Education took the biggest hit as state revenue fell

Duane Goosen was as somber-toned as an un-dertaker when he talked about the state’s budget last week at the conference on the state’s economy at the University of Kansas.
He reminded his audience that the Legislature had cut spending sharply in its session earlier this year and that Gov. Mark Parkinson had felt it necessary to make further reductions as tax revenues continued to fall below estimates. Still another reduction is possible. The consensus estimating committee will meet again in a few days. If those economists and students of the state’s economy decide that more revenue reductions lie just ahead, further spending cuts will be required, he said.
Goosen, highly respected director of the Kansas budget office, used pie charts to show where the state’s money comes from and where it is spent.
Half of the state’s income comes from the income tax. This is where the recession has hit hardest. Because of falling prices of real estate and equities, such as shares of stock, income to individuals from capital gains fell like a stone, taking tax revenues over the cliff with it. Withholding from individuals also dropped as workers lost jobs and employers cut back hours worked and overtime hours.
Corporate income tax payments were off 40 percent, he said.
Sales tax revenues, on the other hand, held “pretty steady,” only down 1 percent, indicating that consumer spending is not as dependent on personal income as might be anticipated. Severance tax income is down this year because it is based on oil and gas prices, which are lower this year than last.
A bevy of smaller revenue sources, the property tax, taxes on liquor and tobacco, taxes on insurance premiums and interest earned on state investments, shrank but little.

THE IMPACT of lower revenues from personal and business income taxes was felt mostly by the schools, he said, because that’s where most of the money is spent. About 52 percent of the general fund is devoted to K-12 education. That has been reduced by 8 percent over last year. Appropriations for the universities, community colleges and technical schools, which account for another 12.6 percent of the budget, dropped even further, prompting those institutions to raise tuition rates to keep their doors open.
(Contrary to the re-gents universities, community colleges have access to property tax revenue and have an easier job of making their budgets work.)
Goosen also pointed out that Medicaid ex-penses continue to rise along with the cost of health care — one of the very few segments of the national economy swimming against the deflationary currents — and that that single budget item now consumes 16-to-17 percent of the general fund. About half of the 300,000 residents of the nursing home and extended care facilities in Kansas are Medicaid recipients, he said.
As the population continues to age, the cost of caring for the indigent elderly will rise.
Goosen and others who made presentations during the daylong seminar saw no immediate turnaround. The Kansas economy fared better than some, it was said, but primarily because it had not been been part of the housing bubble that burst, nor did it have a lot of monster banks that took outrageous risks and then collapsed.

GOOSEN OBSERVED that his charts were limited to general fund income and outgo and didn’t show spending or revenue for the Kansas Department of Transportation’s highway program, with the exception of a small amount, which is transferred from the general fund each year. The comprehensive transporation program, which comes to an end this year, is funded primarily with highway fuels taxes, registration fees and a distribution from the federal highway trust fund, which also is funded by fuels taxes.
Other state programs and agencies funded from separate revenue sources include the economic development initiatives fund, special funds received by the universities and the unemployment fund.

Emerson Lynn, jr.