Kansas Gov. Sam Brownback (R) is reportedly getting ready to propose some form of revenue increases as part of a plan to fix the nearly $900 million budget hole his tax cuts created for the state. But whatever cracks are emerging in his anti-tax facade, the conservative governor’s response to the budget crisis is more likely to focus on spending for the state’s already flailing schools.
“Revenue didn’t come in quite as was projected,” chief of staff Jon Hummel told the Wichita Eagle over the weekend, in reference to tax collections that have fallen hundreds of millions of dollars short of what Brownback’s administration predicted when it passed deep tax cuts in 2012. Brownback’s State of the State address Thursday will outline how he plans to both cover a $200 million shortfall in the current fiscal year and fill an additional $648 million gap in next year’s projections, and Hummel told the Eagle that the proposal “will include what he called revenue enhancements.” So long as the overall package remains true to Brownback’s conservative philosophy, Hummel said, “we can do some things on the tax side.”
None of this means the diehard conservative will reverse course or even make small concessions to critics who have warned for years that his trickle-down tax cuts would harm the Kansas economy, however. “If you want to know what we’re likely to do, I would look at what we’ve proposed before and statements that he’s said before. This is not going to be inconsistent with his previous proposals,” Hummel said.
Since even delaying the final stages of his signature income tax cut would mean admitting that his Democratic opponent from the last election was right, the Eagle predicts, Brownback has relatively few revenue raising options available to him. The governor’s critics say that sales tax increases and other options they’ve heard discussed are both insufficient to the size of the budget problem and unfair to the people who will get stuck paying for them.
“When we talk about a sales tax increase, those disproportionately impact the most vulnerable Kansans” who already got a tax hike as part of Brownback’s 2012 reforms, said Annie McKay, executive director of the Kansas Center for Economic Growth (KCEG). Instead of using taxing consumer spending to “throw a little dirt back into this giant hole,” McKay said, lawmakers should focus on fixing the holes in Brownback’s business tax plan. “That was the one piece that was lifted up by both the left and the right as being just this terribly misguided aspect that’s not going to create any significant benefits,” McKay said, and fixing it “doesn’t impact the most vulnerable Kansans.”
The 2012 legislation eliminated all business income tax for what is called pass-through revenue, a “highly fiscally irresponsible” move according to Michael Leachman, director of state fiscal policy research for the Center on Budget and Policy Priorities. “It was billed as a small business tax break that would cause more businesses to move to Kansas and cause existing small businesses in the state to add more jobs and grow the economy. There’s no evidence that happened,” Leachman said, and “that portion of the tax cut package has turned out to be significantly more expensive than the state originally expected.” Besides, small businesses that have the potential to grow into large job creators don’t need help with their taxes nearly as much as they need help connecting with other businesses in their sector and assistance finding the workforce they need to make their product. “You can do those things for a lot, lot, lot less money than a very broad tax cut for any income that happens to fall under this one kind of category,” Leachman said.
Whatever the specific ideas about revenues Brownback tucks into this week’s address, the primary action is likely to come on state education spending. “The governor feels like the growth in spending that’s occurred the last several years in school finance is unsustainable,” Hummel told the Eagle. But judges have already ruled that the state’s current school funding is too low to meet the requirements of the Kansas Constitution in a case that is likely to end up in the state Supreme Court. Instead of flat-out cuts, then, Brownback may seek the first wholesale reform of Kansas’ education funding formula in over a decade, in hopes of simultaneously reducing the overall cost of education in the state and increasing the amount of funding that goes to classroom instruction.
Kansas Association of School Boards Associate Executive Director Mark Tallman said that would be a high-risk strategy with many complex moving parts, and no guarantee of turning up savings. “The point of a formula is to allocate dollars. If you change the formula and allocate dollars in a different way, presumably some districts are gonna get less and some districts are gonna get more,” Tallman said Monday. Any Brownback proposal to rewrite the formula would presumably draw resistance from districts that would face school cuts from the measure.
Schools funding goes to a variety of different things including teacher compensation, administrative costs, and building and equipment costs. Tallman warned that any fight over school funding rules will hinge on the semantics of those categories. While administrative spending might sound like easy-to-cut overhead, it actually goes to “counselors and nurses, transportation costs, social workers, libraries, librarians, a whole host of student support functions,” he said. “The problem is we really have no clear agreement as to what any of those terms even mean.” Schools already compete for scarce resources from the state, and money is so tight at one Kansas City school that school nurses are instructed to use frozen sponges instead of buying ice packs.
Given the complexities of the status quo, Tallman said, specific legislative ideas from the governor would surprise him. “At this point I really can’t see [Brownback making] anything more than a call to say, here are the problems and the legislature should look at them.”