By Tim Jones, Bloomberg News (TNS)
Income tax cuts in Kansas championed by Gov. Sam Brownback have led to credit downgrades, political turmoil, and deepening budget deficits. This week, they’ll start forcing schools to close early.
As lawmakers work to erase a projected $800 million budget gap for the fiscal year starting July 1, at least eight school districts that saw their funding cut this year because of a greater-than-projected slide in state tax collections will begin shutting down before the scheduled end of classes. Dozens of others have eliminated or cut programs.
“We felt we didn’t have a choice,” said Janet Neufeld, superintendent of Twin Valley schools, which will end the academic year on Friday, 12 days early.
“It’s not good for kids, it’s not good for families,” said Neufeld, whose district serves 590 students in eastern Kansas. “But we’re trying to keep the ship from sinking.”
Early school closings and program reductions are signs of a budget sinkhole in Kansas, where Brownback and the Republican-controlled Legislature approved large income tax reductions in 2012 and 2013. They said reduced levies would spur economic activity that would compensate for lost state revenue. The governor called his move to gradually end the income tax “an experiment.”
It hasn’t delivered the promised benefits, producing instead bigger revenue losses and, at least in the short-term, a cautionary tale of the effectiveness of using large tax cuts to spark economic growth.
Brownback and lawmakers have embraced or considered stop-gap measures to balance the budget, including a $1 billion pension-bond sale and draining the state’s highway fund by $130 million.
They also junked the school funding formula, replacing it with temporary block grants that had the effect of cutting budgets in the current year and forcing districts to adjust to unexpected reductions.
“There have been times when things were tight, but this is the absolute worst I’ve ever seen it,” said Mike Sanders, superintendent of Skyline Public Schools, which will end the school year two days early on May 12.
Skyline, about 75 miles west of Wichita, has petitioned the state for emergency cash so it can meet its June payroll.
“It’s crazy times,” Sanders said. “The ideology in this tax experiment has gone too far. It’s almost as if they’re hell- bent on proving their point, no matter the damage it causes.”
Brownback and tax-cut supporters have insisted the reductions need more time to deliver the economic boost. And the governor’s office said it’s not responsible for the early school closings because overall education funding increased, topping $4 billion for the first time.
“Blaming the education block grants may be convenient, but it is not accurate,” Brownback’s press secretary, Eileen Hawley, said in an email.
Mark Tallman, associate executive director of the Kansas Association of School Boards, said the problem for many districts is that state aid hasn’t been keeping up with costs. Part of the increased state dollars has gone toward beefing up underfunded pension systems, he said.
“There’s no doubt the income tax cuts have significantly reduced income to the state and produced a much steeper decline in revenue than had been expected,” Tallman said.
Public schools have been adjusting to declining revenue for the past two years by closing classrooms, firing teachers and raising local property taxes.
While declining oil prices have slashed tax revenue in energy-producing states such as Alaska, Oklahoma and Louisiana, the Kansas budget crisis is self-inflicted. In 2012, the Legislature cut the top income tax rate by 26 percent, increased standard deductions for married and single head-of-household filers and eliminated levies on about 191,000 small business owners.
The number of filers that identified themselves as small businesses exceeded 300,000, causing larger-than-forecast revenue losses.
Lawmakers returned to Topeka, the state capital, last week for a final push to fill the revenue gap that continues to spread because of reduced tax collections.
Moody’s Investors Service and Standard & Poor’s cut Kansas’s credit rating. Moody’s downgraded the rating to Aa2, third highest, from Aa1 on April 30, saying revenue reductions “have not been fully offset by recurring spending cuts.”
In response to larger-than-projected revenue losses, Brownback proposed slowing the rate of future tax reductions in January as well as boosting levies on cigarette and liquor. Those suggestions have been resisted by lawmakers, and the path to a budget resolution remains unclear.
The tax cuts and their effect were the dominant issue in last November’s governor race, in which Brownback won re-election by four percentage points, or 33,000 votes, over Democrat Paul Davis.
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Photo: Gage Skidmore via Flickr