Governmental Challenges Amid COVID-19: Legislature Passes State Budget & Recesses to Uncertain Future
by Paul Johnson
The political, economic and fundamental health changes caused by COVID-19 of the last 30 days seems unimaginable. This unprecedented crisis came on quickly, and no one has any idea of when this ‘disease war’ may subside or when and if normal life will resume. By executive order the Governor has closed schools for the year, prohibited utility and water shut-offs, stalled housing evictions, furloughed 18,000 executive branch employees (except for vital public services) for two weeks, and warned the State this crisis will last until late Spring if not into summer or fall.
Combined with the national and global economic crisis the disease has created, “normal” is likely a long way off. How we respond as a state and federal government is critical. Sobering lower State revenue estimates will be made on April 20 that will change Kansas’ budgetary future. During this chaos, bad legislative proposals should not be slipped through.
State Budget. The Kansas Legislature rushed to pass a basic State budget for 2020 and 2021 on Thursday March 19 and recessed the session early for at least six to maybe eight weeks to the veto session scheduled for early May. The House voted 99-16 and the Senate voted 28-10 in approval.
The final approved $19.8 billion budget gave the Budget Director $50 million to respond to unforeseen expenses related to the coronavirus pandemic. Another $15 million was earmarked for emergency preparedness connected to coronavirus. The final budget also deleted the scheduled $268 million transfer to KPERS that the Legislature had earlier approved. They also removed payments of $132 million planned to the Pooled Money Investment Board in light of the new economic uncertainties.
It is unclear when the veto session will begin and there is also a question of whether public health conditions will allow it. But lower April 20 revenue figures will clearly impact the 2021 and future State budgets. Kansas was slowly recovering from the 2008-2009 Great Recession and self-inflicted, unaffordable tax cuts that severely impacted vital State services with arbitrary across the board reductions. Thus, Kansas has no rainy-day reserve fund to cushion an inevitable downturn in revenues. It took Kansas 3-4 years to recover from the great recession and this coming recession could be much larger in scope.
Transportation. The approved budget also includes a new ten-year highway plan for $9.7 billion. This highway plan consumes over 16% of general sales tax that funds all other essential state services. There is no increase in fuel taxes (user fees) and Kansas has not increased fuel taxes since 2003. There is no provision to institute a tonnage per mile tax to counter the extra weight and damage put on the highways. This is no transportation plan given that roads get 95% of the funding while alternatives such as rail and mass transit are capped at 5%.
The world of energy, transportation and mass communication is evolving and changing but Kansas has doubled down on its fossil fuel reliance. In the future, Kansas cannot afford the fourth largest highway system in the U.S. given just 2.9 million residents and most rural counties slated for population loss by 2044. The coming national recession will force Kansas to re-allocate some of these sales tax highway dollars. The highway plan should have been put on hold this year as revenue losses are computed and budget priorities re-examined.
Taxes. There has been no grand compromise on cutting taxes. The Governor’s proposal of sending $54 million to counties to lower property taxes has been scuttled. The Governor’s request to re-establish a refundable food sales tax rebate for lower income individuals and couples has been set aside. The plan to allow Kansas residents – 10% of the filers to itemize deductions on state taxes if they don’t itemize federally is on the backburner as is the plan to lower certain corporate income taxes on multi-national corporations that bring foreign cash reserves back to Kansas. For now, any tax reduction legislation will have to wait till the veto session and the lower revenue picture probably stops any significant reduction.
Energy. EVERGY’s quest to offer reduced electric rates to certain large customers – with all other rate classes funding the revenue loss – continues to progress. This bill passed the Senate unanimously and had a House committee hearing but no committee action was taken. The political games have started to stuff this legislation into another bill (HB 2585) and run it through even though there were meaningful concerns expressed in the House committee.
Independent Energy Office. On a partisan basis, the House duly voted down the Governor’s Executive Order to establish an independent energy office to write a state energy plan. Kansas is one of only six states that have not developed such plans. It is sad in the sense that the Legislature ordered an independent study of Kansas electric rates which clearly reported back to the Legislature that Kansas needs a state energy plan. The current Governor has appointed one commissioner – Susan Duffy – to the three-member Kansas Corporation Commission (KCC). A second KCC commissioner’s term is up in March but the Governor’s office has not yet announced a replacement. The future of the state’s electric service, its reliability and affordability are at stake.
Medicaid Expansion. The battle over Medicaid (KanCare) expansion has stalled since it is politically tied to the constitutional amendment on women’s health (abortion). But the debate has now sharpened with the health and survival of thousands of Kansans on the line. Time will tell whether by the veto session there has been enough political pressure and health care concerns expressed to separate these issues and deal with Medicaid expansion on its own. As federal Medicaid funding increases to respond to the coronavirus, will Kansas lose out on any expedited funding because
Kansas has not expanded Medicaid? This is not a time to play politics with basic health care for any Kansan.
Human Resources. The House also voted down the Governor’s plan to create the Department of Human Resources by combining the Department on Children and Families, Department on Aging and Disability Services and certain juvenile offender programs from the Department of Corrections.
Federal Response to COVID-19. The question now turns to federal government stimulus packages. While Kansas and all states must balance state budgets, the federal government has the ability to debt finance assistance. Hopefully the support for state and local government needs will be prioritized over saving the cruise ship and other corporate industries.
The 2017 federal tax cuts went primarily to executive salaries and stock buy backs that assisted existing stockholders while the new federal bailouts should be fairly shared with the most vulnerable among us – workers, families, and small businesses that are the lifeblood of the country.
Will COVID-19 be the catalyst like a World War to force meaningful compromise at both the state and federal level? Sound science in the name of saving Mother Earth may not matter to many vested political leaders, but sound science to save your life or that of your community may finally be the saving grace for consensus.
While seasonal flu can impact 20% of the nation (but be tempered by built up immunity over decades), everyone is susceptible to COVID-19 with possibly half of the population catching this virus. Covid-19 does not discriminate by race, gender, religion or economic class. This disease war is now in Kansas with the number of infected patients rising daily. We’ve suffered the first couple of deaths. Will political leadership promoting equitable solutions and certainty be found in Topeka? And in Washington, D.C.?
(By Paul Johnson with assistance from Mary Fund)
Paul Johnson can be contacted at email@example.com.