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: Revenue estimate questions, budget under water, Gov abandons useful analysis, college grads leaving

In this issue …

  • Revenue estimate recommendations raise questions
  • September revenues mean state budget is under water
  • Kansas abandons a useful measure of success
  • Regents say college grads leaving state


Revenue estimate recommendations raise questions

This week, Governor Brownback’s Consensus Revenue Estimating Working Group issued its final recommendations.  In recent years, official revenue estimates have not been accurate and have over-estimated the amount of revenue expected to be collected by the state.

Recommendations by the group included discontinuing the monthly comparison of revenue collected to official estimates of what would be collected.

Another major recommendation that has not received much attention is to move development of fiscal notes from the Kansas Legislative Research Department to the Kansas Department of Revenue.

Here is a link to the working group’s final recommendations.

That monthly comparison has been useful in letting everyone know whether state revenue was enough to fund the state’s budget (it has not been enough in recent years).

The group recommended monthly reports that compare actual collections in the month with actual collections from the same month the previous year.

Ironically, the abandonment of the monthly comparison is contained in a recommendation entitled, “Build greater transparency into the CRE process.”  The recommendation says, “Monthly estimates (SGF spreads) relating to the official CRE estimate should not be used to avoid trend analysis bias in revising future official estimates by the CRE group.”

Our reaction is to ask, “Why not do both?”  Provide information in many forms so policy makers and the public have as many tools as possible to understand whether the state’s revenues are enough to fund the budget.

The other problematic recommendation is moving responsibility for developing fiscal notes on legislation from Legislative Research to the Revenue Department.

Fiscal notes are estimates provided to the legislature about how much a bill will cost the state or bring to the state in additional revenue.  The working group’s report recommends the move without offering much rationale for it.

The Kansas Legislative Research Department is widely viewed as non-partisan, while the Kansas Department of Revenue (under control of whatever administration is in power) is sometimes seen as partisan.

One major example of why this is problematic is the 2012 income tax cuts, which have cut deeply into state revenues, and are a major cause of the problems with estimating state revenues.  After the legislation passed, the Legislative Research Department released a budget profile that accurately predicted the ensuing trend of a negative impact on revenues.

At the same time, the Kansas Department of Revenue was supporting Governor Brownback’s claim that the legislation would be a “shot of adrenaline” into the state’s economy.

Here’s a paragraph from the May 23, 2012 report on the signing of the income tax bill in the Kansas City Star:

“Nick Jordan, the state’s revenue secretary, said the administration ultimately imagines the creation of 22,000 more jobs over ‘normal growth’ and 35,000 more people moving into the state over the next five years.  And he expects the tax changes to expand disposable income by $2 billion over the same period.”

The trend predicted by the Research Department was accurate while Jordan’s was not.

Here’s a link to that Kansas City Star story from 2012.

Other recommendations seem to center on providing more input and expertise to the revenue estimating process to make it a more accurate tool for building a state budget.

Some of the recommendations seem to contradict a news conference called by Senate President Susan Wagle (R-Wichita) on Wednesday morning.  She and several other Republican Senate candidates want more legislative control over the budget, not less.

The GOP Senate proposes the formation of a legislative budget oversight committee.  Wagle said the legislature should be able to develop its own budget proposal.

She said anger is great among voters about the condition of Kansas finances.


September revenues mean state budget is under water

Meanwhile, the latest monthly revenue report is telling us that the Kansas’ 2017 fiscal year budget is already in the red.  September revenues were almost $45 million less than expected.

A state general fund profile from the Legislative Research Department on September 21 (before news that September revenues were down) estimated a fiscal year ending balance of $5.6 million.  Taking into account the $45 million shortfall for September, that puts the FY 2017 budget at a deficit of over $39 million.  However, some estimates put the deficit at over $60 million.

Of course, Kansas cannot operate at a deficit, so something has to give.

Read former Kansas Budget Director Duane Goossen’s explanation of why the 2017 budget won’t work and why he expects new revenues estimates in November to be about $200 million lower.



Kansas abandons a useful measure of success

The Brownback Administration is no longer producing the IKE (Indicators of the Kansas Economy) report for the Governor’s Council of Economic Advisors.

We here at the Kansas Economic Progress Council took special note of that news because we were the first to publicize the reports and their importance.  We were tipped off by a Republican legislator about the reports’ existence.  They were posted on the Commerce Department web site.

In a March 31, 2014 news release, we said “standards established by the State of Kansas two years ago to measure economic growth show the state’s income tax cuts are not growing the economy.”

We pointed out the report showed Kansas lagging in growth behind other states in the region in growth in employment, population, gross domestic product, personal income, private industry wage levels and establishment of private businesses.

Our news release received considerable attention in the media and among editorial writers.

After our first news release, the IKE reports were no longer made available on the Kansas Department of Commerce web page.

We were able to obtain copies of subsequent reports and issued news releases on them in 2015 and 2016.  By that time, it wasn’t really news anymore.  The reports continued to show lackluster economic performance in the state.  Some reporters and editorial writers began to obtain copies on their own and write about them.

We thought the IKE reports were common sense, useful, and accurate in their depiction of where we are as a state.

In that first news release, I said:

“This is a responsible report that confirms what’s really going on with the Kansas economy.  It comes from the Governor’s own Council of Economic Advisors and uses benchmarks established specifically to measure the success or failure of the state’s economic policies.  It draws no conclusions, but simply presents the facts.

“The reports used a system of measurements to monitor key economic indicators in the state.  At the time of the first report in 2012, Governor Brownback said, “These economic metrics will allow us to determine the state’s relative economic position as it relates to the six-state region and the nation, and to monitor in a timely manner if our policies and initiatives are having the desired economic effect.”

The six other states included in the analysis were Arkansas, Colorado, Iowa, Missouri, Nebraska, and Oklahoma.  The reports looked at growth over the past year, the past five years, and the past ten years.  It compared us to ourselves, our region, and the country.

The last report produced was in May of this year. We have obtained a copy and have posted it on our web page here.

It shows Kansas continues to lag the region in:

  • Population growth
  • Personal income growth
  • Nonfarm employment growth (was a negative over the one-year period)
  • Private sector employment growth (also a negative over the previous year)
  • Public sector employment growth (which was zero)
  • Private establishment growth

Ironically, the May report does show some minor improvements.

  • We are barely above the region in gross state product growth but trail the U.S. average.
  • We lead the region in personal income per capita growth but trail the U.S. average.
  • Kansas building permit growth leads the region and the U.S. over a one-year period.


Regents say college grads leaving state

At its annual retreat this summer, the Kansas Board of Regents heard that fewer Kansas college graduates are staying in the state.

The Regents President and CEO Blake Flanders gave the assessment, saying it’s not clear if higher education is not aligned with the economy, or whether the economy in Kansas is not offering the jobs that college graduates want.

Flanders cited numbers that indicate a decline in college graduates who remain employed in Kansas five years after graduation.  He said that applies to all post-secondary graduates, including those who received a bachelor’s degree, associate degree from a community college, or technical college certificate.

Those earning bachelor’s and master’s degrees are more likely to leave.


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KEPC UPDATE: Ended & unbalanced, prop tax lid, STAR Bonds/Bioscience, Budget process improvements, Angels, Eco devo incentives

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KEPC UPDATE: Lawmakers return, biz income tax, property tax, STAR Bond, S&P, Question

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KEPC UPDATE: Revenues plunge, Governor announces actions, KDOT half billion

In this issue … Revenues plunge Governor announces actions KDOT will delay half a billion in projects   Revenues plunge The official revenue estimates for the State of Kansas were reduced dramatically Wednesday, forcing the Brownback Administration to announce major cuts to transportation.  The Governor also proposed options that include cuts to K-12 and higher […]

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