One-time federal aid should replenish Kansas’ unemployment fund | Commentary

With ink still drying on a $1.9 trillion COVID package, Kansas governments are on track to receive a $1.6 billion taxpayer handout. However, Kansas governments do not need a bailout. They need a course correction. The state should use federal COVID aid only for a one-time cash expenditure. There is no better example than replenishing the unemployment trust fund and staving off tax increases on Kansas businesses trying to recover.

Early in the crisis, news articles opined that state and local tax revenues would see “financial devastation,” with drops in tax revenues of 15% to 20%. Yet according to the U.S. Census Bureau, tax revenues to state and local governments fell by only $8 billion nationwide — 7% on average. Since then, state and local governments have received hundreds of billions in federal help while sitting on a roughly $200 billion cash cushion.

In Kansas, the state fiscal picture is even rosier. Kansas state government gained $70 million more tax dollars than 2019. What officials and special interests call a “financial devastation” is, in truth, a wish that their spending grew even faster than reality. However, the folks in financial trouble are Kansas families.

Kansans across the political aisle know Kansas has an unemployment problem. Gov. Laura Kelly’s school closures, lockdowns and business restrictions placed thousands of Kansans out of work. They made an already-stressed unemployment system more overburdened. While the federal government provided unemployment relief, it in some ways exacerbated the issue. Kansans were encouraged to stay home, drawing relief instead of working.

Additionally, it drew in scammers to divert hundreds of millions of state and federal funds away from those who need it. Now the fund dedicated to providing unemployment relief is down roughly $700 million from a year ago. State law says businesses must pay taxes on employees’ wages to fill that fund. If the downward spiral continues, it will create a vicious cycle. Businesses pay higher unemployment taxes, leading to more job losses and unemployment payouts, thereby increasing unemployment taxes.

Replenishing the unemployment reserve would buy time for Gov. Kelly to finally get fraud under control and stave off potential unemployment tax hikes. While regulatory guidance matters as to how states can use the latest federal package, policymakers’ hands are not tied. For example, lawmakers can repurpose unspent CARES money toward the unemployment trust fund.

Ultimately, what is most important here is that a sustainable economic recovery means ongoing revenues must match ongoing expenses. Those who claim that Kansas governments are in dire fiscal straits exaggerate to make tax increases more palatable as the way to finance record spending. The truth is that too many elected officials will not cut waste to make ends meet, unlike many Kansas families today.

“Fiscal responsibility” means policymakers should tighten their belts. Then they must get unemployed Kansans the relief they need. A win on both policy and politics would be to fill the unemployment fund and avoid unintended tax hikes.