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Kansas Revenues Take Nosedive After Tax Cut, Praised by Sinquefield

In a recently penned op-ed in Forbes magazine, billionaire Rex Sinquefield praised the action taken by the state of Kansas to drastically cut taxes last year. In Mr. Sinquefield’s mind, “lower income tax rates have in fact stimulated the economy by reducing the price both of work and conducting business in the state, not to mention that lower rates have predictably proven effective when it comes to luring out-of-state businesses to Kansas’ friendlier business environment.” It is not surprising that members of the Missouri General Assembly that supported HB 253 have been shopping this article around to fellow members.

Unfortunately, the results in Kansas are not as rosy as some like Mr. Sinquefield would lead legislators to believe. According to the Kansas Budget Office, one year after the changes, revenue to state coffers has declined by $135 million, or a 9 percent drop from last year. And according to a report from the Kansas City Star, the Kansas Legislature’s own research staff projects that there will be a net reduction this fiscal year of a half billion dollars and a billion dollars by 2018. The crisis is causing the state to dip into its dwindling reserve fund that is projected to run out in the next few years.

Another thing to highlight in Kansas is that at the same time the tax cuts were enacted last year, a lawsuit seeking an adequately funded education system was filed. The suit, which was filed by students, is now working its way through the courts. An initial ruling has already come down in support of the students. The final ruling by the Kansas Supreme Court could cause a massive increase to budget obligations (approximately $440 million) as Kansas looks at significant budget shortfalls.

As the debate begins to heat up moving into the 2014 Legislative Session administrators and educators need to watch the many economic development proposals very closely. While economic development is in the best interest of everyone, including schools, the last thing we want is for Missouri to go down the same path as Kansas and leave our budget in shambles.

If anything was learned from the defeat of HB 253, it’s that legislators need to take into account how changes to the tax code affect public schools in the state of Missouri.

If you get a chance, please share the following articles and Kansas budget information with your legislators as they begin their work on the 2014 legislative session.