The State of Kansas released it's revenue figures today, announcing that it had failed to hit expected targets for January, falling $47 Million dollars in tax receipts short. This number was largely impacted by the below expected personal income tax figures submitted to the state for the month, resulting in the estimate being too high.
http://www.therepublic.com/...
The budget gaps arose after lawmakers aggressively cut personal income taxes in 2012 and 2013 at Brownback's urging to stimulate the economy. The state dropped its top rate by 29 percent and exempted the owners of 191,000 businesses altogether.
The current projected shortfall is pegged to revenue estimates that were made in November, showing the state collecting $560 million in taxes in January. Kansas actually took in $513 million, or 8.4 percent less. And since the current fiscal year began in July, the state has collected $59 million less in taxes than the $3.3 billion anticipated, a revenue shortfall of 1.8 percent.
At current projections - which, we should note - Kansas has been woefully wrong on to the detriment of budgeting purposes, Kansas currently projects a $436M shortfall for the next fiscal year. You have to temper the validity of that projections considering it assumes that Governor Brownback's education cuts and recalculation of the formula, as well as an overturn of Gannon will come to pass.
Should Governor Brownback not receive the budget cuts anticipated, or a recalculation of the formula, and should the Gannon decision stand, the state of Kansas could be somewhere between $770M-$1B in negative for FY2016, a debt greater than most government service expenditures combined.
Kansas, it seems, has found itself in a pay-day loan level of economic damage. In a study conducted by the Wall Street Journal last summer - before continuing rounds of bad news, the state was linked to projections that a negative impact of greater than $700M was reasonable.
This figure closely aligned with the 2011 study by Insight, noting that the pay day loan industry likely cost the nation $774 Million in resources. While the link may appear only as a nice coincidence of numbers, the state of Kansas is in fact acting as it's own payday loan lender, financing it's next payday against currently held revenue hoping that on the next paycheck, they will be able to pull ahead.
http://www.kansas.com/...
Gov. Sam Brownback plans to divert more than $100 million from state highways, reduce pension spending and cut numerous other agencies’ budgets by 4 percent to help plug a projected budget hole for six months.
The state also will transfer more than $100 million from other dedicated funds into the general fund, including $55 million from fee revenue in the Kansas Department of Health and Environment.
This policy of moving funds in order to fill short term gaps while pushing back interest and held cost closely aligns with the problem of too many Americans who get stuck in Payday loan turnaround: living paycheck to paycheck, only to pay back the payday loan and need to finance another. The problem for Governor Brownback is the cost of his borrowing may be expanding faster than the rate he can effectively borrow money from friendly sources.
http://www.kansas.com/...
In addition to these possible cuts, the House Appropriations Committee approved an amendment Thursday that would delay the state’s capital outlay equalization funding to school districts. The state would pay $25 million of the payments due in February and delay the remaining $20 million in funding until June 20. Wichita’s delayed payment would be more than $3.5 million. Brownback’s budget plan called for delaying all $45 million in payments until after June 15.
With legislation pending that not only cuts spending schools - but asks currently contracted vendors and agents to wait several months before receiving payment, the Governor's office has signaled that it is willing to borrow free services and labor from the Kansas economy, under the guidance that it will pay for it all later.
This tax plan, often referred to as "I will gladly pay you Tuesday for a Hamburger Today" policy, seeks to delay payment under the promise that at a later point, the promise will be held at full credit.
In order to make sure those funds are available later, however, some belt trimming has to occur.
http://www.kansas.com/...
Not only does Gov. Sam Brownback want to cut $127 million in school operating funding next year, but some lawmakers want to cut $39 million this current year – even though the school year is more than half over and the cut would disproportionately hurt poorer school districts.
Senate Bill 71, which is expected to have a hearing next week in the Senate Ways and Means Committee, would change how the state calculates its supplemental aid to school districts. This is aid that helps equalize the cost of local option budgets between districts, thus reducing the local property tax burden in many districts.
This combination, of borrowing against uncertain revenues while frantically cutting the budget in order to make sure the loan of services and goods can be repaid represents the stereotypical Pay Day Loan cycle, in which the debtor must begin to plan and save immediately on uncertain funds in order to meet future obligations acquired.
It is uncertain if Governor Brownback's borrowing plan - which also involves significant tax hikes on beer & cigarettes (50% on alcohol, a $2.29 per pack tax on cigarettes) will generate the kind of last minute revenue boost needed to make all of the cutting and borrowing work out.
Should Kansas fail to meet their obligations, proposed budget changes - like putting debt repayment first - would immediately cause the state of Kansas to continually cut from the budget spending in order to meet the state debt obligation.
The real problem is: there is no hamburger today; and borrowing against stone soup with some ramen flavor packets mixed in is becoming a much more difficult sell, both for investors and for those waiting to be served.