Tag Archives: Kansas state government

Articles about Kansas, its government, and public policy in Kansas.

Spirit expands in Wichita

It’s good news that Spirit AeroSystems is expanding in Wichita. Let’s look at the cost.

While it is good news that Spirit AeroSystems is expanding its Wichita operations, it is not without cost to several governmental agencies. Here’s a summary of what is publicly available so far.

First, a new “entity” will be formed in order to facilitate the construction and ownership of a new building on the Spirit campus. 1

This entity will be funded with $7 million in cash from Sedgwick County and $3 million cash from the City of Wichita. Further, the city will forgive Spirit’s debt of $3.5 million associated with a water project. 2

Second, through the mechanism of Industrial Revenue Bonds,3 Spirit receives a property tax exemption of one hundred percent for five years, with renewal for another five years if goals are met. Despite the use of the term “bond,” no governmental entity is lending money to Spirit, and no one except Spirit is liable for bond repayment.

Third: The bonds confer another benefit to Spirit: According to city documents, “IRBs will, pursuant to STATE law, provide for a sales tax exemption on materials and labor subject to sales tax necessary to construct and equip FACILITY.” 4 City documents give no dollar amount is given for the sales tax exemption. But in the analysis conducted by Center for Economic Development and Business Research at Wichita State University these figures are used for the amount of sales tax exemption: City of Wichita: $279,445. Sedgwick County: $137,354. State of Kansas: $5,370,270. Total: $5,787,069. 5

Fourth, this project will undoubtedly quality for PEAK, or Promoting Employment Across Kansas. This is a State of Kansas program that allows companies to keep the state income taxes their employees pay through paycheck withholding, less a small fee. 6 It isn’t possible to know in advance how much PEAK benefit the company will receive, because the individual circumstances of each employee determine the income tax withheld. The following calculation, however, gives an indication of the magnitude of the amount of PEAK benefits Spirit can expect:

$56,000 annual salary / 26 pay periods = $2,154 per bi-weekly pay period. For a married worker with two children, withholding tables show $55 to be withheld each pay period, or $55 * 26 = $1,430 per year. For 1,000 employees, the PEAK benefit is $1,430,000 per year. 7

There may be other programs that this project qualifies for.

Are these incentives necessary?

Taxpayers might be wondering if these incentives are necessary for Spirit to be able to expand its operations, and for it to select Wichita as the site. Spirit says it has received generous offers from other locations. If so, Spirit could do itself a favor by revealing these offers. So too, could other Wichita companies that have claimed intense courtship by other cities. But the economic development industry operates in darkness.

One thing that would also increase the credibility of economic development efforts is for Wichita Mayor Jeff Longwell (and others) to stop making claims of “no more cash incentives.” The city explicitly offers cash in this proposal. The city also offers to cancel a debt, which is just like cash. Forgiveness of future taxes is as good as cash, too.

For years we’ve been told that Wichita needs to diversify its economy, meaning that it relies too heavily on the aircraft industry. This expansion by Spirit will undoubtedly heighten that concentration. We should not turn down this expansion of our local economy. But the incentives that are offered have a cost, and that cost is paid — partly — by other business firms in other industries that are trying to grow in Wichita.

Many will undoubtedly cheer the Spirit announcement as an economic development win on a large scale. It will add many jobs. But the Wichita-area economy is so far behind it will take much more growth than this to catch up with the rest of the nation. In fact, the Wichita-area economy shrank last year. 8 And while many cheer our low unemployment rate, sole reliance on that number hides a shrinking labor force. 9

Also, let’s be appropriately humble when boasting about this expansion. A region’s largest employer deciding to expand in the same city: This is the minimum level of competence we ought to expect from our economic development machinery.

Further, economists caution us to look beyond any single project, no matter how large, and consider the entirety of the local economy. As economist Art Hall has noted, large-employer businesses have no measurable net economic effect on local economies when properly measured. “The primary finding is that the location of a large firm has no measurable net economic effect on local economies when the entire dynamic of location effects is taken into account. Thus, the siting of large firms that are the target of aggressive recruitment efforts fails to create positive private sector gains and likely does not generate significant public revenue gains either.” 10

That’s assuming that the incentives even work as advertised in the first place. Alan Peters and Peter Fisher, in their paper titled The Failures of Economic Development Incentives published in Journal of the American Planning Association, wrote on the effects of incentives. A few quotes from the study, with emphasis added:

Given the weak effects of incentives on the location choices of businesses at the interstate level, state governments and their local governments in the aggregate probably lose far more revenue, by cutting taxes to firms that would have located in that state anyway than they gain from the few firms induced to change location.

On the three major questions — Do economic development incentives create new jobs? Are those jobs taken by targeted populations in targeted places? Are incentives, at worst, only moderately revenue negative? — traditional economic development incentives do not fare well. It is possible that incentives do induce significant new growth, that the beneficiaries of that growth are mainly those who have greatest difficulty in the labor market, and that both states and local governments benefit fiscally from that growth. But after decades of policy experimentation and literally hundreds of scholarly studies, none of these claims is clearly substantiated. Indeed, as we have argued in this article, there is a good chance that all of these claims are false.

The most fundamental problem is that many public officials appear to believe that they can influence the course of their state or local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering their expectations about their ability to micromanage economic growth and making the case for a more sensible view of the role of government — providing the foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.


Notes

  1. “The CITY, COUNTY and COMPANY would each take action to establish a new legal entity separate and apart from the CITY, COUNTY and COMPANY for development of the PROJECT (the “ENTITY”) which will take such form as the PARTIES may approve.” Memorandum of Understanding for Project Eclipse, Section I.A. Contained within agenda packet for Wichita City Council meeting for December 13, 2017.
  2. “The COUNTY participation of $7 million US is anticipated to be available cash; the CITY participation would consist of cash in the amount of $3 million US, forgiveness of $3.5 million US in future COMPANY payments associated with the CAPITAL COMPONENT and an agreement to make additional capital improvements relating to the WATER AGREEMENT in an approximate cost of $1 million US.” Memorandum of Understanding for Project Eclipse, Section I.B
  3. Weeks, Bob. Industrial revenue bonds in Kansas. Available at https://wichitaliberty.org/kansas-government/industrial-revenue-bonds-kansas/.
  4. Memorandum of Understanding for Project Eclipse, Section I.3.E
  5. Project Eclipse – ROI calcs plus author’s calculation. Available at https://drive.google.com/file/d/1uGaxTgrctYpBjkG7PR6bP81SxgFjpzjo/.
  6. Weeks, Bob. PEAK, or Promoting Employment Across Kansas. Available at https://wichitaliberty.org/kansas-government/peak-promoting-employment-across-kansas/.
  7. Kansas Department of Revenue Withholding tables. Available at https://www.ksrevenue.org/pdf/whtables2017.pdf.
  8. Weeks, Bob. Wichita economy shrinks. Available at https://wichitaliberty.org/economics/wichita-economy-shrinks/.
  9. “It is possible that the unemployment rate falls while the number of people employed falls or rises slowly. This is the general trend in Wichita for the past seven years or so.” Weeks, Bob. Wichita employment up. Available at https://wichitaliberty.org/wichita-government/wichita-employment-up/.
  10. William F. Fox and Matthew N. Murray, “Do Economic Effects Justify the Use of Fiscal Incentives?” Southern Economic Journal, Vol. 71, No. 1, 2004, p. 79. A

Kansas tax receipts

News about Kansas tax receipts for November 2017, along with an interactive visualization.

Following is a press release from the Kansas Department of Revenue regarding November 2017 tax receipts. For an interactive visualization of this data, see Visualization: Kansas tax receipts.


December 1, 2017
Tax receipts show promise of improved economy

TOPEKA–The state has collected $258.75 million over last fiscal year at this time, totaling over 11 percent growth in collections according to data from the latest revenue report released Friday.

So far this fiscal year that started in July, the state has collected $1.09 billion in total individual income tax, which amounts to $176.74 million over last year. In the same time, sales tax collections total $985.71 million, putting it $41.64 million over last year or over 4 percent growth. Corporate income tax continues the multi month trend of outperforming the previous year, hitting a value of $30.51 million over last year’s cumulative collections.

“Sales tax receipts have reached what appears to be stable growth above last year’s collections,” Revenue Secretary Sam Williams said. “Individual income tax collections are also above last year by a wide margin, but it’s difficult to distinguish the impact of the recent tax increase versus economic growth, and we won’t be able to discern that until April.

November tax receipts totaled $463.50 million, which is $62.23 million over November last year. Individual income tax collections totaled $207.62 million for the month, while sales tax revenue came in at $192.63 million. Corporate income tax totaled $379,518.

Example from the visualization. Click for larger.

PEAK benefits across Kansas

The use of PEAK, a Kansas economic development incentive program, varies widely among counties.

An economic development incentive program in Kansas is PEAK, or Promoting Employment Across Kansas. This program allows companies to retain 95 percent of the payroll withholding tax of employees. 1

Data is available for fiscal years 2010 through 2015. For this period, we can see that the application or use of PEAK varies widely among counties. Here is data for the two largest counties in Kansas:

Johnson County: 135 projects, 17,643 new or retained jobs, $36,085,527 cumulative annual benefits.
Sedgwick County: 8 projects, 1,113 new or retained jobs, $1,858,516 cumulative annual benefits.

According to the U.S. Census Bureau American Fact Finder, the 2016 population of Sedgwick County was 511,995. Johnson County population was 584,451. So Johnson County has 1.14 times the population of Sedgwick County, but it receives some 16 to 19 times the PEAK benefits as Sedgwick County.

Of note, this data is available on Kanview, the state’s data download portal. The data is from a spreadsheet compiled in August 2015. It contains data through fiscal year 2015, which ended on June 30, 2015. Upon my inquiry, it appears no similar data compilations were created in August 2016 or August 2017. I have asked for the data and it is taking some time to prepare it, which leads us to wonder how diligently the state collects data regarding economic development programs.

You can access an interactive visualization of PEAK data here.


Notes

  1. Weeks, Bob. PEAK, or Promoting Employment Across Kansas Available at https://wichitaliberty.org/kansas-government/peak-promoting-employment-across-kansas/.

Promoting Employment Across Kansas, or PEAK

An interactive visualization of data regarding PEAK (Promoting Employment Across Kansas), an economic development incentive program.

PEAK, or Promoting Employment Across Kansas, is an economic development program administered by the Kansas Department of Commerce. Information about PEAK from that department may be found at Promoting Employment Across Kansas. Other information about PEAK is available from the Department of Revenue and from Voice for Liberty.

I’ve gathered information about PEAK projects and present the data in an interactive visualization. The List table is a simply list of the available data.

The table shows the count of PEAK projects, the sum of new or retained jobs, and the sum of the annual benefits for the projects.

In the table view, you may select which counties appear. Also, a slider lets you choose the minimum number of projects a county must have in order to appear. This is helpful as there are many counties with just one or two projects.

Click here to access the visualization.

Source of data is Kanview, specifically this page: Promoting Employment Across Kansas (PEAK) Program.

Example from the visualization.

WichitaLiberty.TV: Kansas Representative John Whitmer

In this episode of WichitaLiberty.TV: Kansas Representative John Whitmer joins Karl Peterjohn and Bob Weeks to discuss current issues in state government, and why he supports Wink Hartman for governor. View below, or click here to view at YouTube. Episode 173, broadcast November 18, 2017.

Shownotes

PEAK, or Promoting Employment Across Kansas

PEAK, a Kansas economic development incentive program, redirects employee income taxes back to the employing company.

An economic development incentive program in Kansas is PEAK, or Promoting Employment Across Kansas. This program allows companies to retain 95 percent of the payroll withholding tax of employees.

Flow of tax dollars under normal circumstances, and under PEAK.
Flow of tax dollars under normal circumstances, and under PEAK.
PEAK incentive payments can be a substantial sum. Tables available at the Kansas Department of Revenue indicate that for a single person with no exemptions who earns $40,000 annually, the withholding would be $27 per week (for weekly payroll), or $1,404 annually. For a married person with two children earning the same salary, withholding would be $676 annually. Under PEAK, the company retains 95 percent of these values. (These illustrations are based on 2016 tax rates.)

There are requirements regarding the minimum number of jobs to be created or retained. Also, companies must pay wages greater than or equal to the median county wage. 1

Then, the Secretary of Commerce has “discretion to approve applications of qualified companies and determine the benefit period.”

Legislators and public officials like programs like PEAK partly because they can promote these programs as self-financing. That is, the state isn’t subsidizing a company. Instead, the company is paying its own way with its own taxes (actually, its employees’ taxes). PEAK supporters say the state is not sending money to the company. Instead, the company is just holding on to 95 percent of its employees’ withholding taxes instead of sending the funds to the state.

Schemes like PEAK call into question one of the fundamental principles of taxation: That tax funds be used to fund the operations of government, not to enrich one particular person or company. But continually, states and local government use programs like PEAK — and others like tax increment financing (TIF) districts, Community Improvement Districts (CIDs), Industrial Revenue Bonds, and others — that turn over a public function to private interests.

Illustration of a shortfall under PEAK
Illustration of a shortfall under PEAK
Here’s another consideration regarding the PEAK program. The amount of money withheld from a worker’s paycheck is not the same as the amount of tax the worker actually owes the state. Withholding is only an approximation, and one that is biased in favor of the state. Many Kansas workers receive an income tax refund from the state. This is in recognition that the sum of the withholding taxes paid by a worker is larger than the actual tax liability. Therefore, the state is returning money that the state was not entitled to.

Now, what about workers who are employed at a company that is in the PEAK program and who receive a state income tax refund? Their withholding taxes — 95 percent, anyway — have already been given back to their employer.

So: What is the source of the money used to pay these refunds? How much money is paid in refunds to employees working at PEAK-participating companies?

We should note that the funds don’t come from the PEAK company’s employees, as the employees receive credit for all their withholding taxes, even though 95 percent never contributed to the state treasury.

Inquiry to the Department of Revenue revealed that there are no statistics on actual income tax liability of PEAK employees vs. the amount of withholding tax credited to that employee that was retained or refunded to the PEAK employer. The Department of Commerce referred inquiries to the Department of Revenue.

If we wanted to know how much money was paid in refunds to PEAK-company employees, I believe we would need to examine the account of each affected employee. I’m sure it’s not possible to come up with an answer by making assumptions, because the circumstances of each taxpayer vary widely.

Whatever the amount, it represents state tax revenue being used to fund an economic development incentive program that is pitched as being self-funded.


Notes

  1. “PEAK requires the qualified company to commit to creating five new jobs in non-metropolitan counties or ten (10) new jobs in the metropolitan counties of Shawnee, Douglas, Wyandotte, Johnson, Leavenworth and Sedgwick over a two-year period. The qualified company must also pay wages to the PEAK jobs/employees, that when aggregated, meet or exceed the county median wage or North American Industry Classification System (NAICS) average wage for their industry.” Kansas Department of Commerce. Promoting Employment Across Kansas (PEAK) Program. Available at http://kansascommerce.gov/141/Promoting-Employment-Across-Kansas-Progr.

Kansas school spending

New data for spending in Kansas schools is available.

Through its Data Central section, Kansas State Department of Education has made spending figures available for the school year ending in spring 2017, or the fiscal 2017 school year.

These are amounts per pupil, adjusted for inflation to 2016 dollars, showing change from 2016 to 2017.

State aid: $8,613 to $8,714
Federal aid: $1,058 to $1,082
Local: $3,460 to 3,441
Total: $13,144 to $13,326

In 2015 there was a shift in the way state and local figures are allocated, so it’s important to look at state and local spending as a sum. This figure increased from $12,073 to $12,155.

In the charts below, state and local total spending, per pupil, adjusted for inflation, has been remarkably level since 2013. At the same time, schools are telling us spending has been slashed.

Click charts for larger versions.

Kansas hotel tax collections

Kansas hotel guest tax collections presented in an interactive visualization.

Cities and counties in Kansas may levy a transient guest tax collection on hotel guests. It is sometimes called a bed tax or guest tax. The tax is collected as a percentage of total room revenue, not the number of rooms or the rate charged for rooms. While the Kansas Department of Revenue collects the tax, the proceeds are returned to the cities or counties, except for a two percent processing fee. In Wichita the rate is six percent.

In some cases, jurisdictions may levy additional taxes that may not be paid to the Kansas Department of Revenue. This is the case with the Wichita city tourism fee, which took effect on January 1, 2015. This tax of 2.75% is paid directly to the city1, so it doesn’t appear in KDOR figures.

Also, jurisdictions may change the tax rate. The Kansas Department of Revenue maintains a list of taxes charged. 2

The visualization has three views of data. One is a table of collections, including percent change from the previous year. A line chart shows the dollar amount of collections. A second line chart shows collections indexed to a common starting point. This is useful for comparing the relative change in guest tax collections. These line charts show data as the average of the previous 12 months.

Examples of nondisclosure.
This data does not represent all hotels in Kansas. Confidentiality rules prohibit disclosure when a jurisdiction has a small number of hotels. In the nearby example, the value “C” is reported for Sedgwick County, indicating such non-disclosure. Obviously, there are hotels in Sedgwick County. But considering hotels in Sedgwick County that are not located in cities like Wichita, the number is too small to report, based on confidentiality guidelines. Similarly, for small cities, data is probably not available to the public.

Of note, while Wichita is the largest city in Kansas, Overland Park collects the most hotel guest tax. Of the largest markets in Kansas, Wichita has experienced the least growth in hotel tax collections since 2010.

Click here to access the visualization.

Guest tax collections in largest hotel markets in Kansas, indexed change. Click for larger.


Notes

  1. City of Wichita ordinance 49-745. Available at http://www.wichita.gov/CityClerk/OrdanicesDocuments/49-745%20TBID%20Fee%20Ordinance.pdf.
  2. Kansas Department of Revenue. Transient Guest Tax Rates, Effective Dates, and Number of Active Accounts. Available at https://www.ksrevenue.org/pdf/tgratesfilers.pdf.

Kansas highway spending

A look at actual spending on Kansas highways, apart from transfers.

KDOT spending, major road programs. Click for larger.
KDOT spending, total road programs. Click for larger.
KDOT transfers. Click for larger.
KDOT funding sources, partial. Click for larger.
When we look at actual spending on Kansas roads and highways, we see something different from what is commonly portrayed. Kansas Department of Transportation publishes a Comprehensive Annual Financial Report that details spending in four categories. These figures represent actual spending on roads and highways, independent of transfers to or from the highway fund.

For fiscal year 2017, when ended June 30, 2017, spending on three categories (Maintenance, Preservation, and Modernization) was nearly unchanged from the year before, while spending on the category Expansion and Enhancement fell by 31 percent.

For these four categories — which represent the major share of KDOT spending on roads — spending in fiscal 2017 totaled $738.798 million. That’s down 14 percent from $857.133 million the year before, and up from a low of $698.770 million in fiscal 2010.

Again, these are dollars actually spent on highway programs. A common characterization of the way Kansas government is funded is called “robbing the bank of KDOT.” To the extent that characterization is accurate, there is a separate line item titled “Distributions to other state funds” that holds these values. It appears in the nearby table. A chart shows sales tax distributions from the general fund to KDOT, and transfers from KDOT.

Many also criticize Kansas government for slashing highway spending, letting our roads crumble. While total spending on these four programs has been falling (after adjusting for inflation), the decline is minor compared to the hysterical claims of those with vested interests in more government, and especially highway, spending.

Kansas law specifies how much sales tax revenue is transferred to the highway fund. Here are recent rates of transfer and dates they became effective: 1

July 1, 2010: 11.427%
July 1, 2011: 11.26%
July 1, 2012: 11.233%
July 1, 2013: 17.073%
July 1, 2015: 16.226%
July 1, 2016 and thereafter: 16.154%

A nearby chart shows the dollar amounts transferred to the highway fund from sales tax revenue. In 2006 the transfer was $98.914 million, and by 2016 it had grown to $514.519 million.

KDOT spending, major road programs. Click for larger.


Notes

  1. Kansas Statutes Annotated 79-3620.

Kansas tax receipts

Kansas tax receipts by category, presented in an interactive visualization.

The Kansas Division of the Budget publishes monthly statistics regarding tax collections. I’ve gathered these figures present them in an interactive visualization. In the visualization, there are these available tabs:

  • Table: A table of data. For each month the two data items supplied by the state are the actual value and the estimated value. This table also holds the computed variance, or difference, between the actual value and the estimated value. A positive number means the actual value was greater than the estimated value.

  • Collections: Shows monthly collections for each component. Because monthly numbers vary widely, this data is presented as the moving average of the previous 12 months.

  • Annual Change: Shows the change from the same month of the previous year. A positive value means the value for the month is greater than the same month last year.

  • Estimates: The Governor’s Consensus Revenue Estimating Working Group provides monthly estimates. This chart shows the variance, or difference, between the actual value and the estimated value. A positive number means the actual value was greater than the estimated value.

  • Running Total Estimates: This is the cumulative sum of the estimate variances, reset to zero at the start of each fiscal year (July 1).

  • Running Total Change from Prior Year: This is the cumulative sum of the monthly changes from the prior year, reset to zero at the start of each fiscal year (July 1).

Source of data is Kansas Division of the Budget.

Click here to use the visualization.

Example from the visualization.

WichitaLiberty.TV: Kansas Speaker of the House Ron Ryckman

In this episode of WichitaLiberty.TV: Speaker of the Kansas House of Representatives Ron Ryckman joins hosts Bob Weeks and Karl Peterjohn to discuss current governmental affairs in Kansas. View below, or click here to view at YouTube. Episode 162, broadcast August 20, 2017.

Shownotes

WichitaLiberty.TV: After the Kansas tax increases

In this episode of WichitaLiberty.TV: Jonathan Williams, chief economist at American Legislative Exchange Council (ALEC), joins Bob Weeks and Karl Peterjohn to discuss what ALEC does, and then topics specific to Kansas. View below, or click here to view at YouTube. Episode 159, broadcast July 30, 2017.

Shownotes

Kansas legislative highlights for 2017

Kansas Legislative Research Department, one of four nonpartisan agencies that provide support services for the Kansas Legislature, 1 has released its annual highlights of legislation document for the 2017 session.

This is a 12-page document that provides short summaries of each bill. KLRD also publishes lengthier summaries of legislation.

Click here to access Kansas Legislative Research Department publication page, or click here to directly access the 2017 highlights document.


Notes

  1. Kansas Legislative Research Department. About Us. http://www.kslegresearch.org/KLRD-web/About-Us-Our-Office.html.

Happy Fiscal New Year, Kansas (not)

A Kansas public policy group celebrates tax increases. But it isn’t enough, and more reform is required.

Kansas Center for Economic Growth has promoted higher taxes in Kansas for many years, and this year it got its wish. Here are a few remarks based on its self-congratulatory article titled “Happy Fiscal New Year, Kansas.”

KCEG wrote: “Kansas is now better positioned to provide great schools”
Wait a moment. I thought Kansas already has great schools. That’s what the Kansas public school establishment tells us.

And I think that the author made a mistake here. Instead of writing about “public schools,” the author mentions — simply — “schools.” Usually the Kansas public school establishment is careful to qualify their plea for more school spending with “public.” To them, spending on private schools or charter schools is money wasted, money that should have gone to public schools. Fortunately, and amazingly, the tax credit scholarship program, a program limited to students currently in low-performing schools, was expanded slightly. 1

If KCEG really wanted to promote great schools in Kansas, it would embrace school programs such as charter schools.

KCEG: “vibrant communities”
Here, KCEG believes that taking more money from the private sector through taxation and letting government spend it is “vibrant.” But how does government work? In a democracy, a majority forces its will on the minority. Or, special interest groups intensely lobby for benefits at the expense of everyone else. Or, a form of the precautionary principle tamps down sparks of innovation in government bureaucracies, like public schools. Government is the opposite of “vibrant,” which the dictionary defines as “full of energy and enthusiasm.”

KCEG: “It also phases in the restoration of an important tax credit and three deductions that were eliminated in 2012 to pay for tax breaks for the wealthy.”
In 2012 everyone’s taxes were cut. Aside from that, we don’t pay for tax cuts. We pay for the cost of government.

When someone says we must pay for tax cuts, it presumes that tax cuts have a cost. The only way this makes sense is if we believe that the state has first claim on our incomes. The state takes what it says it needs, and we get to keep the rest. If the government is ever persuaded to reduce its claim on our incomes, that has a cost that must be paid in some way.

But for those who believe in self-ownership, this is nonsense. It’s the people who “give” tax money to the government, not the government who “gives” it back in the form of tax cuts. If the government cuts taxes, the government gives us nothing. It simply takes less of what is ours in the first place.

But the attitude of many government officials is the opposite. In 2006 Kansas cut taxes on business equipment and machinery. At the time, the Wichita Eagle reported: “Gov. Kathleen Sebelius, a Democrat, who first proposed the business machinery tax cut, agreed. ‘We’re not giving away money for the sake of giving it away,’ she said. ‘I’m hoping that the economic growth will actually help fund the school plan that we just passed.'” (emphasis added)

(By the way, this sounds like Sebelius was planning for tax cuts to pay for themselves.)

KCEG: “This means looking beyond income tax reforms and rebalancing Kansas’ ‘three-legged stool’ by addressing problems with the state’s sales tax and property tax.”
The three-legged stool is one of the most inappropriate analogies ever coined. If the state of Kansas were to develop an additional source of tax revenue, say by slapping a tariff on Budweiser imported from Missouri or Coors imported from Colorado, we’d hear spending advocates like KCEG speaking of the virtue of a stable four-legged chair. Many states thrive without one of our three legs, the income tax. And if we’re looking for stability, as Hineman mentions, income taxes are quite volatile compared to the other legs. 2

KCEG: “To pay for the Governor’s irresponsible and steep income tax cuts”
Again, we don’t have to pay for tax cuts. But there was irresponsible behavior, that being to continue to spend and avoid serious attempts at spending reform.

KCEG: “In response to the ongoing budget crisis, the sales tax was increased in 2015 to offset lagging state revenue. This affected every Kansan in every county, but especially hurt low-income residents.”
Here, KCEG is correct. The state should not have raised the sales tax, and the state needs to work on lowering the sales tax rate on groceries. For more on this topic, see Wichita sales tax hike would hit low income families hardest and Kansas sales tax has disproportionate harmful effects.

(Actually, KCEG is not totally correct. The sentence should have ended with “… to continue to pay for wasteful state spending because the governor and legislature would not seriously consider spending reform.”)

KCEG: “And because of the gamble with income tax cuts”
There was no gamble with income tax cuts, the governor’s boastful claims notwithstanding. 3 The tax cuts did what tax cuts should do: Leave more money in the hands of the people it belongs to.

KCEG: “As a result, property taxes shot up as communities struggled to keep up with the demand for basic services.”
If taxation was shifted from the state level to local levels, that in itself is not bad. In fact, it keeps taxing and spending more closely controlled at the local level, without communities having to fight in Topeka for a share of the state budget pie.

KCEG: “If we want to fully recover from the past five years, tax reform must address sales and property tax problems in addition to income tax issues.”
KCEG doesn’t say what are the problems with sales and property taxes. But I think I know what they believe: These two forms of taxation are too low. They don’t raise enough money from the right people.


Notes

  1. “On and after July 1, 2018, the bill amends the definition of “public school” within the TCLISS Program Act to mean a school identified by KSBE as one of the lowest 100 performing schools with respect to student achievement. It also amends the definition of “qualified school” to require accreditation on and after July 1, 2020. Accreditation must be by KSBE or a KSBE-recognized national or regional accrediting agency. Additionally, the bill expands eligibility for the tax credit to individuals and places an annual cap of $500,000 on contributions.” Kansas Legislature. SB 19: Creating the Kansas school equity and enhancement act, summary. Available at http://www.kslegislature.org/li/b2017_18/measures/sb19/.
  2. Federal Reserve Bank of St. Louis, Gary C. Cornia & Ray D. Nelson. State Tax Revenue Growth and Volatility. 6 Regional Economic Development, 23-58 (2010). Available at https://files.stlouisfed.org/files/htdocs/publications/red/2010/01/Cornia.pdf.
  3. Weeks, Bob. The yardstick for the Kansas experiment. Available at https://wichitaliberty.org/kansas-government/yardstick-kansas-experiment/.

Deconstructing Don Hineman

Another Kansas legislator explains why raising taxes was necessary. So he says.

Many members of the Kansas Legislature are writing pieces defending their decision to vote for higher taxes. Don Hineman is one. His explanation merits more than average attention, as he is the Majority Leader of the Kansas House of Representatives. This week the Topeka Capital-Journal published his op-ed Rep. Don Hineman: Why tax reform was necessary. It deserves comment.

Hineman wrote: “This return to common sense tax policy resulted from legislators listening to their constituents and fulfilling the promises they made during 2016 campaigns.”
There may have been some candidates who campaigned on a platform of higher taxes. But most used more subtle language, such as Hineman’s use of the phrase “common-sense tax policy.” Does anyone know what that means? Does it mean the same thing to everyone? Besides, raising taxes was just one issue for most candidates and campaigns. And, voters must vote for candidates, not specific policies. As Justice Antonin Scalia told us, “Campaign promises are, by long democratic tradition, the least binding form of human commitment.” An example comes from Hineman’s web page, which states one of his four core values is “Respect for private property rights.” He has respect for your property, unless that property happens to be your money. Then he wants more.

Hineman: “… restore our state to firmer fiscal ground.”
This could have been done with spending cuts, too.

Hineman: “… a group of 88 representatives and 27 senators from across the political spectrum voted to override the governor’s veto.”
Here, Hineman refers to the coalition of Republicans and Democrats that passed the tax bill notwithstanding the governor’s veto. Because members of both major parties voted the same way, it’s described as nonpartisan. It’s meant as a good thing. But most of the Republicans who voted for higher taxes qualify as Democrats in many ways. They dismiss the Republican Party platform and embrace most aspects of the Democratic Party and progressive goals. There is no “spectrum.” Regarding taxation and the size of government, they’re pretty much the same color. Kansas Policy Institute confirms: “The Freedom Index published by Kansas Policy Institute has repeatedly shown the legislative political division to not be about Democrats and Republicans but about legislators’ view of the role of government, and the above June 2 update of 2017 Freedom Index certainly bears that out. With a score of 50 percent being considered neutral, there are 13 Senators at the top of the list with positive scores and 13 Senators at the bottom of the list — and every one of them is a Republican.” 1

Hineman: “Brownback’s tax plan abandoned the ‘three-legged stool’ approach to funding government, which had served Kansas well for decades by relying on a stable balance of income, sales and property.”
The three-legged stool is one of the most inappropriate analogies ever coined. If the state of Kansas were to develop an additional source of tax revenue, say by slapping a tariff on Budweiser imported from Missouri or Coors from Colorado, we’d hear spenders like Hineman speaking of the virtue of a stable four-legged chair. Many states thrive without one of our three legs, the income tax. And if we’re looking for stability, as Hineman mentions, income taxes are quite volatile compared to the other legs. 2

As far as serving Kansas well: There are a variety of ways to look at the progress of Kansas compared to the nation, but here’s a startling fact: For the 73rd Congress (1933 to 1935) Kansas had seven members in the U.S. House of Representatives. (It had eight in the previous session.) Until 1992 Kansas had five. Today Kansas has four members, and may be on the verge of losing one after the next census. This is an indication of the growth of Kansas in comparison to the nation.

” … sweep from the highway fund … rejected the governor’s short-term fixes as being neither responsible nor conservative …”
In this (heavily edited) sentence, Hineman complains about sweeping money from the state’s highway fund. But: Even after raising taxes, the budget just passed by the legislature continues sweeps from the highway fund in the amount of $288,297,663 in fiscal year 2018. For fiscal year 2018, the total of the quarterly sweeps is $293,126,335. 3

Hineman: “The fiscal strain created by the 2012 tax cuts caused public schools to suffer, increasing class sizes and reducing program offerings.”

Kansas school spending. See article for notes about 2015. Click for larger.
The nearby chart shows Kansas school spending, per pupil, adjusted for inflation. It’s easy to see that since 2011, spending has been remarkable level. There was a change in 2015 that shifted the way some school funding was credited, but in total, not much changed.

Kansas school employment. Click for larger.

Kansas school employment ratios. Click for larger.
Some people will dismiss spending figures for a variety of reasons. They may say that inflation affects schools differently from everything else, or that these figures don’t include KPERS, or that they do include the cost of facilities. So let’s look at something else: The number of employees compared to the number of students. When we do this, we find that igures released by the Kansas State Department of Education show the number of certified employees rose slightly for the 2016-2017 school year.

The number of Pre-K through grade 12 teachers rose to 30,431 from 30,413, an increase of 0.06 percent. Certified employees rose to 41,459 from 41,405, or by 0.13 percent.4 These are not the only employees of school districts.5

Enrollment fell from 463,504 to 460,491, or 0.61 percent. As a result, the ratios of teachers to students and certified employees to students fell. The pupil-teacher ratio fell from 15.2 pupils per teacher to 15.1. The certified employee-pupil ratio fell from 11.2 to 11.1.

If we look at these ratios over time, we see they are remarkably consistent since 2012. These figures, at least on a state-wide basis, are contrary to the usual narrative, which is that school employment has been slashed, and class sizes are rising rapidly. The pupil-teacher ratios published by KSDE are not the same statistic as class sizes. But if the data shows that the ratio of pupils to teachers is largely unchanged for the past five years and class sizes are rising at the same time, we’re left to wonder what school districts are doing with teachers. And, why are programs being eliminated?

(The relative change in enrollment and employment is not the same in every district. To help Kansas learn about employment trends in individual school districts, I’ve gathered the numbers from the Kansas State Department of Education and present them in an interactive visualization. 6 7)

Hineman: “Though raising taxes is never easy …”
No. Spenders love to raise taxes. In fact, some legislators warned that the tax hikes are not enough, and that they’ll be back for more. Indeed, projections show spending outpacing revenue in just a few years.

Hineman: “… it was unfortunately the only responsible option available. State government has been cut to the point where there is no reasonable way to reduce spending enough to balance the budget.”
No. One example: The efficiency study commissioned by the legislature recommended savings in the method of acquiring health insurance for public school employees. This was not adopted. Therefore, $47,200,000 in general fund spending is added over what the governor recommended. 8 9 This was not cutting services or benefits. It was asking school employees to do something differently in order to save money. But, it didn’t happen.

Can Kansas cut spending? There are many states that spend less than Kansas on a per capita basis. 10

Hineman: “Those who parrot the phrase ‘we have a spending problem, not a revenue problem’ have repeatedly failed to offer realistic suggestions for further cuts.”
Hineman is correct in a small way. To balance the budget this year with cuts alone was probably impossible. The lust for spending other people’s money is just too great. But there have been proposals that should have been followed. First, the legislature should have commissioned the efficiency study in 2012 when taxes were cut. That didn’t happen. Then, the legislature should take the efficiency study seriously. But even simple things — like the recommendation of savings through school employee health insurance acquisition reform — are difficult to accomplish, because the spenders don’t want these reforms.

And, in the past there have been responsible plans for reforming spending and the budget. But these plans were not wanted, nor were they realized. 11

Hineman’s criticism shows that it is difficult to cut spending. People become accustomed to other people paying for their stuff. Legislators want to appear to be doing more for their constituents, providing seemingly free stuff while pushing aside the idea of paying for it. And so government grows, at the expense of our liberty and what might have been had the money been left in the productive private sector.


Notes

  1. Trabert, Dave. “Freedom index: Political division is citizens vs. government, not party lines.* Available at https://kansaspolicy.org/freedom-index-political-division-citizens-vs-government-not-party-lines/.
  2. Federal Reserve Bank of St. Louis, Gary C. Cornia & Ray D. Nelson. State Tax Revenue Growth and Volatility. 6 Regional Economic Development, 23-58 (2010). Available at https://files.stlouisfed.org/files/htdocs/publications/red/2010/01/Cornia.pdf.
  3. Weeks, Bob. In Kansas, sweeps to continue. Available at https://wichitaliberty.org/kansas-government/kansas-sweeps-continue/.
  4. According to KSDE, certified employees include Superintendent, Assoc./Asst. Superintendents, Administrative Assistants, Principals, Assistant Principals, Directors/Supervisors Spec. Ed., Directors/Supervisors of Health, Directors/Supervisors Career/Tech Ed, Instructional Coordinators/Supervisors, All Other Directors/Supervisors, Other Curriculum Specialists, Practical Arts/Career/Tech Ed Teachers, Special Ed. Teachers, Prekindergarten Teachers, Kindergarten Teachers, All Other Teachers, Library Media Specialists, School Counselors, Clinical or School Psychologists, Nurses (RN or NP only), Speech Pathologists, Audiologists, School Social Work Services, and Reading Specialists/Teachers. Teachers include Practical Arts/Vocational Education Teachers, Special Education Teachers, Pre-Kindergarten Teachers, Kindergarten Teachers, Other Teachers, and Reading Specialists/Teachers. See Kansas State Department of Education. Certified Personnel. http://www.ksde.org/Portals/0/School%20Finance/reports_and_publications/Personnel/Certified%20Personnel%20Cover_State%20Totals.pdf.
  5. There are also, according to KSDE, non-certified employees, which are Assistant Superintendents, Business Managers, Business Directors/Coordinators/Supervisors, Other Business Personnel, Maintenance and Operation Directors/Coordinators/Supervisors, Other Maintenance and Operation Personnel, Food Service Directors/Coordinators/Supervisors, Other Food Service Personnel, Transportation Directors/Coordinators/Supervisors, Other Transportation Personnel, Technology Director, Other Technology Personnel, Other Directors/Coordinators/Supervisors, Attendance Services Staff, Library Media Aides, LPN Nurses, Security Officers, Social Services Staff, Regular Education Teacher Aides, Coaching Assistant, Central Administration Clerical Staff, School Administration Clerical Staff, Student Services Clerical Staff, Special Education Paraprofessionals, Parents as Teachers, School Resource Officer, and Others. See Kansas State Department of Education. Non-Certified Personnel Report. http://www.ksde.org/Portals/0/School%20Finance/reports_and_publications/Personnel/NonCertPer%20Cov_St%20Totals.pdf.
  6. Weeks, Bob. Kansas school spending, an interactive visualization. Available at https://wichitaliberty.org/wichita-kansas-schools/kansas-school-spending-interactive-visualization/.
  7. Weeks, Bob. Kansas school employment. Available at https://wichitaliberty.org/politics/kansas-school-employment-2/.
  8. “The FY 2018 budget assumes savings of $47.2 million from implementation of Alvarez & Marsal efficiency recommendations to include K-12 health benefit consolidation and sourcing select benefit categories on a statewide basis.” Budget Report, p. 17
  9. “Add $47.2 million, all from the State General Fund, for removing savings associated with A&M recommendations for health insurance and procurement for FY 2018.” Bill Explanation For 2017 Senate Sub. For House Bill 2002, p. 10.
  10. Weeks, Bob. Spending in the states, per capita. https://wichitaliberty.org/economics/spending-states-per-capita-2/.
  11. Kansas Policy Institute. A Five-Year Budget Plan for the State of Kansas: How to balance the budget and have healthy ending balances without tax increases or service reductions. Available at https://kansaspolicy.org/kpi-analysis-5-year-kansas-budget-plan/.

WichitaLiberty.TV: Kansas Representative Susan Humphries

In this episode of WichitaLiberty.TV: Kansas Representative Susan Humphries joins Bob Weeks and Karl Peterjohn to discuss issues in the Kansas Legislature. Humphries represents District 99 in far east Wichita and Andover, and just completed her first term. View below, or click here to view at YouTube. Episode 156, broadcast July 2, 2017.

Shownotes

Decoding Duane Goossen

When reading the writings of former Kansas State Budget Director Duane Goossen, it’s useful to have a guide grounded in reality.

In a look back at the Kansas Legislature this year, former state budget director Duane Goossen has a few opinions. Here are a few, as appeared in the Wichita Eagle, and some counter arguments.

“Kansans, we are done being kicked around.”
No, Kansans are just starting to be kicked around even harder. That’s what higher taxes represent.

“We became famous, the poster state for bad tax policy.”
No, Kansas became the poster state for bad spending policy. Our legislature and governor had several years to find ways to reform spending, but there was not the will to do so. One example: The budget for next year contains $47.2 million in spending because the legislature did not adopt a recommended plan to save money on purchasing health insurance for school employees. That number rises to $89.0 million the following year.

“Kansans wanted their government to work, and wanted public education adequately funded.”
But spending on schools, adjusted for inflation, on a per-student basis, varied very little the past six years. 1 Kansas school employment rose slightly for the current school year, and ratios of employees to pupils fell, also slightly. The ratios of teachers to pupils and certified employees to pupils has been nearly constant in recent years. 2

Another constant refrain is that the state was not spending on highway maintenance. But spending on actual road maintenance programs has risen, with a few ups and downs. (This is spending apart from the sweeps of highway funds.) Additionally, while groups claimed that the state could maintain only 200 miles of roads a year, data from KDOT show that the number of miles maintained has risen for three years, and is well above 2,000 miles per year. 3

“…a discredited ‘trickle down’ tax cut ideology.”
“Trickle down” is not a term that economists use. It has no meaning in economics.

“Certainly, kudos should go to the courageous legislators and legislative leaders who voted to override.”
It is not courageous to raise taxes on anyone, wealthy or not. Courage would have been starting to reform spending five years ago.

“Most citizens prefer not to spend their time thinking about budget and tax policy issues.”
Goossen is correct. Politicians and bureaucrats prefer to work out of the spotlight, especially when raising taxes while showing no resolve to reform spending.

“An even higher percentage of voters expressed concern that the state was not investing enough in education.”
The spending establishment does a very good job convincing people that spending on nearly everything, especially schools, is lower than the reality. As a result, surveys of people across the county, and in Kansas, repeatedly show that the average person has little knowledge of the level of spending in schools and whether spending is rising or falling. 4 This reinforces the previous point.

“Kansas will be climbing out of the Brownback experiment for years.”
Here, Goossen is probably referring to delayed KPERS payments and borrowing from the highway fund. Well. When Goossen was state budget director, the KPERS funding ratio fell year after year. 5 The general fund swept from the highway fund during those years, too. That’s at the same time KDOT was also issuing long-term debt, including some bonds that were interest-only payments for many years. 6 (The state still does this.) To top it off, the budget just passed by the legislature continues sweeps from the highway fund in the amount of $288,297,663 in fiscal year 2018. For fiscal year 2018, the total of the quarterly sweeps is $293,126,335. 7


Notes

  1. Weeks, Bob. Kansas school spending, an interactive visualization. Available at https://wichitaliberty.org/wichita-kansas-schools/kansas-school-spending-interactive-visualization/.
  2. Weeks, Bob. Kansas school employment. Available at https://wichitaliberty.org/politics/kansas-school-employment-2/.
  3. Weeks, Bob. Highway budget cuts and sweeps in Kansas. Available at https://wichitaliberty.org/kansas-government/highway-budget-cuts-sweeps-kansas/.
  4. Weeks, Bob. Kansans still uninformed on school spending. Available at https://wichitaliberty.org/wichita-kansas-schools/kansas-uninformed-school-spending/.
  5. Weeks, Bob. This is why we must eliminate defined-benefit public pensions. Available at https://wichitaliberty.org/kansas-government/we-must-eliminate-defined-benefit-public-pensions/.
  6. Weeks, Bob. Kansas transportation bonds economics worse than told. Available at https://wichitaliberty.org/kansas-government/kansas-transportation-bonds-economics-worse-than-told/.
  7. Weeks, Bob. In Kansas, sweeps to continue. Available at https://wichitaliberty.org/kansas-government/kansas-sweeps-continue/.

WichitaLiberty.TV: Kansas Representative Leo Delperdang

In this episode of WichitaLiberty.TV: Kansas Representative Leo Delperdang joins Bob Weeks and Karl Peterjohn to discuss issues in the Kansas Legislature. Delperdang represents District 94 in west Wichita, and just completed his first term. View below, or click here to view at YouTube. Episode 155, broadcast June 25, 2017.

Shownotes