In case it was overlooked in all the election news, it is important to draw attention to the state’s new revenue estimates – and the huge budget hole caused by the income-tax cuts signed by Gov. Sam Brownback.
Revenue forecasters projected that the state will collect nearly $705 million less in revenue next fiscal year than it will this year, or a drop of 11.4 percent. Even if it spends down all of its cash reserves, the state will have a budget shortfall next year of about $327 million. That assumes overall state spending doesn’t increase, despite likely growth in Medicaid and the possibility of the state losing the lawsuit on school funding.
The cause of this shortfall is not a stalling economy. Rather, it was the reckless decision last session by conservative state lawmakers and Brownback to cut taxes far beyond what was affordable.
As a result of those cuts, the state’s income-tax revenue from individuals is expected to drop 15.1 percent next fiscal year. In addition, the planned phasedown of the state’s sales-tax rate on July 1, 2013, will reduce those collections by about $262 million.
State Budget Director Steve Anderson said that “more pruning” in state spending may be necessary. That’s an understatement.
Anderson asked state agencies to prepare budgets for next year with scenarios for 10 percent cuts, though he said he doesn’t expect to have to cut that much. The Kansas Health Institute News Service obtained documents showing how the state’s three top health agencies might cut 10 percent of their spending – and it wasn’t pretty, or realistic.
For example, the Kansas Department of Health and Environment proposed reducing its administrative costs by nearly 34 percent, as well as reducing funding for safety-net clinics and aid to local health departments. The Kansas Department for Children and Families said it would not replace workers who quit or retire, would cut support for early childhood programs, and would help fewer parents pay their child-care bills. Possible cuts for the Kansas Department for Aging and Disability Services included home- and community-based services for the frail elderly.
Rather than such draconian cuts, the better way to cover the shortfall would be to restore some revenue. Though taking back some of the tax cuts is politically unlikely, Brownback may seek again to eliminate some tax deductions and credits. He also has expressed openness to keeping the sales-tax rate in place. That seems politically difficult, though, as many GOP lawmakers opposed the initial increase, and keeping it in place would shift even more of the tax burden to lower-income Kansans. Another alternative might be for the state to keep in the general fund the portion of the sales tax that is supposed to go to the highway fund.
But any of these options involve pain. And what is frustrating is that the cause of the budget pain was entirely self-inflicted.