The Consensus Revenue Estimating Group (CREG) is a non-partisan group of economists and state budget experts who estimate how much money the state will take in (revenues) by analyzing current law (property & income taxes) and anticipating taxpayer spending habits (sales taxes). These estimates are used to craft the budget (spending). When revenues do not meet the estimates, it means the state has budgeted to spend more than it actually received.
2015 Budget Challenges
CREG issues estimates in April and November each year and this month’s estimate included more challenging news – they anticipate a gap of more than $278 million between revenues and budgeted expenditures in the current fiscal year, meaning cuts to the existing budget will be considered when we return to Topeka in January. Over the summer, State Budget Director Shawn Sullivan said he identified $101 million savings in efficiencies within the state agencies. No details have been released to date what these efficiencies truly mean or how they impact agencies budgets or delivery of services. So it is possible, the severity of budget cuts can be offset by improved operational efficiencies identified by the Brownback Administration.
Governor Brownback has the authority through a process known as allotments to make budget cuts during this type of revenue shortfall environment, so we need to see what action the Governor’s office implements before the legislature convenes. I remain deeply concerned about spending our remaining end-of-year-carryover down to zero or near zero. It is unwise for the state to be unprepared for a downturn in the national economy or catastrophic event confronting our citizens, and we should carry a “rainy day fund” in our budget.
2016-2017 Budget Process
Once we get past the immediate budget cuts for the current year operating budget, the Legislature needs to prepare and adopt the two-year 2016-17 budget. A two-year budget is not mandatory, but when we did this for the first time in 2013, it helped state agencies – especially school districts – plan farther in advance than just a few months.
In addition to the outlook for the current fiscal year, CREG also estimated a $434 million shortfall for fiscal year 2016, which starts on July 1, 2015. How the Legislature tackles this challenge is not going to be pleasant for the public to watch. But once you cut through all the political positioning, there are only three basic solutions: continue cutting state budgets; raise revenues; or a combination of both.
From my conversations with constituents the past few days, there is a real palatable fear the Legislature will have no qualms about cutting $400 million from the 2016 budget. I will not be participating in such drastic budget cuts. I am entirely open to taking a fresh look at our tax policies. Too much is at stake for Kansas to let ideology stand in the way of pragmatic decision-making.
I can also share with you there is a plan being promoted to cut hundreds of millions out of the State Highway Plan to make up for lost revenue. The quarter-cent sales tax dedicated to the highway fund generates about $500 million a year. I consider it short –sighted thinking to rob funds from KDOT and undermine our state highway system.
To Learn More
Duane Goossen is the recognized expert on all-things-budget in Kansas. His blog is a great source of budget data, graphs/charts, and hard numbers on the Kansas budget. With fiscal years that straddle calendar years, revenue estimates (on which the budget is based) made in November and April, and actual revenues compared to estimates – and what that means for the bottom line – it’s hard to know which way is up. Duane does a good job of explaining in plain English (charts and graphs help) what all of it means for the taxpayer. I highly recommend you read his October blog post entitled “Revenue Down! What Does It Mean?”.
