Kansas simply does not have enough revenue to pay bills. For more than three years running, expenses have outpaced tax revenue by hundreds of millions a year.
How has Kansas survived financially? By blowing through every dollar held in reserve, borrowing, and moving money from kids’ programs and the highway fund. The state only escaped the last fiscal year by leaving about $175 million in bills unpaid, promising to make payment sometime in the future.
Kansas cannot do that anymore. All those use-up-the-savings, pay-later maneuvers made the state poorer and poorer, garnered yet another credit downgrade, and took us into the ditch.
We are left with a stark directional choice: Impose more spending cuts, or raise revenue. Deciding how to respond constitutes the most critical job lawmakers will have when they arrive at the 2017 legislative session in January.
Many current lawmakers acknowledge the financial ditch, but say it’s a spending problem. “Clearly we’re here because we haven’t cut expenses enough,” Senate President Susan Wagle, R-Wichita, said in June.
Certainly there have been cuts – to road projects, universities, hospitals, classrooms – just not “enough.” Yet supporters of the cut-more direction often speak abstractly, rarely specifying what “more” means.
The other route open to Kansas adds revenue back. The 2012 income tax cuts – lowered rates and “business income” exemption – caused a huge swath of receipts to disappear. Income tax collections dropped $700 million the first year, and cumulatively the revenue loss now exceeds $2 billion.
Lawmakers did raise sales and cigarette tax rates in 2015 to compensate, but the new revenue only dented the amount needed to make up the income tax revenue loss. So far, lawmakers have not been willing to revisit the income tax cuts that caused the state’s financial problems in the first place.
Which way? That’s the question at the heart of this year’s election cycle. A choice between deeper cuts to services or raising revenue has become unavoidable.
Primary election voters expressed dissatisfaction with the current state of affairs by voting out many incumbent legislators. General election voters may well choose to fire some more.
Election outcomes cannot remove the unpleasant choice ahead, but what happens in November will determine the path that Kansas takes.
Duane Goossen is a former Kansas budget director.