Topeka The proposed tax-cutting bill now under consideration by the Legislature would lead to significant budget shortfalls under certain scenarios, according to a new state projection obtained by the Lawrence Journal-World.
Up until now, Gov. Sam Brownback's administration and supporters of the latest tax cut proposal have said that even with the tax cuts, the state budget would maintain positive balances in future years. The proposed tax package would reduce personal income tax rates and phase out taxes on non-wage income of businesses.
But if the tax cuts were enacted, and legislators wanted to restore a small portion of recent cuts to schools, that would produce a negative ending balance of $408 million by 2018, according to the projection put together by the Kansas Legislative Research Department. The projection was composed at the request of legislators.
In another area of the budget, Brownback has proposed an overhaul of Medicaid, called KanCare, which he said will produce significant savings. But some legislators have doubted that assertion.
If the state fails to realize savings from implementation of KanCare, the state would have a negative ending balance of $895 million in less than six years.
Recently, the federal government has indicated it may take action against the state because of lengthy waiting lists for services for the physically disabled. If the state were to eliminate those waiting lists, the negative ending balance under the tax cut proposal would be $256 million in 2018.
Combing those three scenarios — an increase in school funding, the failure to realize savings from KanCare and eliminating the waiting lists — would result in a negative ending balance of more than $1.5 billion by 2018, the projection indicated.
Brownback and his team have said the tax cuts will increase economic activity. The plan is "a compromise that gets Kansas on the path to a pro-growth tax policy that will grow the economy and create jobs," Brownback said.
But opponents say they are concerned the plan will leave the state without the necessary revenue to meet critical services.
"The tax bill is way too large," said state Sen. Tom Holland, D-Baldwin City, and the lead Democrat on tax issues. "This leaves no money for additional services," Holland said. "We're just locking ourselves into major structural deficits," he said.
Brownback has said if the Legislature fails to approve the proposal, he will sign a larger tax cut bill that was sent to him earlier. That bill will produce deficits in the $2.5 billion to $3 billion range by 2018.