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 step further.)

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 budget.

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’ in 2018.

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.