News that the state missed its tax collection estimate was not surprising. After all, it has come in short 11 of the past 12 months.
But what’s stunning is the size of the latest shortfall: Tax collections in February were about $53 million less than projected.
Keep in mind, revenue projections were reduced significantly in November – yet the state still can’t meet them.
February’s shortfall is particularly devastating because the state has no money to spare. The revised budget plan the Legislature approved last month was projected to leave only $6 million in cash reserves at the end of the fiscal year on June 30.
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Now the state is going to have to do a lot more cutting – or more transfers from the state highway fund – just to get to zero. Gov. Sam Brownback has already announced a $17 million cut to the state’s public universities.
What’s more, the current budget doesn’t address the Kansas Supreme Court ruling that K-12 education funding is inequitable. That might require another $50 million or more in state spending.
And why should lawmakers expect the state to meet its tax collection projections the remaining four months of this fiscal year? It’s more likely the shortfalls will continue, creating an even larger budget hole.
Even if the state is able to fill that hole, the problems likely will repeat next fiscal year. And then there is the likelihood that the Supreme Court will rule that education funding is inadequate.
In short, state finances are a mess and likely to get worse.
Brownback blames the shortfalls on a slowing national economy and drop in commodity prices. No doubt those are significant factors.
But the structural problem is that Brownback’s tax cuts – including eliminating income taxes on pass-through business income – caused a huge loss of revenue without resulting in significant economic growth. As a result, the state hasn’t had enough revenue to meet its obligations.
Brownback and the Legislature masked this problem the past few years by spending down cash reserves and raiding other funds – including more than $1 billion from the highway fund. That can’t continue.
Yet Brownback remains in denial, saying in a statement Tuesday that the state doesn’t have a tax policy problem.
At some point – and now is a good time – lawmakers have to step up and accept that the tax cuts haven’t acted like “a shot of adrenaline into the heart of the Kansas economy” and are unlikely to in the near future – if ever.