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: Primary change, 2017, $15m lost in Osawatomie, credit rating, March of Folly

In this issue …

  • Why the primary election means a change
  • What can change in 2017?
  • Osawatomie Post Audit: $15 million lost so far
  • Credit rating drops
  • The March of Folly

 

Why the primary election means a change

By now you’ve heard about Tuesday’s primary election in Kansas and the discussion about how moderates shocked conservatives at the ballot box in legislative races.  The number of changes might seem low, but they are critical in determining who is in the majority in the Kansas Senate and Kansas House of Representatives.

In the Kansas Senate, six very conservative Senators lost their seats to moderates:

  • Tom Arpke (R-Salina)
  • Terry Bruce (R-Hutchinson) – The Senate Majority Leader
  • Forrest Knox (R-Altoona)
  • Jeff Melcher (R-Leawood)
  • Larry Powell (R-Garden City)
  • Greg Smith (R-Overland Park)

In two or three other Republican races, conservative candidates seeking to replace conservatives who did not run for re-election were defeated by moderate Republicans.

There are currently four moderate Republican seats in the Senate. Two of them, Senators Carolyn McGinn (R-Sedgwick) and Vicki Schmidt (R-Topeka), survived tough primaries.

If those four moderate seats hold in the general election that adds up to 12 moderate Republicans.  Add the 8 current Democratic votes and you get a moderate Republican-Democrat coalition that can produce 20 votes, enough to block legislation in the 40 seat Senate.

However, observers widely believe Democrats can pick up somewhere between three and five seats in the general election.  That could produce a “working majority,” similar to the 2010 Kansas Legislature which passed the temporary one-cent sales tax and the now devastated transportation program.

If Democrats hold on to their current seats and pick up a few more, they can run the Senate with moderate Republicans.  If they beat enough conservative Republicans in the general election, moderate Republicans might be in a position to elect their own leadership.

A similar situation occurred in the House Republican primary election.

Eight conservatives lost their re-election.

  • Craig McPherson (R-Overland Park)
  • Brett Hildabrand (R-Shawnee)
  • Rob Bruchman (R-Leawood)
  • Jerry Lunn (R-Overland Park)
  • Charles Macheers (R-Shawnee)
  • Connie O’Brien (R-Tonganoxie)
  • Will Carpenter (R-El Dorado)
  • Kasha Kelly (R-Arkansas City)

In three House races where a conservative Republican did not seek re-election, moderates won.

That’s a tentative pickup of eleven Moderate Republican seats.

There are 94 House Republicans.  Twenty-two or so are considered dependably moderate, depending on the issue.

All things being equal, let’s say those seats remain moderate Republican.  Twenty-two and eleven is 33 moderate Republicans.  Add that to the 31 existing Democratic seats and you get 64 votes.  It takes 63 out of the 125 votes in the House to pass a bill, so a moderate Republican-Democrat coalition would be able to control legislation.

But, as was the case with the Senate, Democrats are expected to pick up some seats.  If their candidates can beat conservative Republicans, that makes an even bigger margin.  Some observers it is possible for moderate Republicans to take over the House leadership.

Don’t hold me to the numbers above.  Some observers believe there were other incumbents who lost who might be considered conservative.  That changes the whole picture as well, to the better for moderate Republicans.

Also, anything can happen in the general election.  What we know for sure is the 2017 Kansas Legislature will be much less conservative.

 

What can change in 2017?

In addition to legislative leadership changes in 2017, there are the issues that dominated the primary election and will continue to be in the forefront of the general election.  They include education, transportation, and other public services that have been impacted by a continuing budget crisis brought about by tax cuts.

Reversing that trend cannot occur quickly.  For example, any change in income taxes for 2017 would not have a measureable effect on revenue coming into the state until the first quarter of 2018, a year and a half from now.  Building a budget will continue to be very difficult and likely controversial.

Adding to that difficulty is the expected Kansas Supreme Court decision on school funding.  If that goes against the state, the bill could come to as much as $500 million.

One possibility that looks strong at first glance is passage of Medicaid expansion.

Whatever a new legislature wants to do would require approval from Governor Brownback, who still wields the power of the veto.

 

Osawatomie Post Audit: $15 million lost so far

Lost in all the election news is a recently released Legislative Post Audit of the Osawatomie State Hospital, which was reviewed recently by the Legislative Post Audit Committee.

State auditors were asked to review the state psychiatric facility’s recent loss of federal funding.

Representative Henry Helgerson (D-Wichita) asked for the audit.

Osawatomie State Hospital’s Medicare funding was terminated by the federal government in December because it failed to comply with federal regulations related to staff and patient safety.

Some of the findings:

  • As of June, the loss of Medicare funding and additional expenses to address the deficiencies have cost an estimated $15 million.
  • Federal officials and state officials have offered “significantly different estimates of the time it will take to recertify a 60-bed unit.”
  •  The audit says the hospital will continue to lose significant Medicare funding until the entire facility is recertified.

Here’s a link to the audit.

 

Credit Rating drops

The same continuing Kansas budget problems that many believe are a source of problems at Osawatomie and Larned State Hospitals were mentioned a week before the primary election when Kansas’ credit rating was downgraded by S & P Global Ratings.

The rating agency dropped Kansas from AA to AA-, which means 41 states now have a higher rating than Kansas.

Cited in the drop (the second in two years) was the state’s lack of cash reserves.

 

The March of Folly

In case you missed it, at least two Kansas newspapers published my op-ed on Kansas ongoing budget problems and other examples in history of governments and institutions that take actions that are in conflict with their own best interest.

I related Kansas current problems to Pulitzer Prize-winning historian Dorothy Tuchman’s book, “The March of Folly.”  The book looks at historic bonehead actions, such as the British government’s activities that led to the loss of its American colonies.

Here’s a link to the Garden City Telegram version. A shorter version was published by the Wichita Eagle.

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