The state of Kansas will not have enough money to pay its bills through June unless it cuts $279 million in spending, according to updated revenue estimates.
Just a week after being re-elected, Gov. Sam Brownback is staring down a budget crisis, and nonpartisan analysts point to his signature policy as the cause.
Budget director Shawn Sullivan had the unenviable chore of presenting the state’s dire fiscal outlook at a news conference Monday evening at the Capitol. The state must cut $279 million for the current fiscal year, which ends in June, and another $436 million in the next fiscal year.
The estimates were made by the Consensus Estimating Group, which meets every six months and includes the budget director, officials from the Department of Revenue and the state’s Legislative Research Department.
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“The state of Kansas must continue to live within its means, just as families do every day,” Sullivan said.
The shortfall hits Kansas a year earlier than previously expected and will present state lawmakers with many difficult decisions when they convene the legislative session in Topeka in January.
Kansas statute forbids the state from running a deficit, so cuts will need to go into effect before June.
Sullivan would not say whether education funding would be protected from the cuts. He said the administration would meet to form a plan on how to balance the state’s budget.
He said that allotments, which are budget reductions the governor can make without the Legislature’s approval, are an option for this year and that he had been crafting possible plans since June, when he was appointed to his post.
The shortfall is primarily being driven by the state’s income tax cuts, which Brownback signed into law in 2012, confirmed Raney Gilliland, director of the state’s nonpartisan Legislative Research Department. The state has lowered its expectation for individual income tax revenue by $239 million since April.
Sullivan said he had not discussed raising taxes or delaying scheduled tax cuts as possible solutions to righting the state’s financial ship.
Gilliland said the state’s current budget woes differed from the crisis it underwent during the recent recession, when the federal government came to the aid of Kansas and other states that saw revenue plummet.
“It’s not a national phenomenon, so I’m not expecting under these circumstances for the federal government to come to our rescue,” Gilliland said.
Gilliland said it was “yet to be determined” whether the income tax cuts were stimulating more economic activity than the state would see otherwise. The state is projected to see slower growth next year than the nation as a whole.
On the campaign trail, the governor repeatedly promised that economic growth would cover the state’s projected shortfall.
“If you’re asking me to look down a ways, I would say, yes, growth will close the shortfall,” Sullivan said. “Now for this year … the next 18 months, we’re going to find efficiencies, develop policy proposals to help close the shortfall.”
Sullivan said it would take time for the tax policy to generate the growth that the administration expects.
Senate Minority Leader Anthony Hensley, D-Topeka, who observed the news conference, called the budget news proof that Brownback had spent the past six months lying to voters and that the state was facing a self-imposed crisis.
“For the last six months, he has basically said the sun is shining in Kansas and don’t let anybody tell you any different. With these numbers, it’s obvious to me he’s known all along that his policies were going to bankrupt the state,” Hensley said. “He just wasn’t truthful with the people in terms of explaining the devastation these policies were going to bring about.”
Hensley said that legislators face very difficult choices and that he expects there would be cuts to social services and education.
Senate President Susan Wagle, R-Wichita, blamed the projected shortfall on economic uncertainty nationwide. She said Kansas lawmakers have a duty to balance the budget and that lawmakers will “evaluate both the tax and spending side of the ledger to meet that obligation, once again, with Kansas families and taxpayers as our top priority.”
For 2015, income tax rates will be 4.6 percent for the upper bracket and 2.7 percent for the lower bracket, with the lower bracket scheduled to drop to 2.4 percent in 2016. The upper bracket will fall to 3.9 percent in 2018.
Limited liability corporations and S corporations pay no income tax.
For his part, House Speaker Ray Merrick, R-Stilwell, has been unwilling to budge on the income tax cuts.
“The new revenue estimates only highlight the continuing need to protect core services while streamlining state government,” Merrick said in a statement. “We do not have a revenue problem, we have a spending problem.”
Democrat Paul Davis, who lost to Brownback by 4 percentage points in the race for governor, had called for freezing income tax rates at 2015 levels as a way to bring in more revenue.