Lawmakers welcome improved budget news — but caution state isn’t in the clear yet
The state received a rare bit of good news Friday about its budget picture, as the end of election season has given way to stakeholders beginning to consider how best to navigate an uncertain fiscal future.
Updated projections from the state’s fiscal experts show a budget shortfall of $152 million, a far different can of worms from the $1.4 billion deficit predicted earlier this year.
But lawmakers aren’t proclaiming the state out of the woods just yet.
As COVID-19 case counts have begun climbing again in much of the state, there are fears that this could again affect businesses — and the state’s bottom line.
“I think it is too early to get too giddy about this,” said Sen. Tom Hawk, D-Manhattan, the top Democrat on the Ways and Means Committee. “But it certainly is trending the right way.”
Agencies generally submit their budget requests in the fall ahead of Gov. Laura Kelly’s formal budget proposal to the Legislature, which comes in January. The two branches of government then grapple over the final form, which is generally passed in late spring.
But the economic fallout from the COVID-19 pandemic has put the matter front and center far earlier.
Tax revenues are still down overall since the pandemic began, even as recent months have been more robust.
And it is still uncertain whether there will be any further federal aid to more directly support states, with negotiations over a second stimulus package remaining stalled in Washington.
Kelly has said major cuts would be forthcoming without “significantly more support” from Washington, although that was before the latest revenue estimates.
“We need a coherent, top-down strategy that will reassure businesses and Americans that our government has a plan to keep our economy stable until we have a vaccine in place,” she told a congressional subcomittee earlier this year.
While the state may well wind up with less money to spend, legislators say there are areas where it is penny-wise and pound-foolish to cut.
Senate Ways and Means Committee chair Carolyn McGinn, R-Sedgwick, pointed specifically to spending on road and highway construction, with the state just starting its latest 10-year transportation plan, approved in March.
Lawmakers at the time viewed it as a stimulus for the state’s economy, especially as it entered the COVID-19 pandemic. Eight months later that view largely remains the same.
Many projects prioritized in the transportation plan were specifically boosted after being delayed during Gov. Sam Brownback’s administration.
McGinn noted that contractors have only just begun hiring again in the state following that lull. Those jobs are vital in the current environment, she said.
“To me, that’s something that will help pump money into our economy,” McGinn said. “We need to be careful when we start talking about who we’re going to cut. Because it is not just about cutting, it is about how can we deliver services in a more effective and efficient way.”
The plan was also predicated on lawmakers being more restrained in their zeal to siphon off funds specifically earmarked for transportation projects, which have often been moved by lawmakers of both parties to pay for unrelated expenses.
Kelly had pledged to dramatically reduce the use of what is popularly dubbed “the bank of KDOT.”
There is a worry, however, that a COVID-19-induced budget shortfall could tempt lawmakers to go to the KDOT piggy bank again.
But Michael White, executive director of the Kansas Contractors Association, said he was fairly confident there was a bipartisan interest in moving away from the transfers.
“I think we have an opportunity here,” White said. “We want to work with the Legislature and the administration to be part of any budget solution.”
Other areas are likely to get messy as well.
State spending on K-12 education is largely constrained by a series of court rulings which have had the stated aim of making the school funding formula equitable.
Mark Tallman, a lobbyist for the Kansas Association of School Boards, said it was KASB’s hope that the Legislature would abide by funding levels previously agreed to as part of the litigation process.
But there are complicating factors as well. Districts saw an enrollment dip this year due to the pandemic, meaning less state funding was doled out. That may not continue next year.
And the governor’s allotment plan in June moved some payments to districts into the coming fiscal year, which the state will also have to grapple with.
All this comes as districts are faced with a decision over whether to move classes online amid rapidly increasing COVID-19 case counts.
Tallman said the dust hasn’t settled yet on the state’s education future.
“The dust just keeps getting kicked back up,” he said.
Hawk, whose district includes Kansas State University, said higher education shouldn’t be forgotten either.
The Kansas Board of Regents voted in September to request a $643.6 million budget — the amount they would have received before COVID-19 forced a $30 million cut.
Investments in technical and community colleges could also be useful, Hawk said, as the state charts a post-pandemic course for its economy.
“It is good news when we are looking at potentially not having to make some of those cuts that were likely to be considered in education,” he said.
Additional uncertainty comes following last week’s elections, with a more conservative batch of Republican lawmakers likely to arrive in Topeka come January.
Democrats also failed in their efforts to break the GOP veto-proof majority, decreasing their leverage in any budget negotiations.
That means Republicans could have more power to pursue a tax reform agenda, such as a package of legislation designed to help individuals and businesses who had seen their income tax bills hike up. Kelly vetoed them, arguing that it would be detrimental to the state’s finances long term.
Discussions about the budget will not heat up in earnest for some time, with lawmakers first set to elect their leadership teams in December.
But while the final spending document is miles away from completion, most agree it will be an unprecedented ride.
“We are a totally different society today and our needs have changed,” McGinn said.