I received this analysis and commentary from a friend of mine. It concerns an article that appeared on the front page of The Wichita Eagle a few months ago. I have removed mention of specific names.
I was appalled to read the front page editorial that appeared above the fold on the front page of the April 22, 2007 Wichita Eagle. Let me count some of the egregious flaws in this article:
1) The article mentions the “…a drop off of $185 million…” in state revenues but does not mention the primary reason. Let me provide it: “The new legislation setting aside $122.7 million for the school finance ‘lock-box’ and $80 million for statewide maintenance and disaster relief is primarily responsible for the large adjustment to this (revenue) source.” (source: April 19, 2007 Kansas Legislative Research State General Fund receipt revisions for FY 2007 and FY 2008, page 5). This point alone deserves a correction.
There’s $202.7 million that explains the main reason for this drop off. The money is being spent on increased state spending programs. Add to this the money that was shifted out of the general fund and over to the highway fund, “…enacted in 2004 for the Comprehensive Transportation Program reducing the amount of sales and use tax receipts deposited directly into the SGF (state General Fund)…” (ibid, page 1).
What was neglected in this article was the fact that Governor Sebelius and many legislative spending advocates want even more spending in both the current and next fiscal years. Last week Governor Sebelius proposed a $54 million increase in the current fiscal year plus $146 million in FY 2008 that begins July 1. That salient fact was missing in this article.
2) You repeat the lie that the tax cuts in 1997 and 1998 led to dramatic declines in state revenues leading to spending “cuts.” That did not occur. State General Fund expenditures in FY 2000 (1999-2000) were 4.1% above the previous year’s levels when the last of the 1995, 1997, & 1998 tax cuts phased in. The state ran into budget problems as part of the 2001 recession and the negative economic impact of the September 11 atrocities. These events were separated by several years. I have the FY 1999, 2000, 2001, & 2002 budgets if you need to revisit that fiscal history.
If you will look at past state budgets, the state has increased spending every year from 1993 to 2002. There was a decline that started during the recession in 2001 and the other events of that terrible year but this commentary tying the 1998 tax cuts to a budget shortfall four years later needs to be part of Brownlee’s operation on the editorial page and not on the news pages.
3) The tiny tax cut enacted this year at $36 million (ibid, page 1) is magnified by stretching this out over five years. This 2007 tax cut is slightly more than 1/2 of 1 percent of the state’s general fund spending this year.
If you used the same measuring tools the state’s spending it total in the billions on top of the total state spending (All Funds budget) that will far exceed $60 billion over five years (I can inflate these numbers the same way [the reporter] did, but I don’t have a front page position to have my commentary appear).
[The reporter’s] article does provide some of the numbers so I could calculate the five year phase out of the franchise tax is $135 million (I did that addition) and the total for the social security tax cut over five years is only $56.9 million.
That’s a total of only $191.9 million. Where’s the other tax cuts to get to $570 million total this commentary claims? Where’s the rest of the $378 million?
This editorial commentary then ignores the earned income tax credit hike that was part of this legislation. The EITC is where the Dept. of Revenue ships tax funds out to low income Kansans. Critics view it as welfare using the tax code since these folks have no Kansas personal income tax liability. That welfare style tax break was raised a little over 13 percent in this bill.
I can only guess that the “…$570 billion in lost revenue…” must also include the unemployment tax reduction too. That would be the largest single item bulk of the “reduction.” Based on the rest of the figures you cite, the EITC would then be the next largest, if the social security reduction has only a $5.4 million price tag in 2008.
Left wing spending advocates pulled this stunt back in the 1990’s to try and magnify the size of the tax reductions during the 5 year unemployment tax moratorium from 1995-1999. Fortunately, unemployment taxes can’t be shifted into the state’s general fund budget. The mainstream Kansas press largely swallowed this as did [the reporter’s] article, “…Gov. Bill Graves responded with record-setting tax breaks–an estimated $4 billion during Graves’ eight-year administration.”
Sorry: That’s $500 million a year in annual tax cuts. Graves’ first budget was FY 1994 and Gen. Fund spending was $3.111 billion. By FY 2002 Graves budget had grown to $4.466 billion or 43% increase (KS Fiscal Facts 2006, p. 23). How did these “cuts” reduce state revenues and spending? The single largest item in these calculations was the unemployment tax moratorium enacted in Graves first year as governor and excluded from the General Fund. Including this figure misleads your readers.
If you wanted to be more accurate you could point out that in nominal dollar terms Kansas had its first $3 billion General Fund Budget in 1994 and stands a good chance of enacting its first $6 billion General Fund budget for FY 2008 depending upon what the legislature does in their 2007 wrap up/veto session. That would be close to a 100% hike in nominal dollar terms.
Or you might point out that the state had its first All Funds budget exceeding $6 billion (including Medicaid and highway programs) in FY 1994 and has gone over $12 billion in the current fiscal year. Even adjusted for inflation, state spending is soaring in Kansas.
The Eagle hasn’t reported that the Tax Foundation’s latest ranking of state and local taxes as a percentage of income ranked us 15th highest among the 50 states earlier this month. That is where this state’s economic problem lies. Not with your unsourced commentary, “…lawmakers…wonder whether it’s a road map back to the budget crisis of the early 2000s, when tax cuts took effect just before a downturn in the economy and left the state scrambling to provide vital services.”
I guess that is fine in editorial commentary but it should be forbidden in news stories. Or, perhaps you could find some legislator or other elected official to make this type of assertion.
Let me add, that despite [my organization] and my best efforts, a sizable portion of the property tax cuts enacted in 1997-98 at the state level never got to taxpayers. They were grabbed by local units who raised their property taxes to offset the state reductions. So, much of the “tax cuts” never got back to the folks who paid them.
This commentary should have appeared on the editorial page. The only useful point in this piece was Rep. Jim Ward’s (D-Wichita) statement that “…We spent it…”