“Balancing recurring revenue with recurring expenditures is the foundation of a structurally balanced budget ... A truly structurally balanced budget is one that supports financial health for multiple years into the future.” —A&M KansasStatewide Efficiency Study, 2016
- Borrow. The governor proposes to borrow $317 million to be paid back over 7 years. If the Legislature agrees, that would increase expenses over the next 7 years, widening the structural imbalance.
- Don’t pay bills. In order to stay financially afloat in FY 2016, the state simply did not pay $87 million worth of bills, including $75 million owed to school districts. The bills were carried over to FY 2017 to be paid as soon as money was available. The governor now recommends not paying those bills at all. (A $96 million KPERS bill also went unpaid in FY 2016, with a promise that it would be paid with interest in FY 2018. The governor also now recommends not paying that.)
- Sell the tobacco settlement revenue stream. “Securitization” would sell the next 30 years of tobacco settlement payments (which currently pay for early childhood programs) for a lump sum to prop up the general fund in the short term. It’s the same concept as a payday loan.
- Gut the highway fund. Between directly transferring money to the general fund and sending general fund bills to the highway fund for payment, more than $500 million of highway fund resources would be diverted to the general fund each year. Administration officials claim this would not harm highways, but that’s as believable as the claim that the budget is structurally balanced.
- Don’t make required KPERS payments. Kansas law sets out a clearly defined schedule of payments into the state retirement system. The governor’s budget proposes paying almost $600 million less than required over the next two years. Defaulting on these payments doesn’t reduce the state obligation, just pushes it off to future years.
- Tax increases. The governor wants to raise about $180 million per year with a package of tax hikes that include doubling the taxes Kansans pay when they make purchases at liquor stores, and adding $1.00 to the per-pack tax on cigarettes.
—This entry was originally published on the Kansas Center for Economic Growth website.