2018 State Legislature Wraps Up
by Paul Johnson
The Kansas State budget has finally been stabilized after several years of tax cuts, costly transfers, and numerous rounds of budget reductions. The question going forward in this 2018 election year is whether stabilization will move toward restoration of essential programs or will Kansas experiment with another round of tax cuts?
Thanks to the Kansas income tax restoration in 2017 and increased state revenue from the federal tax cut changes, state general fund (SGF) revenue increases from $6.34 billion in 2017 to $7.10 billion in 2019 and up to $7.44 billion in 2022. (For years 2020 -2022, the assumption is a 3% income tax increase and 1.9% sales tax increase.) What starts on May 22 is the review by the Kansas Supreme Court of the adequacy and equity of the new school funding formula. Will the Supreme Court decide that increased funding is needed? and if so, how soon must that happen?
Gov. Colyer has signed the State Budget for 2018 & 2019. The largest adjustment for 2018 was $40.5 million from the State General Fund (SGF) to fund the updated estimates for human services caseloads. For 2019, the adjustment for human services caseloads is $76.9 million from SGF.
The Board of Regents receives an additional $15 million for a combined restoration of $21.7 million of the $30 million cut in 2016. $57.3 million for Department of Education transportation needs now comes from SGF instead of being taken from the State Highway fund (although the overall transfer from the State Highway Fund to SGF is still $280 million).
$56 million is transferred from SGF to the KPERS Trust Fund. $5.2 million is transferred from the Children’s Initiatives Fund (tobacco settlement) to the Pre-K Pilot ($4.2 m) and Parents as Teachers ($1 m). $1 million from SGF is directed to the Tiny-K program. $22.1 million of all funds are added for nursing home facility reimbursement rates that were cut 4% in 2016. $5.5 million of all funds added to increase foster care kinship payments from $3 to $10 dollars a day. The State Water Plan gains $2.75 million from SGF and $500,000 from lottery receipts for water-related projects. $27.7 million from all funds provides salary increases for many state employees including judicial branch employees, correction officers and judges.
The SGF profile out to 2022 is sobering. On the revenue side – 3% income growth and 1.9% sales tax growth may well happen, but nationally this is one of the longest periods of growth without a recession. Kansas could be seriously impacted by a trade war. The federal tax adjustment impact on Kansas is estimated as a plus $150 million annually, but it will take at least two years for the IRS to write all of these new regulations.
On the expenditure side, the promised transfers to city/county government for property tax relief and roads are ignored along with just partial payment to the State Water Plan and the $280 million continues to come out of the State Highway Fund.
The ending balance for 2019 is $375 million but falls to $143 million in 2020 as required KPERS payments are finally made, and by 2021 – just to reach a zero ending balance – there will have to be $127 million in cuts or revenue increases. For 2022 to reach zero balance the number is $196 million in cuts or revenue increases.
So, while steps have been taken to stabilize the budget, the debate is far from over in Kansas. In addition to the continuing uncertainties about education funding, other critical questions remain: how to restore staffing shortages in state agencies, respond to emergencies caused by recessions or natural disasters, as well as how to restore essential services. Will Kansas maintain its’ hard fought for momentum toward rebuilding the state economy in the 2018 elections, or will we backslide toward further cuts and loss of services? This is the essential economic and political debate that Kansans deserve in 2018.