State budget outlook grows bleaker

TOPEKA–The state government is waiting for some bad news on March 8. And that news could mean the Legislature will have to consider increasing taxes.

When the new state revenue estimates are released March 8, the state’s budget shortfall could be as much as $700 million, not the $426 million the governor’s recommended budget was based on.

Sen. Steve Morris, R-Hugoton, chairman of the Senate Ways and Means Committee, said the state could face an additional $200 million drop in revenue and a $40 million to $60 million increase in SRS and Aging caseload expenditures.

“We can’t do this with cuts alone,” Morris said. “If we don’t reverse these trends, we are not talking about small tax increases. Unfortunately, a lot of our colleagues still think that there’s some kind of silver bullet that would avoid deep cuts or tax increases.”

House Speaker Kent Glasscock, R-Manhattan, said the gap could be as much as 15 percent of the State General Fund. The budget cuts during the Mike Hayden administration were only 6 percent, Glasscock said.

State corporate-tax revenues are falling massively short of expectations, and personal income tax revenue is starting to show some serious weakness, he said.

“Whether or not we’re going to raise taxes has already been decided,” Glasscock said. “It’s a question of who is going to do it.”

Without new revenue, the Legislature will have to cut state aid to education, putting tremendous pressure on local governments to raise local sales and property taxes, he said.

“Then rich counties will do well and poor counties will do poorly.”

Glasscock said it was too early to tell where the House stood on tax increases. The no-tax pledge, taken by about one-fourth of Kansas legislators, was definitely an obstacle, he said. And some legislators like to point out that some states operate without any taxes at all.

“My first task is to educate the House about the ramifications of the budget problem,” Glasscock said. “I do not underestimate the job of educating Republicans and Democrats in my chamber, but I was very surprised at how many members of my caucus expressed concern and willingness to consider options.”

Among the ramifications of the budget problem are cuts in highway projects.

Glasscock said the state’s transportation plan was in trouble. It could be $1.5 billion short during the seven years remaining in the plan. Losing those projects hurts local economies, Glasscock said.

State Budget Director Duane Goossen said it would be possible for the Legislature to extract itself from the problem without cutting taxes, but that it would be hard. K-12 education, higher education, and social services take up 85 percent of the State General Fund.

The state could close down the rest of the government and not even solve half of the state’s budget problem.

“We can’t get out of this without cutting education and social services,” Goossen said.

Gov. Bill Graves said the budget cuts he outlined last month were deep even with the tax increases he proposed. He said rural school districts would be disproportionately affected by cuts in state aid to education because small districts get more state aid per pupil.

“Budget cuts will hit rural Kansas,” Graves said.

The severity of the budget problem was starting to get through to the Legislature, he said, but he knew it was hard to call for tax increases.

“Your jaw starts to lock up,” he said. “You can already see it appearing in your opponent’s campaign ads.”

But Morris and Senate President Dave Kerr, R-Hutchinson, were supporting an $87 million sin tax package on cigarettes and alcohol, Graves said.

It was significant that House Majority Leader Sheri Weber, R-Herington, has said she could probably vote for a tax package, Graves said. And Bill Reardon, D-Kansas City, was the first Democrat in many years to say that tax increases were needed, the governor said.

Reardon has proposed increasing individual and corporate income taxes, increasing the sales tax by .75 percent to 5.65 percent, and re-imposing the inheritance tax. He also proposed exempting food from the sales tax to reduce the impact on the poor.

Graves said he was fairly confident that his proposed cigarette tax increase would pass.

“We’re going to pass 65 cents,” he said. “It could be even bigger.”

The March 8 numbers could lead to approval of slot machines at the state’s race tracks, Graves said.

“If it comes down to needing another $100 million in cuts or a general tax increase, it could happen.”

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