Archive for Thursday, November 17, 2016

New forecasts show huge budget holes ahead for Kansas; Democrat worries of state layoffs

November 17, 2016

TOPEKA — New state revenue forecasts were released Thursday showing the state of Kansas will face a revenue shortfall of nearly $350 million in the current fiscal year, and another $583 million in the next fiscal year that begins July 1.

And that does not take into account any additional spending the Kansas Supreme Court may order to resolve the ongoing school finance lawsuit. The governor did not offer any immediate plans for closing the shortfall, but one leading Democrat worried it would involve major cuts to programs, and possibly job losses.

“I’m sure there will be more of the same,” said Sen. Laura Kelly, D-Topeka, the ranking Democrat on the Senate Ways and Means Committee. “Raiding KPERS (the state pension system); I think the securitization of tobacco funds will come up. I think the Regents ought to expect the worst. And then I don’t know. I think we may be looking at layoffs in various agencies because we’ve cut as many programs as we can. I don’t see how we get away with it unless some money from heaven comes in.”

But Gov. Sam Brownback’s budget director said the administration will not take any immediate action to address those deficits. Instead, Shawn Sullivan said, the governor will present his proposals in January when the newly-elected Legislature convenes, a decision that Kelly called “chicken.”

“He’s going to present a budget proposal in January that’ll be most likely in the form of a rescission bill,” Sullivan said, referring to a bill that would rescind spending previously approved in the last legislative session. “Then, both he and I and others in the administration will work with the Legislature on the best way to close the gap.”

“I think it’s chicken and I think it’s payback,” Kelly said. “He lost a lot of his allies in this last election, and I think he wants to put the onus of these cuts on them.”

Last spring, as lawmakers were finalizing this year’s budget, the Consensus Revenue Estimating Group forecast that the state would take in just over $6 billion in taxes for the state general fund. Thursday’s report lowered that estimate to about $5.7 billion, a reduction of $355 million, or nearly 6 percent.

The report also forecasts that revenues will grow only slightly, 1.4 percent, to $5.76 billion in the next fiscal year. But the state would need much more than that to keep pace with rising costs in Medicaid, other social services and K-12 education. That means next year’s budget would need to be cut by another $583 million just to avoid ending that year with a negative balance.

Sullivan blamed the downward trend on a number of economic factors, starting with low prices for oil and gas, and depressed prices for farm products. And even though most farmers pay no direct income taxes from their farming operations, he said those factors reduce consumer spending in rural areas, leading to reduced sales taxes.

He also cited studies showing unprecedented “deflation” in the cost of many things that are subject to sales tax such as food and used cars.

Sullivan also said Kansans’ personal income is growing at a slower pace than the rest of the nation, a trend he said forecasters expect to continue. Overall, he said, the group is predicting zero growth in Kansas’ gross state product over the next year, a broad general measurement of total economic activity.

Sullivan declined to offer any suggestions about how Brownback might propose closing a $350 million budget hole in the current fiscal year. He said that’s because his office has just started issuing its own budget recommendations to state agencies, and those agencies still have time to appeal before the governor drafts the budget plan he will submit to the Legislature.

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