliff/capital gains issue, it appears that some of the fiscal notes associated with various income tax law changes enacted in 2012 and 2013 were understated. Additional study will be needed to provide updated information for the Consensus Group in November on the magnitude of the shortfall relative to the most recent estimate – regardless of the reason or combination of reasons that caused the shortfall.

Read the entire memo. And, you can also learn more from a KHI special report.

 

Medicaid expansion with a Kansas twist

The Kansas Hospital Association will propose Kansas-specific legislation in 2015 to expand Medicaid in the state, according to a report by the Kansas Health Institute News Service.

The report says in part:

“The legislation being drafted by the hospital association will be tailored specifically to Kansas, though it will borrow elements from so-called private sector expansion proposals in other states. Pioneered in Arkansas by a Democratic governor attempting to overcome opposition from a Republican-led legislature, the private-sector approach has been adopted by an increasing number of Republican governors seeking an alternative to expanding public coverage.”

Here’s a link to the story on the KHI News Service.