Kansas and Wichita quick takes: Tuesday April 12, 2011

Kansas Medicaid overhaul ideas. Kansas Reporter: “A collection of 120 ideas to overhaul the Kansas Medicaid program will become the groundwork for the state‚Äôs effort to transform its health program for the poor.” Full article at Lt. Gov. releases Medicaid overhaul ideas.

Moody’s down on Kansas finances. From Dow Jones: “Moody’s Investors Service lowered its outlook on Kansas to negative, citing several budget challenges for the Midwestern state. The move indicates an increased likelihood of a near-term downgrade and comes as U.S. states face a host of hurdles, such as the funded status of pensions for public employees, mounting costs for programs such as Medicaid and tax revenue that remains pressured amid tepid economic growth. Moody’s noted Kansas’ general fund balance was negative for the second-straight year in fiscal 2010 and is likely to remain in the red in the current year. Meanwhile, the state legislature appears unlikely to include significant reserve-rebuilding provisions in the budget for the 2012 fiscal year, which begins July 1, it said. Kansas has used non-recurring measures to bolster its budget, such as a proposed $200 million from the state highway fund, the rating agency added. It also said pension under-funding ‘remains a significant challenge.'” … Moody’s has Kansas at Aa1, a step below its coveted Aaa rating. It said the state’s strengths include “strong management, with financial flexibility and adherence to best practices.”

Kansas tax revenue. Following is a chart of the composition of Kansas general fund tax revenue through 2009. Note the general trends of personal income tax rising, and retail sales tax declining. This chart does not cover the time period since the statewide sales tax was increased last year.

Composition of Kansas General Fund Tax Revenue

Kansas consensus revenue estimating group. Within the next week the Kansas consensus revenue estimating group will meet to arrive at a forecast of revenue for the next fiscal year, and perhaps adjusting the estimates for the last few months of the current fiscal year (2011, which ends on June 30, 2011). This group is composed of “representatives of the Division of the Budget, Department of Revenue, Legislative Research Department, and one consulting economist each from the University of Kansas, Kansas State University, and Wichita State University.” All of these people are Kansas state government employees, and their institutions are dependent to different degree on appropriations from the legislature. Could this composition lead to a conflict of interest or possible bias in the forecasts? … The chart below shows the percent error between the group’s initial estimate of revenue for a year and the actual results. It seems that the group has a tendency to underestimate the magnitude of the swing of actual results, both good and bad. During the recession years of the early 2000s, the group was too high in its estimates (leading to a negative error percentage). Then during the following boom years the group underestimated. For the past two years the group forecast much more revenue than the state actually received, leading to some of its largest errors, in relative terms. … Forecasting the economy, of course, is a very difficult task, subject to all sorts of uncertainty that can’t be forecast.

Kansas Consensus Revenue Estimating Group Error

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