|Wrap Up Newsletter Part 2: The Budget
In the first wrap-up newsletter I sent last week, I discussed tax policy and the Legislature's decision to pass a massive, retroactive $1.2 billion tax increase on the backs of almost everyone in Kansas, from the poor to the middle class to small business owners who are the backbone of our economy.
The tax increase, which now places an income tax rate in Kansas above that even in Massachusetts, threatens to cripple our economy and sends a signal that Kansas is no longer open for business. We have now created a tax structure that is wholly unattractive to any business looking for a place to locate here.
The foundation of all tax increases is spending. Left-wing majorities in both chambers, rather than simply balancing the budget by holding the line on new expenditures from one fiscal year to the next, opted to spend money we did not have to fund a bloated budget that was simply unjustifiable, packed with tens of millions in new and unnecessary spending increases. There seemed to be no recognition of the number one rule in economics: a) there are unlimited wants; but, b) there are limited resources. The legislators who voted for the budget ignored part b - that there are limited resources and real consequences for taking money out of the private sector through taxation.
Simply put, there is a pervasive attitude in Topeka that spending must always go up, not down. Even the term "cut" has been redefined to mean that an approved number is lower than something that was proposed earlier. However, in the real world, a cut is when expenditures are lower than a previous year.
The biggest recipient of tax dollars - K-12 Education (about half the state budget) - has lobbyists who distort the actual total expenditures. These lobbyists are quick to throw multiple wrenches into any attempt by a legislator who dares to propose educational reform that might change an inefficient, antiquated, system-based-model to an efficient, modern, student-focused-model that would help serve the educational needs of all of our kids. I will be addressing school finance in greater detail in my third post-session newsletter.
Today, the focus is on the rest of the budget adopted in HB 2002, so keep in mind that the numbers I am about to discuss do NOT include new spending on education. This will then lead to a discussion about an alternative plan conservatives offered, the "Republican Balanced Budget Solution," which did not require any tax increase at all, and instead merely held the line on spending and maintained a tax policy focused on generating economic growth.
First, let's review where we were prior to this fiscal year and the budget adopted. In FY 2016, a total of $6.115 billion was spent from the State General Fund. For the next few years, revenues have been estimated to continue dropping because of the decline in the agriculture and oil industries. (Despite the media narrative, the revenue drop has nothing to do with the 2012 tax cuts.)
For FY 2018, this session, the majority of the Legislature voted to add $337.3 million along with $87.3 million more borrowed from the PMIB fund. On top of that, it added $582 million it plans on receiving from the tax increase.
For FY 2019
, this session, the majority of the Legislature voted to add $487.2 million and added $624 million it plans on receiving from the tax increase.
What you don't see is all the borrowed money from KDOT ($6.2 million in 2017 and $457 million for 2018), or the money that didn't get appropriated for the 2018 and 2019 KPERS payments ($115.2 million for 2018 and $194 million for 2019). And don't forget the borrowed $317.3 million from the PMIB fund that will need to be paid back.
It gets worse. None of the figures I just cited include the increase in education spending that was included in SB 19.
When you include the increase in spending in SB 19, which was just signed into law by Governor Brownback, it adds almost $187 million to the FY 2018 total and nearly $284 million to the FY 2019 total, bringing those figures to $6.571.8 billion in FY 2018 and $6.613.4 billion in FY 2019.
It gets even worse. Because of this massive spending, the out-years show the budget going back into the red by FY 2020, despite the massive tax increase.
But it gets even worse from there. FY 2019 has a phony balance, using the same budgetary maneuvers that the very authors of the bill criticized on the floor during debate.
Fact 1: The estimated ending balance given on the date of the vote for FY 2019 is $209.7 million. (I've heard since then, that it is estimated to be even lower.)
Fact 2: That doesn't take into account the budget defers two KPERS payments - one that's from FY 2018 of $115.5 million and another one for FY 2019 of $194.0 million, for a total of $309.5 million.
Fact 3: Without those two deferrals of obligations to KPERS, the balance would be negative $99.8 million in FY 2019:
$209.7 million - $309.5 million = -$99.8 million
So, not only is this budget bloated, it's fake.
Let's remember - the very reason that many voters were upset with previous Legislatures was too much spending, not the fact taxes were too low - this was backed up in multiple recent polls. In fact, many left-wing legislators falsely campaigned on rhetoric claiming they were fiscally responsible and against tax increases, but then turned around and increased taxes and subsequently voted for a budget that doesn't balance, increases debt by borrowing, and defers current obligations to retirees for a future date, to cover an increase in spending.
Perhaps many of my colleagues should attend a Dave Ramsey class.
Many have asked me how each Senator voted on the final Budget.
Here is the budget vote in the Senate:
Senator McGinn moved that the Senate adopt the Conference Committee Report on S Sub for HB 2002.
On roll call, the vote was: Yeas 27; Nays 11; Present and Passing 0; Absent or Not Voting 2.
Yeas: Berger, Billinger, Bollier, Bowers, Denning, Doll, Estes, Faust-Goudeau, Francisco, Givens, Goddard, Haley, Hardy, Hawk, Hensley, Holland, Kelly, Kerschen, Longbine, McGinn, Pettey, Rogers, V. Schmidt, Skubal, Sykes, Taylor, Wilborn.
Nays: Alley, Baumgardner, Fitzgerald, Hilderbrand, Lynn, Olson, Petersen, Pilcher-Cook, Pyle, Tyson, Wagle.
Absent or Not Voting: Masterson, Suellentrop.
The Conference Committee Report was adopted.
Here is the budget vote in the House:
On motion of Rep. Waymaster, the conference committee report on S Sub for HB 2002 was adopted.
On roll call, the vote was: Yeas 88; Nays 27; Present but not voting: 0; Absent or not voting: 9.
Yeas: Alford, Arnberger, Baker, Ballard, Becker, Bishop, Brim, Burroughs, Campbell, Carlin, Carmichael, Clark, Clayton, Concannon, Cox, Crum, S. Curtis, E. Davis, Deere, Dierks, Dietrich, Elliott, Ellis, Eplee, Finch, Finney, Francis, Frownfelter, Gallagher, Gartner, Good, Hibbard, Highberger, Hineman, Hodge, Holscher, Jennings, Johnson, Judd-Jenkins, Karleskint, Kelly, Kessinger, Koesten, Kuether, Lakin, Lewis, Lusk, Lusker, Markley, Mastroni, Murnan, Neighbor, Ohaebosim, Orr, Ousley, Parker, F. Patton, Phelps, Phillips, Proehl, Rafie, Rahjes, Ralph, Resman, Rooker, Ryckman, Sawyer, Schreiber, Schroeder, Schwab, Seiwert, Smith, A., Smith, E., Stogsdill, S. Swanson, Tarwater, Thimesch, Thompson, Trimmer, Vickrey, Ward, Waymaster, Weigel, Wheeler, Whipple, K. Williams, Wilson, Wolfe Moore.
Nays: Alcala, Awerkamp, Blex, Burris, B. Carpenter, Claeys, Corbet, Delperdang, Dove, Esau, Garber, Hawkins, Helgerson, Henderson, Highland, Hoffman, Houser, Jacobs, K. Jones, Mason, Miller, Osterman, R. Powell, Sutton, Victors, Weber, C., Winn.
Present but not voting: None.
Absent or not voting: Aurand, Barker, Huebert, Humphries, Landwehr, Pittman, Ruiz, Sloan, Whitmer.
The Alternative - the Republican Balanced Budget Solution
Understandably, many want to know what the conservative alternative was, or if we were just voting "No." It was our contention from the very beginning that there was a better way - a pathway that balanced the budget, funded KPERS, and moved our state towards fiscal discipline and real education
reform. A pathway that involved approaching government spending differently, rather than the age-old way of tax and spend.
That is why members of the Kansas Truth Caucus (of which I am a part), a bicameral Senate and House group of principled conservative legislators, joined together to offer the Republican Balanced Budget Solution.
This proposal did not involve making cuts from one year to the next, though it was substantially less than the budget that was passed, and it was lower than the governor's recommendations. The reason - it simply held the line on spending and returned to one-year budgeting, which was the practice before 2012.
It's worth noting that
government spending has increased by 145% since 1992 - $1.9 billion above the rate of inflation during that same period. Given that past, it is prudent and responsible to hold the line particularly when you expect revenues to drop in the next few years. It would be no different than a household making up for years of spending by keeping things level for a couple of years. It's simply being responsible.
Here are the details of the Republican Balanced Budget Solution:
- The Republican Balanced Budget Solution provided a common-sense path forward that balanced our budget, fully funded all KPERS delayed payments, and protected our core functions of government and critical Children Initiative Fund (CIF) programs without increasing taxes on Kansas families and seniors on fixed incomes.
- The benchmark of the Republican Balanced Budget Solution was controlling the growth of government by eliminating new and unnecessary spending. Many Kansans wanted to cut spending, but this plan merely held the line.
- This budget would have protected Kansas families from massive tax increases - Kansans did NOT want higher taxes, according to numerous recent polls.
- The Republican Balanced Budget Solution utilized a sound investment strategy that 18 other states have also used, and would have led to $154 million in savings over the long-term.
- The Republican Balanced Budget Solution would have brought stability back to the Medicaid program by restoring the 4% reimbursement cuts.
- The Republican Balanced Budget Solution would have kept promises to make KPERS whole by funding all delayed payments.
Unfortunately, the Republican Balanced Budget Solution was not given serious consideration in either legislative chamber, and I can only conclude that those in positions of leadership preferred massive tax increases over sensible budget solutions. I am grateful for the 12 Senators who voted for it as an amendment to the budget on the Senate floor, and for Senator Ty Masterson's hard work in putting it together.
According to polling information, the public seemed to support the concept of the Republican Balanced Budget Solution:
- Only 25% approved of new taxes to fill the deficit.
- According to the recently released Docking Institute Kansas Speaks poll, a whopping 75% of Kansans want the budget deficit solved with either cuts alone (41%) or a combination of cuts and taxes (34%).
- The Kansas Legislature INCREASED spending AND raised taxes, which wasn't even given as a possibility to any survey responders.
- The Republican Balanced Budget Solution simply held the line and DID NOT increase taxes, which also wasn't given as a possibility to survey responders. Given that 41% wanted cuts alone, imagine the percentage who would have favored a budget without cuts!
- The Kansas Chamber released a separate poll, which showed that 77% of Kansans did not want taxes raised on the middle class.
Regarding education spending, some have asked what the conservative response would have been to the court, given we did not advocate spending almost $500 million more over two years. There were different ways to address the court ruling without increasing overall expenditures. I will address some of those ideas next week when we discuss the school finance plan that passed in SB 19.
"Reality". One would think that word had been taken out of the dictionary. Reality used to constrain people, because they knew there would be dire consequences if they did not conform budgets to reality. One reality to remember with budgets is there are unlimited wants, but there are limited resources. Another reality is that tax and budget policies create real incentives with immediate and long-term consequences, and policies should be evaluated with an understanding of how the economy works - not based on personal ambition, desires or good intentions. Voting to spend other people's money so they can no longer spend it in the way they choose takes away a portion of their liberty.
Quote of the Week
This was added to the Senate Journal after the vote:
This budget did steal from KPERS, transportation and the PMIB, contrary to the Ways and Means chairman. I guess you can ignore that if you are the one who built the budget.
The spending increase in this conference committee report on HB2002 is unacceptable because it is such a heavy burden for the people of Kansas. This report does nothing to structurally fix the budget, as it increases spending at such a high level and even delays over $300 million in KPERS payments to make the ending balance appear higher than it actually would be. The members of this Legislature voting for this budget are using taxpayers like a credit card, as they kick the can down the road and create more problems in future years. In addition, it comes with a RETROACTIVE $1.2 billion tax increase, which is immoral to take from Kansas citizens after they have already spent their paychecks. I vote against this measure and encourage my colleagues to do the same."
- Senator Mary Pilcher Cook, joined by Senators Julia Lynn, Steve Fitzgerald, Molly Baumgardner, Larry Alley, and Richard Hilderbrand
Conservatives Need A New Way Of Doing Things
In closing, conservatives need to get better at advocating for a new way of doing things in Topeka - a concept that should be basic but often disappears under the dome. That concept says that appropriate growth in spending is not $1.9 billion beyond the rate of inflation, but instead keeps spending growth limited to inflation plus population growth. That concept says that the taxpayers should be the last resort for more funding, not the first resort. That concept says that government should be limited, individual liberty should be respected, free enterprise protected, and traditional values maintained.
It is an honor to serve you in Topeka.
When we lose our way from those core beliefs, we end up in the situation we found ourselves in today.
In honor of your liberty,