BEYOND THE NUMBERS
Kansas lawmakers continue to debate how to find the revenue needed to fix a huge fiscal mess caused by the ill-advised, unaffordable tax cuts that Governor Sam Brownback signed into law in 2012. It’s a challenge: they need both to close the latest massive shortfall in the state’s beleaguered budget and also raise hundreds of millions of additional dollars so that school funding reaches the adequate levels that the state constitution requires.
The vast majority of Kansas lawmakers understand that to even hope to repair the state’s finances, they need to reverse course on the tax cuts, the main cause of the state’s fiscal disaster. This means taking three steps: (1) restoring the state’s top income tax rate to at least pre-tax cut levels; (2) eliminating the additional income tax rate cuts in state law that will take effect in future years; and (3) repealing a wasteful tax break for certain kinds of business income that has encouraged tax evasion.
But those steps may not be enough because the state’s Supreme Court has ruled that schools are underfunded, requiring the state to not only cover its current budget, but generate additional, permanent revenue.
Lawmakers are considering a number of proposals, including a surcharge on income taxes and a fee on utility bills. Whatever revenue solution lawmakers choose should adhere to the following three principles:
- Raise the revenue needed for all Kansas students to achieve state education standards. State education standards are meaningless if the state fails to give schools adequate funding for all children to meet them. The Supreme Court is rightly basing its assessment on this common-sense principle and will hold the legislature accountable to meet it.
- Ask more of those with the greatest ability to pay. Kansas’ current state and local tax system is upside down. It asks the least of the state’s wealthiest residents and the most of those Kansans with the fewest resources, despite the state’s interest in boosting the prospects of its most vulnerable families. The Brownback tax cuts made this even worse. Reversing them would be a strong step in the right direction, but wouldn’t fully fix the problem. The additional school revenue should be designed to make state and local taxes more fair. A surcharge can help or hurt tax fairness, depending on whether it’s building on a tax that’s based on ability to pay — as one on the state’s income tax would be, especially following repeal of the Brownback tax cuts. Conversely, a fee on utility usage would make Kansas’ overall system less fair, because it would require a low-income family or senior citizen to pay a larger share of their income than a wealthy resident.
- Solve the school funding crisis permanently. Kansans want the problem fixed, for good. A temporary solution would mean that lawmakers would be back in crisis mode when its provisions expired. Similarly, the revenue source for schools should be one that will keep up with education funding needs over time. Of Kansas’ major revenue sources, income taxes are best at growing with the economy over time. Sales tax revenues don’t keep up as well, in part because many services and Internet sales are not taxed and these exempt sales are an increasing part of consumption.
By holding to these basic principles, Kansas lawmakers can do what their constituents want them to do — reverse course on the tax cuts and get Kansas schools back on track.
Senior Vice President for State Fiscal Policy and Co-Leader of the State Fiscal Policy Division