There’s good news for those who are understandably concerned about the state’s
ability to fund core services with implementation of the just-signed tax reform
legislation. The billions in
deficits that have been predicted in future years will never happen.
The standard analysis performed by Kansas Legislative Research Department (KLRD) makes no allowance
for the Constitutional requirement to have a balanced budget. Spending adjustments
required in 2014 would have long term effects that are not accounted for in that
methodology, thereby artificially inflating future deficits. KLRD also assumes
that State General Fund (SGF) spending would grow by more than $700 million over
the next few years, so a lot of the predicted deficits are driven by the assumption
of large spending increases. (It’s standard methodology to change just one
variable; we’re not here to criticize KLRD, only to take their analysis one
Below are three spending and revenue scenarios; the first is KLRD’s baseline
scenario and the other two show the real world application of having a balanced
Scenario 1: We have numbers pulled directly from KLRD. As you can see revenue
is projected to dive in 2014 and climb to $6.3 billion in 2018 while spending is
projected to continuously grow unchecked; resulting in a $2.4 billion ‘deficit’
Scenario 2 uses KLRD’s revenue projections but reduces spending in 2014 by
$670 million… enough to leave a $450 million ending balance ($450 million
was chosen for math simplification and it’s in the ball park of the 7.5% ending
balance requirement). Spending is then allowed to grow in lock step with revenue
so long as $450 million is left in the bank.
Scenario 3 illustrates what happens if we implement aggressive efficiency programs
and reduce spending by 6.5% in fiscal year 2013.
That’s a smaller one-time reduction and still allows more spending than in
FY 2011. The ending balance dips lower than recommended
temporarily but controlled spending increases allow it to gradually rebuild.
Rest assured these tax reductions will not result in a spiraling debt, but they
will result in common sense spending restraint, economic growth and job creation.
As we have shown before a low tax burden is an essential component of economic competitiveness
and the key to a low tax burden is spending restraint.