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.


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

In this issue… Lawmakers face property tax problem at Friday session Kansas economy still shaky   Lawmakers face property tax problem at Friday session The tax package of two bills designed to balance the budget (including the sales tax increase) has an error that could have a significant impact on cities and counties and their […]

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KEPC UPDATE: Senate passes tax increase bill & budget, House returns on Monday

In this issue… Senate passes tax increase bill Senate passes a budget House returns Monday afternoon   Senate passes tax increase bill The Kansas Senate met Sunday afternoon and passed a sales tax increase and several other revenue enhancements that fill the hole in the state’s budget, at least for the time being. The bill […]

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KEPC UPDATE: House rejects tax bill, emergency budget, furloughs

In this issue… House overwhelmingly rejects tax bill Emergency budget waits in the Senate wings State prepares for weekend furloughs of state workers   House overwhelmingly rejects tax bill A compromise tax increase bill was overwhelmingly defeated in the Kansas House of Representatives Thursday by a vote of three to 108. A meeting of negotiators […]

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

In this issue… Legislature plans to work through the weekend The tax overview House tax debate scheduled for Friday Is the legislature running out of time? Monthly Kansas Labor Report indicates continued lackluster economy Education clean-up sent to the Governor   Legislature plans to work through the weekend After a week filled with stumbled starts, […]

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KEPC UPDATE: Tax debate Wednesday, tax overview, budget agreement, bioscience hearing

In this issue… Senate Cancels tax bill debate until Wednesday The tax overview Budget agreement tentatively reached Senate holds Bioscience Authority hearing   Senate cancels tax bill debate until Wednesday The Kansas Legislature went home Thursday and will return to Topeka Tuesday after a four-day Memorial Day weekend. The Kansas Senate had been scheduled to […]

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KEPC UPDATE: Biz tax cuts not working, cmte struggles with tax increas, block grant arguments & appeals, renewable energy, outlook

In this issue … Business tax cuts not working says Rep. Hutton Senate Committee struggles with tax increase Judges hear block grant arguments Block grant appeals Renewable energy compromise passes House The outlook for next week   Business tax cuts not working says Rep. Hutton In what many deemed an extraordinary hearing on HB 2430, […]

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KEPC NEWS RELEASE: Kansas’ own benchmarks lag the region


Wichita, Kan. – Standards established by the State of Kansas and Governor Sam Brownback three years ago to measure the success of the Administration’s economic policies show the state’s economy trailing the rest of the region. The Kansas Economic Progress Council (KEPC) obtained a copy of the February 2015 report from the Governor’s Council of […]

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

In this issue … Tax committees meet as lawmakers return 14 local chambers sign letter on budget/taxes Medicaid expansion favored by public and Catholic bishops Unemployment insurance bill passes Legislature   Tax committees meet as lawmakers return It was a short week as legislators returned to the Statehouse for the veto session, which is expected […]

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