Tax Study Released Today

A new study on the ramifications of lowering the state income tax was released today at a statehouse news conference. Bernie Koch, executive director of KEPC, and study author Dr. John Wong presented findings at the statehouse today. The study finds that, for every 1 job created, 1.63 are lost due to study released today finds that a lowering of the income tax would result in a loss of 1.63 jobs due to a reduction in overall state spending. The study was commissioned by the Kansas Economic Progress Council.

The press release is available here, and the ful text of the study is available here.

Dr. Wong’s slide deck is available here.

KEPC UPDATE: Short breather then more problems…

A regular reader of the KEPC News told me this weekend (after the end of the Kansas Legislature’s special session on school finance) that he would like to read some good news here for a change.

There is good news for the moment.  The legislature appears to have fixed the problem with state distribution of certain education funds that will satisfy the Kansas Supreme Court.  That means schools will not close after June 30.

The bill (Substitute for HB 2001) passed the House 116 to 6 and the Senate 38 to one.

Here’s a link to how the House voted.

Here’s a link to how the Senate voted.

The bill puts $37.6  million into Local Option Budget (LOB) equalization aid for property-poor school districts.

  • $4.1 million is transferred from TANF funds (Temporary Assistance for Needy Families)
  • Virtual state aid contributes $2.8 million (this is for programs that fund virtual schools-learning over the Internet)
  • $10.5 million comes from tobacco settlement funds
  • $7.2 million comes from the extraordinary need fund set up by last year’s block grant bill
  • $5 million is transferred to the extraordinary need fund from KDOT’s $4 motor vehicle registration fee
  • If the sale of the Kansas Bioscience Authority raises more than $25 million, the excess (up to $13 million) will go to fund LOB equalization

That doesn’t add up to $37.8 but there are a lot of moving parts, and the Bioscience Authority sale is not expected to raise that much money.  Even Governor Brownback has said so.

I have been trying to find an online link to what this bill means to each school district in Kansas, but that does not appear to be available yet.

We do know from Kansas Legislative Research that 77 school districts would lose some state aid, 169 would gain, and there would be no change in 40 districts.

Under the original plan introduced Thursday, 141 districts would have lost.  That plan would have used a 0.5 percent cut to general state aid to K-12 education to finance the LOB equalization.  The elimination of that provision is what caused more districts to come out better.

 

Here’s the bad news.

Lost in all of the euphoria is the undisputed fact that more budget problems are on the way, probably next week.

In remarks to the House Appropriations Committee on Thursday, Legislative Research Assistant Director for Fiscal Affairs J.G. Scott said:

  • The projected ending balance for the current fiscal year (FY 2016-which ends Thursday) is $21.5 million
  • The projected ending balance for FY 2017 is $87 million
  • He noted receipts were short of expectations in May by $66 million
  • It appears revenues will be short again in June and the $21.5 million ending balance will be wiped out
  • He said the state may have to sweep funds, and delay certain payments to get through FY 2016
  • In that case, the FY 2017 ending balance probably isn’t there

Governor Sam Brownback’s budget director, Shawn Sullivan echoed those concerns in remarks to the State Finance Council last Wednesday.  The hall talk around the Statehouse last week was June could be in the neighborhood of $40 million or more below estimates.  Sullivan reportedly told the Council June revenues (to be announced July 1) could be $40 to $50 million short.

Sullivan said the state might have to take $16 million in highway funds and delay payments to school districts.  Another option was to transfer up to $45 million in Medicaid fee funds to the state general fund.

It’s ironic that much of the criticism of local school districts has been aimed at their reserves, which school officials have been saying they need in case of delayed state payments.  It appears that’s exactly what might happen.

All of this occurred at a Finance Council meeting where the group voted 8 to one to take out a $900 million certificate of indebtedness for next fiscal year as a cash management tool.  That would allow the state to borrow money from itself at low cash times of the year, but to pay it back before the year is done.

The state’s ongoing budget problems are expected to continue and will have to be faced by the 2017 Kansas Legislature, which (by the way) is supposed to rewrite the school finance formula.

Sorry, I’m just the messenger.

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