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Tax increase okay, but more money needed E-mail
Tuesday, 11 July 2017 13:06

A SECOND OPINION, The Topeka Capital-Journal

Two days after the Legislature overrode Gov. Sam Brownback's veto of a $1.2 billion tax increase, Moody's Investors Service increased Kansas' outlook from negative to stable: "The tax increase enacted this week was a major step forward in the state's willingness to utilize its resources to balance its budget and service its long-term liabilities." However, Moody's also noted that a "failure to restore structural balance" to the budget and "continued underfunding of pension liabilities" could lead to another downgrade.

While Sen. Laura Kelly said the end of the 2017 legislative session "felt like a return to the Kansas I knew and loved," she's also realistic about the state's immediate prospects: "We're still not out of the woods. It's going to take years to dig out of the hole that's been created by the 2012 tax experiment." Even with the $1.2 billion tax increase, the budgets for fiscal years 2018 and 2019 won't balance without $830 million in KDOT transfers and pension delays. This is a predictable consequence of almost half a decade of grossly insufficient tax receipts - if the state hadn't thrown billions of dollars into the void of Brownback's tax cuts, lawmakers wouldn't have been forced to repeatedly assume long-term liabilities with short-term measures.

Still, Kelly is right — the Legislature should be prepared to address the state's growing liabilities in the 2018 session. Kansans were reminded of this fact when the Ball State Center for Business and Economic Research released its Conexus 2017 Manufacturing & Logistics Report Card this month. While Kansas received slightly lower grades in a few areas (such as logistics industry health, human capital and global reach), our most dramatic reduction was in the "expected fiscal liability gap" category. After losing a full letter grade, Kansas is one of five states with an F on this measure - our only failing grade on the report card.

Considering state's history of delaying KPERS payments to balance the budget, this score isn't surprising. Last year, the Legislature granted Brownback the authority to defer a $100 million payment to KPERS, and this was done under the assumption that it would be paid back by June 2018 with 8 percent interest (making the real obligation closer to $115 million). Instead of observing this deadline, the Legislature decided to borrow even more money from KPERS over the next two years — a decision that isn't surprising to anyone who's been paying attention. Here's what Rep. Steven Johnson, R-Assaria, said last year: "I'm not optimistic it will be paid back within the coming year or by that time frame (June 2018)." Kelly was even more candid: "It's so easy to defer. We just don't pay it."

The Conexus report explains that Kansas isn't the only state that withholds pension payments: "Many states have failed to provide a direct funding stream to bond obligations or fully fund pension plans. This leads to unfunded bond and pension liabilities." And as Moody's points out, the state's problems don't end there: "Between its pension funding challenges, pressure to spend more on schools, and stagnant revenue growth, the state is likely to be a below-average performer for the next few years." All of that said, without the tax bill that lawmakers passed this session, Kansas would looking at even larger unfunded liabilities.

We just hope the state will be able to handle all of its bills when they come due.




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The High Plains Daily Leader and Southwest Daily Times are published Sunday through Friday and reaches homes throughout the Liberal, Kansas retail trade zone. The Leader & Times is the official newspaper of Seward County, USD No. 480, USD No. 483 and the cities of Liberal and Kismet.  The Leader & Times is a member of the Liberal Chamber of Commerce, the Kansas Press Association and the Associated Press.

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