Archive for Thursday, October 13, 2016

Economists say population changes threaten to make Kansas budget problems worse in future

Kansas Statehouse in Topeka, February 2014.

Kansas Statehouse in Topeka, February 2014.

October 13, 2016

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A pair of Kansas economists told a University of Kansas audience Thursday that if current population trends continue, state government will have a much harder time providing basic services, especially in rural areas that are losing population.

Jeremy Hill, director of the Center for Economic and Business Research at Wichita State University, and Chris Courtwright, principal economist for the Kansas Legislative Research Department, were two of the featured speakers Thursday at the Kansas Economic Policy Conference held on the University of Kansas campus.

The conference is an annual event sponsored by KU's Institute for Policy and Social Research.

Hill, who studies demographics, said that if current trends continue over the next 50 years, 80 percent of the state's population will be concentrated in a few urban areas, and the rural population could shrink to as little as 700,000 people.

Chris Courtwright, right, an economist with the Kansas Legislature's Research Department, and Wichita State University researcher Jeremy Hill speak Thursday at the Kansas Economic Policy Conference at the University of Kansas, an annual event hosted by KU's Institute for Policy and Social Research.

Chris Courtwright, right, an economist with the Kansas Legislature's Research Department, and Wichita State University researcher Jeremy Hill speak Thursday at the Kansas Economic Policy Conference at the University of Kansas, an annual event hosted by KU's Institute for Policy and Social Research.

In addition, he said, the population of the state is steadily getting older, and by 2066, Kansas could have a smaller working-age population while its retirement population could outnumber its youth.

"It's not fertility," Hill said. "Our fertility is actually pretty high in Kansas. We're good at having babies."

The problem, he said, is that many young people who grow up in Kansas leave after graduating high school, and the state is not attracting enough young people from outside to make up the difference.

And even those who come to Kansas to attend college often do not end up staying, he said.

"When they graduate college, they're finding the size of the economy is not that large, and we don't have a lot of multiple opportunities in their career ladder, so millennials start moving out to larger markets than we have," he said.

Hill said any number of things could happen over the next 50 years to alter the current trends. But he said there is little doubt that unless things change, Kansas is heading toward having a relatively smaller working-age population that is much more heavily concentrated in a few urbanized areas.

Among the many consequences of that, he said, will be higher costs for delivering services like health care and education to the steadily shrinking rural areas, costs that will have to be borne by the smaller working-age population.

Courtwright, who analyzes tax policy for the Legislature, said that in some ways, Kansas is already seeing the effects of those population shifts.

"Consider, for example, as a result of our aging population, especially in rural areas, schools now find it more difficult to get bond issues approved, given that a lot of local residents' children left the public school system several decades ago, and fixed-income seniors may not feel as connected to their schools as they once were," Courtwright said.

But he said the challenges that will face Kansas in the future, even in the short term, are being made more difficult by the state's current tax structure, including the sweeping income tax cuts that lawmakers approved in 2012 and 2013.

Before those tax cuts were enacted, he said, the Kansas tax code was based on a concept that many people called the "three-legged stool" - a balance between income, sales and property taxes.

In 1992, when lawmakers enacted a historic school finance plan, those three tax sources were distributed roughly evenly in the state budget. But in the wake of the Great Recession in 2009 and 2010, he said, the idea of a three-legged stool had fallen out of favor in some political circles.

"A lot of people were suggesting that the severity of the economic downturn made it appear by all accounts to be a different animal than previous recessions, and by 2012 it seemed clear that recovery for different regions, economic sectors and even demographic was not uniform and appeared to be taking longer than had previous recoveries," Courtwright said.

"So the perception that there was not any kind of uniform national recovery, where all boats were being lifted by the same rising tide, fed into this notion that expansion was going to need to be leveraged by state-specific policy initiatives," he said.

The result, he said, were the tax cuts enacted in 2012 and 2013 that lowered income tax rates across the board and eliminated taxes altogether for certain kinds of business income. It was based, he said, on the theory that reducing income taxes would put more money into people's pockets, and that would stimulate the economy in ways that would produce revenue through other streams, primarily sales taxes.

But by 2014, he said, it was becoming clear that the Kansas economy was not responding the way advocates of the tax cuts had hoped, and the cuts were having a more profound impact on state revenues than budget officials had expected.

Just after that year's November elections, he said, new revenue economic numbers showed that the Kansas economy and personal income in Kansas were growing slower than the national average, "basically confirming that no unusual economic growth had been occurring as a result of stimulus from the tax law changes."

And little has changed in those trends in the nearly two years since that time while state revenues have continued to fall short of projections, forcing the governor and Legislature to make several rounds of emergency spending cuts.

Had the Legislature left the tax code as it was in 2012, Courtwright said, Kansas would be taking in an estimated $920 million a year more than it is now.

Those tax cuts have been a major issue in this year's legislative election campaigns, with many candidates calling for another round of tax changes, including repeal of the exemption for non-wage, or "pass-through" business income.

At the same time, however, Courtwright noted that many candidates are also talking about another kind of tax cut, this time lowering or eliminating the sales tax on food purchases.

But Courtwright said the tax cuts alone may not be the only source of the state's fiscal problems, and that other long-term trends may continue to present challenges for Kansas in the future.

Among those, he said, are changes in consumer buying behavior that could limit the effectiveness of any kind of sales tax.

"The sales tax, of course, worked pretty well in the 1930s when it was enacted, when people bought a loaf of bread and a glass bottle of milk," he said. "But with changes in technology, mobility and a vast array of other things that people spend their money on these days, more and more purchases over time have begun escaping taxation."

In addition to that, Courtwright said, state revenues are being squeezed by several other trends that may become long-term problems, such as sagging prices for agricultural commodities along with depressed oil and gas prices.

Coupled with the demographic changes that Kansas is experiencing, Courtwright and Hill said the state of Kansas and its state government could be facing difficult financial problems for many years to come.

Comments

Jerrie DeRose 1 year, 1 month ago

And now that Sam Brownback's failed economic policies are driving even more younger Kansans away, it is only going to get worse. Ex: My son, 26, who left Hutchinson for a job as a technician that does troubleshooting for a company that handles internet companies from KC to Hawaii, made sure and got an apartment in KC MO because of lower taxes, a very low sales tax on food and eating out, a tax holiday "for everyone" for a month prior to school starting. You get your tags and registration according to your last name but don't pay the property taxes on the vehicle until the end of the year. He and many others are/were sick of businesses paying NO state tax on their business earning and the middle class and single taxpayers picking up the cost, fewer jobs, and towns/cities that never try to bring in a variety of businesses, and that Brownback and the republican majority in both Houses do nothing about it. He was sick of seeing my property taxes raise for the past three years because of Brownback's tax cuts at both the local and state level, and more. Some businesses that are exempt from KS income tax are complaining that the public is spending less on goods and services, and they can't afford to hire more workers if their revenue stays down. And most Kansans, like myself, don't have the money to spend because of the tax cut, higher property taxes, and a higher state and local sales tax as communities try to make up for less revenue thanks to Governor Brownback. If I could afford to move I'd hightail it of Kansas, myself. Until the Kansas government changes it's course it is only going to get worse. And as long as we Brownback and his republican puppets in control, nothing is going to change.

Bob Summers 1 year, 1 month ago

So if every taxpayer left Kansas, how will the State take care of the people left?

Michael Kaufman 1 year, 1 month ago

It's easy. They move their estimated tax receipts to "0" then they can meet their goal every month. That and wait for the second coming.

Barb Gordon 1 year, 1 month ago

I don't know, Bob. How will the state take care of you?

Greg Cooper 1 year, 1 month ago

Guess it couldn't get much worse, Bob, than it is now. You know, regardless of how you rail against fact, that services have been cut, and more are on the way.

And, by the way, it seems as if migration is outpacing immigration in our state. So the question becomes even more important to our kids.

Jim Austin 1 year, 1 month ago

The feds will take it over as a national park, A monument to the stupidity of conservative right wing evangelical dogma

Calvin Anders 1 year, 1 month ago

I think Brownie and the jackals in the state legislature are making ready for another war. This will be a war on numbers. They want to avoid any sort of accounting or projections that show how horribly the state's economy is going. I'm betting that soon the legislature will take up a bill making arithmetic a misdemeanor. Accounting and Statistics will be felonies (unless done by an ultraconservative think tank and approved by the Governor's office). A conviction for the teaching of any math at all will carry a life sentence.

Michael Kaufman 1 year, 1 month ago

Young people are leaving Kansas? Who wudda thunk it? One of the most F-ed up states when it comes to handling their economy, and guess who is running the state? It is those nice folks from the GOP. Their ideas has already caused Louisiana to near bankruptcy, thanks to Bobby, and his friends in the legislature. Brownback said, "Sh^t I can do better then that. I can kill the whole state, by not making 60% of the population pay no taxes at all." "Let the poor and middle class make up the difference with a sales tax increase." It is the Kansas version of, "Let them eat cake." Until Kansas voters wake up, and kick those losers out of the legislature, and the governor mansion, life is only going to get worse. I left Kansas many years ago. It is a nice place to be from. Right now I am about 9 thousand miles from it, and that is almost too close.

John Williford 1 year, 1 month ago

Republican party strong hold are older men/woman, under educated and racists (who thrive in rural areas). Its not nice to say but true. Why? Because they are not progressive pure and simple. Younger people are progressive forward thinkers. They can see the destruction coming. Why live in a state without a future. I personally love rural living. I Live in Tulsa and work in a smaller town outside Tulsa. Its lack of progressive thinking and drug issues force me to live in an Urban area which is actually safer. Go figure

Fred Whitehead Jr. 1 year, 1 month ago

I do occasional business on EBay. More than one person has asked me if Kansas has ever gotten it's act together and dumped that "clueless" governor.

Word seems to get around. My aunt in Ohio has asked me if there are any people left in Kansas left with the intelligence to see the total disaster that the state economy has broadcast over most of the nation.

Why would ANYONE with a shred of intelligence come to flyover, bleeding Kansas?? I wish I had not. But that is a long and difficult story.

Daniel Kennamore 1 year, 1 month ago

If any good has come from the Brownback debacle, it's that we finally have a perfect case study that shows that trickle down economics don't work.

People with the means/education are fleeing the state like rats from a sinking ship. These problems won't even begin to get better until a more moderate Governor and legislature takes over.

Dorothy Hoyt-Reed 1 year, 1 month ago

Yes, but there are a lot of people out there who are into beating dead horses.

Dave Kruse 1 year, 1 month ago

There is only one relevant fact as to why Kansas budget problems worse in future.

You elected a tea bag.

Brett McCabe 1 year, 1 month ago

You know what type of young, hard-working people would like to live in Kansas? Immigrants.

Tom Weiss 1 year, 1 month ago

I wish Chris Courtwright had explained further why the tax cuts didn't work. I would hypothesize that the answer is because most of the tax cuts were given to a handful of wealthy people. some of them may have spent it, but not in Kansas. Instead, they took ski vacations in Colorado or Switzerland, or bought French wine, German automobiles, - or maybe just spent a weekend in St. Louis. Others probably didn't spend it on anything; they saved it instead of investing as the trickle down dream requires.

It might be worth noting that Lynn Jenkins and other Republicans have plans to do to the nation what Brownback has done to the state. So vote them all out of office.

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