Budget solution could be messy

A report presented to lawmakers last week on across-the-board spending cuts shows how dire the state’s budget problems are – and why some one-time money may need to be part of the solution.

Kansas faces a budget hole of more than $340 million for the current fiscal year, which ends June 30. Plugging that hole through budget cuts alone could require a 6.95 percent cut to state agencies and a 8.56 percent reduction in state aid to school districts.

The K-12 cut would total at least $219 million, according to the state’s Legislative Research Department. The Wichita school district would lose $24.1 million, if that happened. Funding cuts for other area school districts would be $2.8 million each for Derby and Maize, $2.4 million for Haysville, $2.2 million for Goddard, $2.1 million for Andover, and $1.1 million for Valley Center.

Other cuts under this scenario include $25 million to the Department for Aging and Disability Services, $13 million to the Kansas Board of Regents, $11 million to the Department of Corrections, and $9.4 million to the Department for Children and Families.

What would make these cuts so difficult is that there is so little time to implement them – which is why lawmakers were frustrated that Gov. Sam Brownback didn’t order budget allotment cuts last fall.

Also, the Kansas Supreme Court could rule soon that the state is inadequately funding K-12 education. If so, not only would the state be unlikely to cut $219 million from schools, it might have to significantly increase funding.

Lawmakers also are considering tax increases, such as eliminating the exemption on pass-through business income. That will be a key part of next year’s budget plan, but it could be difficult to implement a tax increase soon enough to generate much revenue this fiscal year.

This financial bind is why Brownback is pitching the idea of borrowing from the state’s pooled money investment fund. That could generate about $360 million this fiscal year (which Brownback want to repay over seven years).

“It’s been described as perhaps the best of the alternatives or the best of bad alternatives,” said Kansas budget director Shawn Sullivan.

The problem with this borrowing and other one-time money is that it can make future budget problems even worse. Not only would the budget remain structurally unbalanced, the state would need to pay back the money it borrowed, which adds to future year expenses.

With little time left this fiscal year, and such a deep budget hole to fill, lawmakers may be forced to take an all-of-the-above approach: budget cuts, tax increases, and one-time money. That’s not a permanent or satisfying solution, but when state finances are in such a mess, sometimes the fix has to be messy, too.

This story was originally published February 1, 2017 at 5:04 AM with the headline "Budget solution could be messy."