Solving the state budget deficit, business weighs in

The Brownback administration and the Kansas Legislature have a big job ahead: eliminating a $279 million budget shortfall before June 30, plus a further $436 million shortfall in the year after that.

The governor and the Legislature cut income and business taxes deeply in 2011 and 2012, which has contributed to the shortfall, although some lawmakers also blame a sluggish national economy for the poor revenue performance. Republicans who designed and approved the cuts were largely re-elected earlier this month, and they hold super-majorities in both the House and Senate.

Eliminating the shortfall will almost certainly mean more government cuts; a possibility of a tax or fee increase; and the chance of taking money from other sources, such as highway funding. No matter what happens, it equals financial pain for somebody.

The Eagle asked a variety of local businessmen and businesswomen, who have experience in balancing a budget, to weigh in on the matter by answering these questions:

From your experience as a business leader and your vantage point in Kansas, how would you advise the state to handle the $279 million budget deficit expected this fiscal year? And what would be your approach to putting the state on firmer financial ground, long term.

Mostly, the business leaders approached by The Eagle declined the assignment. One even cited having to carve turkeys for his office’s potluck.

But others stepped up. In addition to the three business leaders who offered comments below, four others – Wink Hartman, Jane Deterding, Brad Elliott and Lynn Nichols – submitted their thoughts in writing, and we are publishing them as well.

Support Brownback

Sam Williams, retired managing partner of ad agency Sullivan Higdon & Sink and former chairman of the Wichita Metro Chamber of Commerce, said he supports Gov. Sam Brownback’s vision for reducing taxes and making government smaller.

He sees shifting money that had gone to government back to individuals and businesses as reinvestment that will lead to economic growth.

The shortfall hasn’t changed his mind about the wisdom of the tax cuts. He blames weak growth in Kansas on the slow national recovery – and the natural delay in sparking private investment and growth that will come from shrinking government.

“It requires patience,” he said. “I believe in the direction we are going, and if I apply that to my business background, I’m always looking for efficiencies. Even in private business you can make a 20 percent reduction in cost if you have to.”

Having managed a very up-and-down business for years, he is a big believer in a creative response to less revenue.

“We run our business much tighter than government does, so if I can find those efficiencies in my business, then I believe you can do that in government,” he said.

He’s not anti-government, he said. If those efficiencies aren’t enough, then new taxes should be looked at, he said.

Cut expenses

Steve Martens, president of the Martens Cos., said he is in agreement with the actions of the governor and the state Legislature. They simply have to cut the budget to fit revenues.

“I support the governor’s tax plan so, in my mind, raising taxes is not an option,” he said.

He said he would advise the state to look at ways to minimize the pain by transferring funds, such as the highway fund, this year. But longer term, the state budget must be cut in all areas to match the revenues in the state’s current budget plan.

Martens said that many people describe the budget gap as a “problem.” That implies that the shortfall is a bad thing, rather than the outgrowth of good policy.

“It’s not a problem, it’s a shortfall,” he said.

Understand the implications

Jeff Lange, owner of the fast-growing RedGuard industrial housing company and several other businesses, describes himself as a political moderate in the sense that he doesn’t believe government should make dramatic shifts in one direction or the other.

“My advice to the state would be to consider running it like a business and quit being extreme in taking it from far left to far right and changing course with every political wind,” he said.

The state paying for school and university buildings creates long-term obligations that are excessive, he said, but he was harder on Brownback’s sharp tax cuts, which is now driving the necessity for cuts to spending.

“Obviously, when we have a new governor come to town and throw down a whole new reduced tax program without understanding the implications that result, that’s your first problem,” he said. “And now that we have that problem, we don’t want to have a knee-jerk reaction to reverse it. Let’s be much more consistent.”

His proposed solution for the short-term budget hole: some cuts, spread widely rather than focused just on highway funds, and not excluding education; and some tax increases with a limited time span.

Everybody should share the pain, he said, and that might change some conservative minds about the wisdom of dramatic fiscal experiments.

“When we all feel the pain across the board, then we might change the people who are making dumb decisions,” he said.

This story was originally published November 27, 2014 at 2:31 PM.