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: Interim cmtes, transpo scorecard, budget, Goossen, FB experiment

In this issue …

  • Interim Committees Approved
  • Economic Lifelines produces scorecard on transportation votes
  • Where we are on the budget
  • Duane Goossen’s take on the budget
  • Our Facebook Experiment

 

INTERIM COMMITTEES APPROVED

The list of committees of the Kansas Legislature that will meet prior to the 2017 session will not include a study of a new school finance formula, probably a major 2017 issue for lawmakers.  However, such a study could still be included later.

The Legislative Coordinating Council, made up of legislative leaders from both parties, approved a list of study topics last week.

Here are some we found interesting:

Review of Budget Stabilization Fund – HB 2739 establishes the Budget Stabilization Fund within the Kansas Treasury as of July 1, 2017.

What is a Budget Stabilization Fund?  It’s commonly called a “rainy day fund” in the form of a separate savings account designed to operate across multiple business cycles and provide additional funding during revenue downturns or for other general purposes.

Kansas is one of only four states that do NOT have a rainy day fund.

The bill directs the Legislative Budget Committee to meet for up to ten days to study and review policies concerning the fund including:

  • Analyzing risk-based budget stabilization practices in other states
  • The appropriate time period over which to analyze State General Fund revenues and expenditures
  • Which entity should certify the reserve amount necessary in the Budget Stabilization Fund
  • Sources of funding for the Budget Stabilization Fund
  • The appropriate level of risk of exhausting the balance within the Budget Stabilization Fund during an economic downturn
  • The circumstances under which money could be withdrawn from the Budget Stabilization Fund

The Legislative Coordinating Council recommended seven days of study.  Senator Ty Masterson (R-Andover) will chair the committee.

The Budget Stabilization Fund is just one portion of HB 2739.  It also sets up a timetable for a revised budget process for state government.  On or before January 14, 2019, a revised budget process would be required that results in a system of “performance budgeting using outcome measures to evaluate program effectiveness.”

Review of the state’s retirement system (KPERS) – The committee approved a quick look at KPERS, including 2016 legislation and the overall funding ratio for the retirement system.

Larned and Osawatomie State Hospitals Study – There are many who believe the state’s mental health system is on the verge of collapse due to a lack of funding.  Whether that’s true or not, there’s cause for concern after some federal funds were pulled from Osawatomie and reports of turmoil at Larned and Osawatomie.

The Committee topics would include, but not be limited to, the following:

  • Monitor the patient populations and review and study the activities and plans of the treatment programs and correlation to patient outcomes
  • Tour each hospital, considering and evaluating facility issues relating to plan management and safety
  • Review state policies relating to the hospitals
  • Review the KDADS (Kansas Department for Aging and Disability Services) policies relating to each hospital
  • Review and study KDADS responsiveness and efforts in identifying and resolving issues relating to facility, staff, and patients
  • Review and study KDADS staffing programs and policies relating to staffing, recruitment, retention, employee morale, and employee relations issues
  • Review and identify patient and employee safety concerns
  • Any other issues brought to the attention of the Committee

The committee might also look at legislative oversight of privatization.

 

ECONOMIC LIFELINES PRODUCES SCORECARD ON TRANSPORTATION VOTES

With a billion dollars taken from Kansas transportation funds for other purposes over the past two years, the state’s transportation coalition, Economic Lifelines, has produced a spreadsheet on transportation votes by legislators since 2010.

In releasing the information, Economic Lifelines CEO Michael Johnston said:

“As the legislature struggled to fashion a budget year after year, it became painfully clear that the highway fund was going to be under constant pressure. That pressure peaked this year with the governor and legislature approving, for general government purposes, the diversion of virtually all sales tax dedicated revenue from the highway fund for FY 16 and 17. That will amount to over one billion dollars for just those two years. 

“Taking all the sales tax from the highway fund reduces KDOT’s income stream by more than a third. If that continues, it will mean T-Works will not be completed as promised and the condition of the state transportation system will rapidly decline.”

Here’s a link to the spreadsheet, which includes the names of challengers to each legislator in the upcoming primary elections.  A red box on the left means there’s a Republican primary election.  A blue box means there’s a Democratic primary election.

Some challengers are former legislators or House members running against Senators.

Where boxes are empty, it probably means the person was not in the legislature or is a challenger.

For those who support transportation in Kansas, the spreadsheet may be helpful in determining who to support or oppose in the August primary.

 

WHERE WE ARE ON THE BUDGET

The state’s ongoing budget crisis seems to get worse monthly.  Here’s a snapshot of where we stand as of now.

  • Because May and June revenues were short of predictions (again), Kansas ended the 2016 Fiscal Year $76.2 million in the red.
  • To balance the budget, Governor Brownback withheld $260 million in June payments to school districts until July, which is FY 2017.
  • The state also swept another $23.6 million from the state highway fund. That emptied the fund of the sales tax dollars.
  • The Governor also took some money from the Corrections Department and money from the Children’s Initiatives Fund that had not been spent yet.

Also new is a July 5 memo from the Kansas Legislative Research Department which adjusts the consensus revenue estimates after actions taken by the special session of the legislature.

Prior to the special session, there had been a June 10th memo that adjusted the estimates after taking into account bills passed by the regular session.  That memo follows the July 5th memo when you go to the link.  Basically, estimated receipts to the state general fund from transfers were increased an additional $22.1 million compared to the June 10 memo.

There’s a sort of a warning in the June 10 memo that we spotted.  It has to do with 2018 and later:

“Individual income tax receipts will continue to be impacted by an additional rate reduction scheduled to occur in tax year 2018, when the bottom bracket will be reduced from 2.7 to 2.6 percent (see KSA 2015 Supp. 79-32,110); and by a special formula that could provide for further reductions beginning as early as tax year 2021 (see KSA 2015 Supp.79-32,269).”

 

DUANE GOOSSEN’S TAKE ON THE BUDGET

Former Kansas Budget Director Duane Goossen has been a reliably accurate predictor of the financial changes facing Kansas for some time.

Now the Senior Fellow at the Kansas Center for Economic Growth (KCEG), Goossen’s latest blog looks at the overall cause of the state’s ongoing crisis and blames the 2012 income tax cuts.

“Individual income tax receipts have been the key driver in the revenue loss, with FY 2016 collections $28 million below FY 2015, and $683 million less than in FY 2013.  FY 2016 became the third year in a row in which a huge chunk of general fund tax receipts simply disappeared.  Normally, income tax receipts would grow, but while other states were experiencing post-recession receipt growth, Kansas income tax revenue fell backward dramatically and stayed down.  Had Kansas income tax receipts grown in a similar way to the rest of the nation, Kansas collections would have been more than a $1 billion higher in FY 2016.”

“To deal with the severe budget problems created by the income tax cuts, lawmakers have blown through reserves, borrowed, raided the highway fund, taken money from children’s programs, cut services, and raised the sales tax rate.  But they have not addressed the source of the problem-unaffordable income tax cuts.  As a result, Kansas literally scrapes by financially, day by day, unable to invest in the future.”

Here’s a link to the complete blog, which includes some eye-opening charts.

 

OUR FACEBOOK EXPERIMENT

During the last day of the Kansas Legislature’s special session (June 24th), we tried a little experiment.  We went live on our Facebook page, giving three updates on where things stood during the day.  The live reports were then saved, so anyone on Facebook can go back to hear the reports.

It was a way to give up-to-the-minute information on what was going on without having to find a computer and write an update.

Judging by the feedback we received, we think it worked and plan to continue the reports in the future.

If you didn’t have a chance to see the reports, you can go to our Facebook page and like KEPC to stay up to date. Scroll down to June 24th and click on my picture to start the video reports.

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