May 5, 2016 Newsletter
I had a great time visiting with Delvin and Rhonda Kinser at Franklin Grahams Decision America Tour 2016. Over 4300 Kansans showed up to pray for our Nation and State. Delvin was on the press stand covering the event for KJIL.
Let’s start with the good news! April’s Tax Revenue numbers, announced May 2, beat expectations by $2.6 million. This number isn’t as good as it sounds because revenue expectations were lowered on April 20th
by $228.6 million for Fiscal Years (FY) 2016 and 2017. Hall talk at the Capitol is of two opinions. One is, we will be $50 million low next year on the lowered expectations; the other is, we have finally gotten our estimates low enough we will have some positive surprises. Time will tell which opinion is correct, but Moody’s, an international bond rating agency, revised its credit outlook this week for Kansas to negative from stable because of our budget problems.
The 2016 legislative session ended Monday Morning with the House adjourning around 1:30 am and was the shortest since 1974, lasting only 73 days. With that being said, we didn’t address a new funding formula for schools or the revenue and spending problems plaguing the state. The Alvarez & Marsal Efficiency Study that was originally viewed with much optimism was put on the back burner and mentioned only in the budget as an additional efficiency savings of $10 million in FY 2017. Hopefully, the $2.04 billion in savings over 5 years will start to materialize shortly. The legislature should have met the full 90 days and had hearings to determine the validity of the Alvarez & Marsal study rather than kick it down the road to next year.
I voted against the budget for a lot of reasons. One, it increased the transfers from KDOT to over $500 Million a year for FY 2016 and FY 2017, which lead to the postponement (cancellation?) of the next two phases of our Highway 54 Expressway in Seward County. All of the money for TWORKS is gone. Two, it put off the KPERS state employer contribution for the fourth quarter payment of $96.5 million for FY 2016 until June 30 2018. Three, the budget is using $16 million a year of Tobacco Settlement Funds that are designated for early childhood programs to payback the KPERS payment. Four, at a minimum an additional $17 million will be cut from Higher Education. The Governor still has to find another $92 million to cut. Of which, I could easily see another $20 million coming from Higher Ed. The States financial situation reminds me of the comedy team of Laurel and Hardy when Ollie says, “Well, here’s another nice mess you’ve gotten me into.”
I worked until the last day of the session with others in the House to pass a real solution to the revenue problem. Unfortunately it didn’t happen, we ran out of time and didn’t have a realistic pathway to carry a bill to the floor that was a real solution, not a Band-Aid. The structural deficit of the state is $400-700 million, depending on how you want to spin the numbers. Two Band-Aids, in my opinion, fell apart late in the session, for lots of reasons. The Governor continues to talk publicly against any restoration of revenue cuts. Everybody wants someone else to be on the hook for the fix. I just want to fix it once and be done with it. This uncertainty is not good for Kansas, see my comment regarding the Moody’s downgrade up above. The Senate Band-Aid, was killed after a Senate Republican Caucus, showed a lack of support. The House Tax bill never had a hearing, as it was presented, it was instead added to a shell in a conference committee by stripping out the contents of another bill and inserting a bill that never had a hearing. Since the bill came out of a conference committee it was not amendable, and failed for all the reasons mentioned above. The revenue problem reminds me of Goldilocks and the Three Bears. One is too small, one is too large, and the Legislature and Governor can’t agree on what is just right.
The latest spin out of Topeka is that tax revenues are up this year $124 million (2.7%), so it’s a spending problem. The “tax package” passed last year was supposed to raise $384 million, not $124 million. Our tax revenue increases came in short 68% and we have to transfer $515 million from transportation, put off our KPERS payment, cut Higher Ed, lose Medicaid funding for our mental hospitals, deal with a 20% vacancy rate in our Highway Patrol, 30% turnover in prison personnel, etc., etc., to balance our deficit this year.
This is no way to run a railroad.
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