It wasn’t surprising that the Kansas Senate overwhelmingly rejected last week an across-the-board spending cut proposed by Senate President Susan Wagle, R-Wichita – choosing instead to borrow money from a state investment fund and defer payments to the state pension plan.
It is difficult to cut spending this late in the fiscal year. And there was little appetite to cut funding to public schools – especially when the Kansas Supreme Court already ruled that funding is inadequate.
But not cutting current year spending – and not approving retroactive income tax increases, which Wagle helped block last month – means next year’s shortfall will be worse. And it was already terrible.
In fact, counting the likely increase in K-12 funding that will be needed, the state is facing a shortfall next fiscal year of well more than $1 billion.
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There aren’t many options for covering that large of a shortfall.
Lawmakers will look for additional spending cuts for next fiscal year, as they should. But after multiple years of budget shortfalls and cutbacks, there aren’t easy targets. Most of the ideas being discussed would barely dent the deficit.
Many of the recommendations in an efficiency study released last year are proving difficult to implement, or unlikely to produce as much savings as suggested – including a proposal to require school districts to join a statewide health insurance pool.
Lawmakers likely will divert more money from the state highway fund, but there is not a lot left that isn’t already budgeted.
That means that covering the shortfall likely will come primarily from the revenue side of the ledger.
Lawmakers came within three votes last month of overriding Brownback’s veto of an income tax bill. That bill would have eliminated the tax exemption on pass-through business income and raised income tax rates on most Kansans, including restoring a third tax bracket.
By itself, that tax increase would not be enough to cover the entire shortfall.
Another option is completely rolling back Brownback’s tax cuts, returning income tax rates to what they were before. That could raise about $1.2 billion a year once fully implemented.
Lawmakers also are considering an increase in the gasoline tax, which hasn’t been adjusted in more than 13 years. Increasing it 5 cents per gallon would raise about $100 million a year. A 15-cent increase would raise about $300 million.
There also are discussions about raising cigarette taxes again, which are regressive but can have a public health benefit. A $1-a-pack increase could raise about $70 million.
None of these options is desirable. But after years of shortfalls and fiscal mismanagement, these are the stark choices Kansas must face.