After years of revenue shortfalls, painful cuts and futile “solutions” to our never-ending budget crisis, it looks like the Kansas Legislature is finally ready to move our state toward fiscal stability. Although lawmakers will likely transfer money out of the Unclaimed Property Fund, freeze pension contributions and impose budget cuts to address the $310 million shortfall Kansas faces this year, the passage of House Bill 2178 demonstrates that many of our representatives intend to do what’s necessary to extricate the state from its fiscal disaster.
HB 2178 would repeal the LLC exemption and restore the third income tax bracket (which was eliminated when Gov. Sam Brownback’s 2012 tax cuts went into effect). While Kansans making $30,000 and under would still be taxed at the current rate of 2.7 percent, the $30,000-$60,000 bracket would increase from 4.6 percent to 5.25 percent and those making more than $100,000 would be taxed at 5.45 percent (also up from 4.6 percent).
The Kansas Department of Revenue estimates that these increases would generate about $590 million — a critical influx of cash at a time when the state is projected to be $500 million short in 2018.
While the final vote on HB 2178 was 76-48 — eight votes short of a veto-proof majority — the bill is still a major repudiation of the tax policies that have long prevented Kansas from developing a sustainable budget. After Brownback’s tax cuts were implemented, total tax revenue collapsed from $6.33 billion in fiscal year 2013 to $5.63 billion in FY 2014 (a $701 million reduction). Since then, the state’s annual tax revenue hasn’t even come close to the 2013 level — it was $5.72 billion in FY 2015 and $5.76 billion in FY 2016.
According to the most recent projections from the Consensus Revenue Estimating Group, Kansas will bring in just under $6 billion in FY 2017. But this number isn’t an accurate representation of how much tax revenue the state is collecting. Duane Goossen is a senior fellow at the Kansas Center for Economic Growth, and he points out that the $6 billion “already includes previously authorized one-time transfers of about $400 million from many different funds (especially the highway fund). That means real income, actual money coming in during FY 2017 to pay bills, is just under $5.6 billion.”
This isn’t nearly enough to cover the state’s expenses (the discrepancy will be even greater next year), which is why you often read about the “structural” imbalance in our budget. Brownback and his supporters can’t will this problem away by relying on even more “one-time transfers” — especially when they have to be paid back with interest — and members of the Kansas House just proved that they recognize this fact. While Brownback calls HB 2178 a “huge step backwards,” it’s actually the first step toward a more equitable tax system and a less chaotic budget.
The legislators who voted for HB 2178 did what they were elected to do — produce a structural fix for a budget that has been in desperate need of repair for years. Kansans gave Brownback’s experiment a chance, but our representatives are right: It’s time to move forward.
Members of The Capital-Journal’s editorial advisory board are Zach Ahrens, Matt Johnson, Ray Beers Jr., Laura Burton, Garry Cushinberry, Mike Hall, Jessica Hosman, Jessica Lucas, Veronica Padilla and John Stauffer.