Kelly veto still leaves state far short in out years, says blog post

Kansas Governor Laura Kelly’s veto of a second tax relief attempt by the Kansas Legislature was purported to be in an effort to keep the state’s budget stable. An economist with the Sandlian Center for Entrepreneurial Government at the Kansas Policy Institute notes that in the out years, even that action won’t be enough.

“Governor Kelly vetoed tax relief again to Kansans saying it will cause a fiscal crisis,” said Michael Austin. “The truth is, we are headed for a $1.4 billion fiscal crisis, regardless of whether tax relief is passed or not.”

The assumption here is that the state will attempt to end the year with a 7.5% ending balance, as they have done this year.

“Unless Governor Kelly and the legislature decide to cut back on spending, or, as we’ve noted, possibly raise taxes, the state’s budget is going to fall into the red,” said Austin. “That’s going to be a problem for everyone.”

More than half of that nearly $1.4 billion shortage is due in 2022 and 2023, which is beyond the terms of all the members of the Kansas Legislature.

“Since the record tax increase of 2017, the State General Fund spending is set to be about $3 billion higher than just inflation, once you hit 2023,” said Austin. “Four decades of unfortunate stagnating economic growth means Kansas is unlikely to grow its way out of this problem.”

Under Governor Kelly’s veto of the so-called windfall bill, the state needs roughly $1.4 billion to keep its ending balance. Without Governor Kelly’s veto, the state would need roughly $1.7 billion.