TOPEKA, Kan. (AP) — Kansas plans to delay major highway projects and cut additional spending at state universities, a top aide to Republican Gov. Sam Brownback announced Wednesday, after a new pessimistic fiscal forecast blew a hole in the state’s budget.
Budget Director Shawn Sullivan also outlined a proposal from the GOP governor to sell off the rights to some the state’s funds from a national legal settlement with tobacco companies in the 1990s. The annual payments would back bonds giving Kansas a one-time infusion of about $158 million.
Sullivan presented two alternatives to the tobacco-money proposal for lawmakers to consider. One would delay $99 million in contributions to public employee pensions due over the next 2½ months until July 2017. Another would make $139 million in spending cuts, including in Medicaid and aid to public schools. All three options involve varying degrees of spending cuts.
Brownback’s administration unveiled the proposals after a new, more pessimistic fiscal forecast for state government slashed projected revenues through June 2017 by $348 million and left the state with projected shortfalls in its current and next budgets totaling more than $290 million.
Republicans in some other states have watched the Kansas tax-cutting experiment closely since it slashed personal income taxes in 2012 and 2013 at Brownback’s urging as a way to generate business investment and economic growth. But it hasn’t worked out as envisioned and the state has struggled to balance its budget ever since.
Even some Republicans want to reverse a key policy that exempted 330,000 farmers and business owners from personal income taxes, but Brownback is resisting.
“I do not believe it would be useful to have a debate about raising taxes on small businesses or anyone else,” Brownback said in a statement. “Instead, we will focus our support and attention on controlling government spending more efficiently.”
Legislative budget committees planned to review the governor’s proposals Thursday. The full Legislature returns from an annual spring break next week to tackle the budget woes.
Sullivan said Brownback prefers the borrowing backed by part of the state’s tobacco revenues, which now are set aside for children’s programs.
The state Department of Transportation announced it would delay 25 major highway projects set to begin before July 2018. Brownback also plans to carry forward $17 million in immediate cuts ordered on state university campuses last month into the next fiscal year that begins in July.
Senate Minority Leader Anthony Hensley, a Topeka Democrat, said Brownback remains in “denial” about his tax policies’ failure to stimulate economic growth while causing the state’s budget problems.
Legislators have been cold to the tobacco-money borrowing plan, and Hensley said Brownback is pushing back by threatening them with less palatable alternatives.
“It may be legal, but it’s borderline extortion,” Hensley said.
The new fiscal forecast drafted jointly by administration officials, legislative researchers and state university economists revised one made in November. It was the fourth consecutive semiannual forecast to be more pessimistic than its predecessor. Tax collections have fallen short of expectations 11 of the past 12 months.
The forecasters reduced the projection for total tax collections for the current fiscal year by $177 million, or 2.9 percent, to about $5.86 billion.
They also cut the estimate for the next fiscal year that begins in July by nearly $171 million, or 2.7 percent, to $6.04 billion.
Democrats have long described Brownback’s income tax cuts as reckless. The anticipated job growth hasn’t arrived, and even some past Brownback allies have grown disillusioned.
House Minority Leader Tom Burroughs, a Kansas City Democrat, called in a statement for “responsible tax policies that will create a sustainable source of revenue for the state.”
But House Speaker Ray Merrick said even with the gloomier projections, tax collections would continue to grow year-over-year. He also pointed to the state’s low unemployment rate of 3.9 percent in March as evidence that businesses are adding jobs.
The Stilwell Republican said in a statement that lawmakers will keep the budget balanced with “a broad, clear-headed view of the actual situation.”
Brownback and his aides blame sluggishness in the state’s economy on national slumps in agriculture, energy production and aircraft manufacturing. And the new fiscal forecast reflects a belief that those industries will remain in a slump through June 2017.
“We are facing headwinds,” Sullivan told reporters.
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