By Duane Goossen
The allotment plan just issued by the governor buys a little time with mostly short-term budget fixes to get Kansas through fiscal year 2015. However, the plan does little to alter the main dynamic at play in the Kansas budget: Even though the current set of expenses are lean, they far exceed a diminished revenue stream.
The governor’s plan to plug the FY 2015 budget hole does two basic things. First, it proposes transfers of $217 million (*) to the general fund from various other funds. These transfers require legislative approval. If approved, they will count as one-time revenue to the general fund. Second, the governor uses his allotment authority to unilaterally cut approved FY 2015 expenses by $62 million. (*)
Here’s how the FY 2015 general fund profile looks as a result of the governor’s actions, assuming legislators approve the transfers:
Under the governor’s plan, by using up the beginning bank balance, raiding other funds, and making some spending cuts, the general fund will finish FY 2015 with a zero balance — the bare minimum.
That moves the focus for the state’s budget problems squarely to FY 2016. The general fund profile below shows the new outlook for FY 2016.
Without new revenue, lawmakers will need to cut approximately $669 million just to keep the general fund solvent in FY 2016. That would be more than a 10 percent cut to every single item, on top of the cuts the governor already imposed in FY 2015.
Even under the governor’s new plan, the reality remains the same:
Lawmakers had better find a way to increase revenue, or the cuts to education and other state programs are going to be deep and highly distressing.
* Some of the expenditure "cuts" shown in the governor’s plan are actually revenue transfers to the general fund. For example, Dept. of Transportation expenditures are cut by $7.8 million, which benefits the Highway Fund, but the savings from the Highway Fund would be transferred to the general fund if approved by the Legislature.
By Duane Goossen
Lawmakers have quite a job awaiting them. During the next legislative session they must first fix the existing FY 2015 budget, and then look into the future and create new budgets for FY 2016 and FY 2017.
None of it will be pleasant.
Fiscal year 2015 (shown below) is almost half over. Expenses total $6.427 billion, but estimated income only reaches $5.768 billion, leaving a $659 million gap to bridge.
A portion of that gap can be closed by using up the $380 million that was in the bank at the beginning of the year, but that still leaves another $279 million to go, just to get to an ending balance of $0.
Zero is the minimum balance. It should actually be much higher. State law and financial prudence require an ending balance equal to 7.5 percent of expenses — about $500 million. However, that’s an impossible goal for this year. Just achieving a zero balance will not be easy.
The Speaker of the House and several other lawmakers have announced their intention to solve the problem with spending cuts alone.
Good luck.
That almost certainly means cuts to public education. Kindergarten through 12th grade education accounts for over half of general fund expenses. Medicaid, an unrealistic area for reduction, accounts for another 20 percent. Without reductions to K-12 education, the cuts to the remaining portions of the budget — higher education, other human service programs, and public safety — would be impossibly deep.
Other legislators have expressed the hope that revenue will turn out to be better than estimated. Not likely. The current FY 2015 revenue estimate was dramatically revised downward after the elections, but may still be too high.
Many budget watchers are predicting that a transfer from the Highway Fund will ultimately be used as a short term repair to the FY 2015 budget and a way to avoid education cuts. A $279 million transfer would require cuts to road programs, but the transfer would count as a revenue increase to the general fund, allowing FY 2015 expenses to remain at $6.427 billion. But in that scenario, the real pain is simply delayed until FY 2016 (see below).
The FY 2016 beginning balance will be zero under almost any scenario. Estimated revenue totals $5.811 billion. That means, without more revenue, there will be $5.811 billion to spend. That’s it. In FY 2016, some one-time expenditures can be taken out of the spending base, but the state will face new costs for Medicaid and KPERS, pushing expenses above $6.5 billion, and creating a more than $700 million imbalance.
In FY 2017, the official revenue estimate totals $5.877 billion. New Medicaid and KPERS costs will keep coming.
Here’s what lawmakers cannot escape: Current expenses are more than $6.4 billion a year and rising.
Without new, ongoing revenue, that set of growing expenses must somehow be whittled down and made to fit within a revenue stream that appears to be roughly $5.8 billion per year and staying relatively flat.
Kansas had better figure out a way to get some more revenue, or a lot of program cuts lie ahead.
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Readers: The Kansas Budget Blog will take a holiday break. Watch for new posts in early January. Thanks for reading! And Happy Holidays!
