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: Moody’s on structural imbalance, cuts, transfers, Brookings on tax cuts

In this issue …

  • Moody’s weighs in on state’s “structural imbalance”
  • Cuts combined with revenue transfers to balance Kansas budget
  • Brookings on tax cuts

 

Moody’s weighs in on state’s “structural imbalance”

Moody’s Investor Services has given a below-average rating to Kansas pension bonds, saying the outlook for them is stable, but they make note of:

“…the significant level of non-recurring budget solutions to balance the state’s budget after successive years of income tax cuts, significant unfunded pension liabilities, inconsistent ending balances which were meant to act as a reserve buffer in downside financial scenarios, and an economy that will continue to underperform the nation due to sluggishness in key manufacturing sectors.”

The state plans to sell over a billion dollars in pension obligation bonds on August 20.  Moody’s has assigned the bonds a Aa3 rating.

Here’s a link to the Moody’s rating.

 

Cuts combined with revenue transfers to balance Kansas budget

The budget cuts and fund transfers announced Thursday by the Brownback Administration add up to more than the $50 million the Kansas Legislature envisioned; and rely heavily on Affordable Care Act (Obamacare) funds.

Budget Director Shawn Sullivan outlined over $38 million in spending reductions and $24 million in revenue transfers to come up with $62.6 million.

Here’s a direct link to the one-page explanation of the plan provided by the Budget Department.

You may recall that the Legislature did not totally fund the Fiscal Year 2016 budget, leaving Governor Sam Brownback to come up with an additional $50 million.  He went further than that, perhaps in anticipation of a shortage of projected revenues.

 

The Cuts

Under the heading of State General Fund Expenditure Reductions, the biggest cut is in the SCHIP Program.

The State Children’s Health Insurance Program (SCHIP) is a partnership between the federal government and states that provides health coverage to uninsured children whose families earn too much to qualify for Medicaid, but too little to afford private coverage.

The $17.6 million reduction is offset by an equal increase through Obamacare, a program severely criticized for years by conservatives and Governor Brownback.

The next biggest cut is $4 million involving the Hospital Provider Assessment.  It’s essentially a tax imposed on hospitals’ net inpatient operating revenue.  It funds the Health Care Access Improvement Program, created in 2004 to increase the Medicaid rates paid to doctors and hospitals.

The Administration said the program has had lower than expected expenditures.

Also in the category of cuts are over $9 million from various agencies in what are called “FY 2015 Reappropriations.”

 

The Transfers

In the category of Revenue Transfers to the State General Fund, the biggest number comes from “operational savings” in the state highway fund of $8 million.

The Administration says this comes from operational savings from FY 2015 due to implementation of efficiencies in Agency Operations.  “This reduction did not and will not affect the T-WORKs program.”

However, the Economic Lifelines transportation coalition has criticized the transfer, saying it will result in “the deterioration of Kansas roads and postponed projects.”  The 2016 and 2017 budgets already rely heavily on significant transfers from transportation to help balance the state’s spending.  KDOT has said some projects will be delayed.

Other significant transfers come from the Department of Children and Families in the form of reduced 2015 expenditures.

Also, economic development expenditures for 2015 were less than budgeted.

About $3.8 million is transferred from various fee boards, which the Administration says “have accumulated fee fund balances in excess of on-going cash flow needs.”

 

Brookings on tax cuts

Widely regarded as the most influential think tank in the world, the Washington-based Brookings Institution has weighed in on Kansas income tax cuts.

Kansas is mentioned prominently in the opinion piece, “State income tax cuts: Still a bad idea,” by William G. Gale.  He’s a Brookings expert on tax policy.

Gale says the record is clear that tax cuts have not boosted growth, citing even former President Ronald Reagan’s former chief economist, Martin Feldstein, who has concluded Reagan’s 1981 tax cuts “had virtually no net impact on growth.”

Gale outlines the recent history of Kansas tax cuts and their failure to induce economic growth.

He concludes:  “The states have no good reasons to believe that tax cuts will bring the desired manna.  Yet they continue to erode their tax bases in the name of business growth during an era in which few states can afford to cut critical services ranging from education to infrastructure repair.”

You can read his full opinion piece here.

KEPC UPDATE: THE SCHOOL FINANCE DECISION

Takeaways from the school finance decision By now, you’ve heard about the 87 page ruling on Kansas school finance by a three-judge panel on Friday.  The court ordered the state to pay about $50 million to local school districts by July 1. Many are still scratching their heads over what this means, particularly considering the […]

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KEPC UPDATE: Property tax problem, Kansas economy shaky

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KEPC UPDATE: Legislature works through wknd, tax overview, tax debate Friday, running out of time, labor report, ed clean-up

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KEPC NEWS RELEASE: Kansas’ own benchmarks lag the region

Indicators_Feb2015_nonfarm

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KEPC UPDATE: Tax cmte, 14 chambers send letter, Medicaid expansion favored by public and Catholic bishops, unemployment insurance

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