Kansas is headed toward its own fiscal cliff, like the nation as a whole, and Gov. Sam Brownback has almost single-handedly driven us to the edge of this abyss. He must now lead his conservative majorities in the Legislature in avoiding financial disaster.
Brownback deserves credit for restraining state spending during his first two years in office and for building up healthy balances, with big help in revenue growth from the “temporary” sales-tax increase of 2010. He pulled Kansas out of the financial ditch but then quickly steered the state toward a deeper chasm by signing a rushed and flawed tax bill.
Revenue estimators project that the revenue hole will be $250 million in the current fiscal year that ends in June and more than $850 million for the year that begins in July. Lawmakers will have to backfill this financial pit or make draconian cuts in education and Medicaid-assisted services, which together comprise nearly 90 percent of the general fund budget.
Brownback could back off on the dramatic reductions in income-tax rates or the elimination of taxes on certain business income, or at least consider phasing them in, but he has vowed not to go there. Unless he reneges on his public commitments to education and assistance to the state’s most vulnerable aged and disabled residents, he will have to reopen the sales-tax issue.
The Kansas House rejected Brownback’s original recommendation last session to extend part of the sales-tax increase scheduled to end this coming July. However, with election results that raised the governor’s political capital and conservative Republican majorities installed in both houses, lawmakers may be more amenable to Brownback’s initial approach. By doing so, they could put off seeing red ink well into next fiscal year.
To make it through the next fiscal year in the black, however, Brownback also would have to stare down highway lobbyists and call for deferring their increased claim on sales-tax revenues, scheduled to begin in July. He diverted $200 million from the highway fund to make it through the past fiscal year and knows he can do this. His diversion in 2011 caused hardly a murmur, as Kansas still has the best-funded highways in the nation.
Two stark realities confront Brownback and his conservative allies as they struggle with cleaning up the tax mess. First, extending the sales-tax increase and stiffing the highway fund are at best temporary fixes. Even with these measures, the state will be experiencing red ink at about election time in 2014. The financial pit created by the tax bill is simply too deep.
Second, with the unavoidable shift in financing state obligations from progressive income taxes to regressive sales taxes, the conservative Republican brand will increasingly become “we tax the poor for the benefit of the rich,” a motto Brownback appears to embrace. Last January he called for “fairer” tax reform with massive tax cuts except for a whopping $88 million tax increase on the working poor. That was discarded, but he then signed a tax bill that makes state income taxes less progressive, by shifting $23 million in income-tax liabilities from 21,000 of the highest-income Kansans, those making $250,000 or more, onto 630,000 of the lowest-income Kansans, those making $50,000 or less.
After Brownback’s highly successful campaign to defeat Republican moderates last August, his political guru David Kensinger told the New York Times: “You’re going to see a durable conservative majority governing Kansas for the foreseeable future.” How Brownback and his allies avoid driving the state over the fiscal cliff may give Kansans more insight into what their future under conservative Republican governance will look like and may speak to the durability of this alliance.