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Archive for Thursday, October 18, 2012

Energy expected to play pivotal role in Kansas economy over next year

October 18, 2012

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Energy, in one form or another, is expected to dictate the course of the Kansas economy over the next year, and attendees of Kansas University’s Economic Policy Conference were told Thursday it likely will not be overly positive energy.

“I feel like gasoline prices kind of act like a governor on the economy,” said Joe Aistrup, a political science professor at Kansas State University and the morning keynote speaker of the conference. “As the economy speeds up, gasoline goes up to $4 a gallon, and then the economy slows back down.

“Right now, the economy isn’t going to go forward very fast because gasoline still hovers around $4 a gallon.”

The tougher energy to predict, though, may be the political energy that comes out of Topeka and Washington, D.C. Aistrup said the economy will be affected by a series of state tax cuts approved by the Legislature during the last session. Kansas Gov. Sam Brownback has said the tax cuts, which include significant reductions for small businesses, eventually will create more than 20,000 jobs in Kansas.

Aistrup wasn’t making any such predictions at Thursday’s conference. He said while tax cuts may provide more money for businesses and individuals to spend, there is no guarantee that the money will be spent in a way that generates Kansas jobs.

“The problem is it doesn’t necessarily create jobs where you want them,” Aistrup said of increased consumer and business spending. “It is like pouring gasoline over your car and hoping that some of it hits your gas tank.”

Instead, Aistrup said parts of the economy that rely on government spending may have reason to worry over the next year.

“I think pretty much everybody can see that more cuts in government spending are on the way,” Aistrup said.

Bernie Koch, executive director of the Kansas Economic Progress Council, a moderate-leaning business organization that is not affiliated with the conservative Koch brothers in Wichita, said the reduced federal spending also could affect the Kansas economy.

Koch said economists with the Federal Reserve have estimated Kansas’ federal employee workforce shrunk by about 5 percent in 2011.

“More is probably on the way,” Koch said.

Aistrup said a reduction in federal funding could be significant for Kansas because studies have shown for about every dollar Kansas sends to Washington, D.C., it receives about $1.12 back in federal funding, wages or other support.

There were positive signs highlighted about the Kansas economy. Kansas Senate President Steve Morris said he too is concerned about possible state budget deficits in the future, but he said he thinks the Kansas economy has some strength to it.

“Oil and gas, particularly oil, is doing well right now,” Morris, R-Hugoton, said. “Commodity prices are at record-high levels too. That not only helps pocketbooks, but it also helps attitudes too. It has created some new investment.”

Aistrup said he agrees the Kansas economy has fared better than the national economy, particularly when it comes to unemployment and the effects of the housing bubble. He said he would give the overall Kansas economy a ‘C’ grade.

“But there is still a lot of uncertainty out there,” Aistrup said.

The Kansas Economic Policy Conference, which was presented by KU’s Institute for Policy and Social Research, drew about 100 people to the Kansas Union and to a site in Ulysses where the conference was presented via a remote broadcast.

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