It has become obvious that the upcoming legislative session will deal with very significant budget shortfalls. The state’s revenues have been very disappointing in recent months, and we are facing a $294 million budget shortfall for the remainder of this fiscal year, followed by a shortfall of $436 million by the end of the next fiscal year which begins July 1.
The budget shortfall for the current year must be dealt with quickly since we are already halfway through the fiscal year. Governor Brownback has proposed a solution to fill the budget hole but his proposal contains only $73.5 million of direct cuts and primarily solves the short-term problem with $206.5 million of one-time funds transfers. That approach only magnifies the size of the budget shortfall for the following year. If Governor Brownback’s proposal is approved by the legislature then the projected shortfall for fiscal year 2016 becomes $663 million.
State general fund budgeted expenditures for the year are projected to be $6.35 billion so the shortfall represents 10.2% of the entire budget. Half of the budget is comprised of expenditures for K-12 public education, a constitutional responsibility of the state and the subject of a current lawsuit. So if that portion of the budget is held harmless, is it reasonable to think that all other state budgets can be cut by 20% to make up the deficit? Keep in mind that plenty of budget cutting has already occurred in recent years in response to reduced state revenues during the great recession.
I am not advocating the following cuts, but offer them to illustrate the magnitude of the problem facing us. The entire budgets for public safety and general government could be eliminated and we still would not have filled the $648.3 million hole in the budget for fiscal year 2016. That means the budgets for all elected statewide offices and cabinet-level departments could be eliminated, all legislative functions be defunded, highway patrol and KBI abolished, and all state prisoners let out on the streets, and we still would not have eliminated the budget deficit.
I believe that cuts of this magnitude cannot be made responsibly without drastically affecting state governmental services. As a life-long Republican and a fiscal conservative I recognize that government must operate as efficiently as possible. But I was also elected to insure that state government provides the services its citizens depend upon and that those services are delivered in a manner that is as user-friendly as possible. It will be impossible to fill the looming budget deficits with nothing but budget cuts and still uphold our duty to provide those services. Some form of additional revenue will be required.
Most states are currently experiencing expanding revenues so the situation in Kansas is fairly unique. The majority of the problem is due to the income tax cut enacted during the 2012 legislative session. It was sold to a majority of legislators on the promise that leaving more money in the pockets of the taxpayers would grow the economy and actually lead to greater state revenue receipts. The first part of that promise is valid, and there is no doubt that granting a tax break can stimulate the economy. But the second part of the promise is highly controversial. President George H. W. Bush once called the theory “voodoo economics”.
It is becoming obvious that attempting to replace income tax revenues with sales tax revenues just will not happen, even when we fully account for the dynamic effect of the tax cut. Evidence continues to grow that the “shot of adrenaline to the heart” of the Kansas economy that Governor Brownback touted has not and will not happen.
I did not vote for the tax cut in 2012. Although I recognize that tax cuts can stimulate the economy I also understand that we can overdo it in the short run and create serious budgetary problems. During debate on the 2012 tax bill I argued that the plan went “too far too fast” and I continue to believe that. Recently others have come to agree with me, including an editorial board which endorsed Governor Brownback only two months ago.
So what do we do now? Those of us who voted no in 2012 would vote to reverse part of the tax cuts, but those who voted yes will resist. Other options are available but all carry negatives. Do we raise sin taxes on liquor or cigarettes? How about another increase in sales tax, which would send even more Johnson and Wyandotte County folks across the state line to do their shopping? Should we increase the motor fuels tax? We will also look closely at current sales tax exemptions. If we were to put a tax on services instead of just goods we could actually reduce the sales tax rate and perhaps even remove the sales tax on food. But I am guessing most of you would resist a tax on legal, accounting, engineering, or medical services. There are no ideal alternatives but I have become convinced that some sort of “revenue enhancement” must be part of the budget solution.
I am honored to represent the people of the 118th District in Topeka, and I welcome your questions, concerns and suggestions.
State Rep. Don Hineman, R-Dighton, can be reached at (620) 397-3242 or [email protected].