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POLICY INSIGHT
BEYOND THE NUMBERS

Kansas — and Other States — Should Reject Harmful Tax and Spending Limits

Recent proposals in Kansas and several other states to arbitrarily limit tax collections or spending would choke off funding for critical public services and compromise states’ long-term fiscal health. Such proposals pose serious risk to states’ ability to pay for quality schools, affordable health coverage, infrastructure, and other vital services. They’re especially harmful to families and communities that have faced structural barriers to opportunity, including people with low incomes and people of color.

In Kansas, lawmakers have introduced resolutions urging the legislature to adopt a constitutional limitation on taxes and spending and a supermajority requirement for any new tax increases. In Pennsylvania, some lawmakers have renewed calls for a spending limitation that would very likely lead to cuts in health care and education; it also would shift costs to localities, which would need to raise their own taxes or make harmful cuts. These tax and spending limitations generally follow a basic formula: put an arbitrary cap on the amount of revenues the state can collect or the amount of expenditures it can make, construct the cap so that over time it will force cuts in spending, and make it difficult — through supermajority requirements or other means — to override the limitation when the capped amount is inadequate to meet the needs of a state’s families and communities.

Other states, such as Colorado, Missouri, Montana, Nebraska, and Texas, are considering limits on property taxes with adverse long-term implications for the quality of each state’s K-12 public schools and local services.

Kansas, in particular, has a history of budgetary self-sabotage: less than ten years ago, lawmakers passed Governor Sam Brownback’s “real live experiment” in extreme tax cutting, which didn’t produce the “shot of adrenaline into the heart of the Kansas economy” that had been promised. Instead, the state’s economic growth lagged all of its neighbors before a bipartisan supermajority of legislators forcefully ended the tax cuts, which were undermining the state’s ability to provide important services, including education. Adopting a new tax and spending limit or supermajority requirement could prove equally damaging over time by constraining revenues and forcing spending cuts. And, if the supermajority proposal on tax increases, now before the Kansas Senate, makes its way to voters in November and is approved, overriding any new restriction will become even more difficult.

Only recently has Kansas begun to course-correct and recover from its past missteps in tax policy. Adopting a tax and spending limit would likely cause substantial new damage. For example:

  • State education funding would likely fail to meet the needs of K-12 schools. Arbitrary state budget limits have forced deep cuts in education spending when adopted elsewhere. For example, after Colorado enacted a particularly strict spending limitation known as TABOR, the state fell from 35th to 49th in the nation in K-12 spending as a percentage of personal income between 1992 and 2001. The state’s ranking has since improved modestly but it remains 43rd as of 2018. During the Brownback administration, rulings by the Kansas Supreme Court that the state wasn’t meeting its constitutional obligation to provide adequate and equitable school funding led to several increases in state funding and helped demonstrate why the tax cuts needed to be reversed; the court is continuing to monitor the issue.
  • The health of Kansas residents would increasingly be at risk. Arbitrary revenue or spending limits would likely result in reductions in Medicaid services and provider rates. Those reductions, in turn, would further diminish the care received by low-income Kansans and increase pressure on families, including those with older relatives or family members with disabilities who rely on Medicaid for services that help them remain at home rather than in institutions. These services are optional in Medicaid, making them vulnerable to cuts. Such cuts would be particularly painful in Kansas, where many families lack health insurance because the state is one of just 12 that have failed to adopt the Affordable Care Act’s Medicaid expansion. That has left over 44,000 Kansas adults uninsured, disproportionately harmed people of color, hurt rural hospitals, and left $468 million in federal funding on the table.
  • Transportation needs may go unaddressed. Kansas’ transportation network relies heavily on sales tax revenues, which likely would be squeezed by a revenue limitation. Lawmakers likely would turn to sources of transportation revenue not covered under the limit, such as gas taxes and vehicle registration fees. Alternatively, the state could shift more of these costs to localities or cut back on construction and maintenance of transportation projects.

Past budget gimmicks have already weakened Kansas’ transportation system. Between 2011 and 2020, the state diverted $2.6 billion away from the transportation budget to the state general fund to help balance the state budget. Partly as a result, Kansas suffers from a substantial backlog of deferred maintenance on highways and bridges. When roads are in poor condition, the likelihood of crashes increases. And, when bridges are structurally deficient and need to be closed for repair, this increases commute times, further stresses the already strained supply chain, and adds to existing congestion.

While the federal Infrastructure Investment and Jobs Act of 2021 will provide a large infusion of one-time federal aid over the next five years, Kansas will still face significant infrastructure costs once the federal aid is spent. An arbitrary spending or revenue limit would make it more difficult to cover these future costs.

Instead of arbitrary revenue or spending limits, Kansas policymakers should focus on policies that help people thrive. These include: using federal Fiscal Recovery Funds to help address the health and economic fallout of COVID-19; protecting and enhancing the state’s revenue system to pay for services needed now and in the future; implementing key recommendations from the governor’s Commission on Racial Equity & Justice, such as addressing social determinants of health (including barriers to education and high-paying jobs); and investing in K-12 schools and universities, child care, infrastructure, and other community assets that help break down barriers to opportunity and advance economic and racial equity.