Duane Goossen wants to rectify the record.

A new report from the Kansas Center for Economic Growth concludes former Gov. Sam Brownback’s supply-side tax reductions induced years of financial crisis, rather than the “rural recession” Brownback blamed.

Now, one year after a partial reversal of the massive 2012 tax cuts, lawmakers face the difficult election-year prospect of paying for another increase in school funding. Goossen, a senior fellow with KCEG and the budget director for three governors before Brownback, said it is important to be honest and clear about the cause of the state’s budget problems.

The KCEG report to be released Monday says the global decline in commodities prices only accounts for a small portion of the overall economy in Kansas and wasn’t significant enough to derail budgets in neighboring states. Also, the agricultural and energy downturn happened after Kansas budgets became unstable.

“Those things were contributors to making our budget situation a little bit worse,” Goossen said. “But it was bad — things were bad — before any of that happened. That’s the thing. The tax cuts go into effect, revenue falls, and then ag prices drop, oil prices drop, and that doesn’t help things.

“But our problems, our budget situation where revenue is dropping sharply, that happened before any of those other things occurred. And now, the fix to it, the correction of our budget problems, happens as we reverse these tax cuts.”

Lawmakers had to override a Brownback veto to deliver a two-year $1.2 billion tax increase last June, abandoning income tax exemptions for lawyers, farmers, doctors and 330,000 businesses.

Some lawmakers remain uncomfortable with current tax levels. Rep. Ken Corbet, R-Topeka, used a handful of sand as a metaphor for residents leaving the state. The tighter you squeeze, Corbet said, the more sand falls out.

“No one has called me and said, Mr. Corbet, please, I beg you, raise my taxes,” he said. “No one.”

Basic math

In a separate reflection on the Brownback years, Kansas Policy Institute president Dave Trabert concludes the tax cuts failed because of a lack of leadership from the governor and the absence of a plan to implement such massive cuts all at once.

Trabert said he is sending a copy of his new book, “What Was Really the Matter with the Kansas Tax Plan,” to every legislator in the country to demonstrate how the plan could have worked. He considers the drop in commodities prices to be more significant than the KCEG report concludes, but Trabert agrees a “rural recession” isn’t responsible for the revenue shortfalls that began immediately after the plan took effect.

“Well, yeah — they cut taxes and increased spending,” Trabert said. “This is a fourth-grade math problem.”

To make the plan work, Trabert said, Kansas needed to develop a way to introduce tax cuts over several years, improve revenue forecasts, implement ways to better analyze agency-level spending, and “wring the excess” out of the cost of providing services.

KPI is engaging in revisionist history, said Sen. Tom Holland, D-Baldwin City.

Brownback beat Holland by a wide margin in the 2010 gubernatorial race, but Holland said Kansans came to realize Brownback’s “silly, supply-side thinking” was a disaster, rejecting the governor’s economic ideology in 2016 elections.

Attributing blame to a “rural recession,” Holland said, was “fanciful thinking on the governor’s part.”

“That’s utter nonsense,” Holland said. “The governor knows it.”

Primary cause

External forces, the KCEG report says, weren’t responsible for the state’s economic distress.

Researchers Emily Fetsch and Michael Raven examined farm earnings in Kansas and surrounding states, as well as yearly severance and income tax contributions to the Kansas general fund.

“I don’t think there’s a doubt that the decline in the agriculture and oil industry had an impact,” Fetsch said, “but ... the primary cause of the budget collapse was tax cuts.”

To support that conclusion, the report shows farm income accounts for just 12.9 percent of the gross state product in Kansas, compared to 21.1 percent in Iowa and 24.3 percent in Nebraska. Budgets in those states remained stable, and Iowa’s revenue increased in all but one year from 2012 to 2017.

As farm earnings in Kansas dropped, Republican Rep. Steven Johnson, a farmer from tiny Assaria, south of Salina, felt the impact. More recently, he said, prices have returned to profitable levels.

“It’s pretty phenomenal what a person can do today versus the world of a few years ago,” Johnson said. “You always wonder how we can get more productive, and somehow it does happen — both in the ability to feed the world and in the ability of one person to do more.”

As the KCEG report notes, Johnson said the decline in crop and oil prices didn’t reach Kansas until the state was two years into the budget crisis. Lawmakers should have realized “big shocks” like the 2012 tax cuts would create unintended consequences, Johnson said.

“Where I was the least comfortable with it — the cuts to spending, some of them could be sustained, at least for a short period of time — but I didn’t like the shifts that we did to say, ‘OK, we’ll just slide this money over here to get by,’ ” Johnson said.

To balance an unstable budget, Kansas dipped into tobacco funds, pooled money, unclaimed property, pension contributions and highway projects.

Great big swoosh

Goossen doesn’t like to use the term “rural recession,” which is difficult to define.

With the state no longer investing in education, transportation and public services, Goossen said, cities and counties began raising property taxes while employers began laying people off.

Those problems were compounded by a 15.8 percent decline in farm incomes, “but I don’t think you would find any economists terming that a ‘rural recession,’ ” Goossen said.

Declining oil prices, the KCEG report says, fueled a drop in severance taxes from 1.66 percent to 0.66 percent of the state’s overall revenue. For perspective, individual income tax receipts declined from $2.7 billion in 2011 to $2.3 billion in 2017 while severance tax receipts dropped from $98 million to $42 million.

Oil prices were just an ancillary contributor to the economy’s declining health, the report says. By 2017, Kansas suffered nine rounds of budget cuts, three credit downgrades and a sales tax increase.

When Brownback signed the controversial bill in May 2012, he said Kansas would become a blueprint for reducing taxes.

“My faith is in the people of Kansas, not the government’s ability to tax and redistribute,” Brownback said. “Today’s legislation will create tens of thousands of new jobs and help make Kansas the best place in America to start and grow a small business.”

A month later, in an appearance on MSNBC’s “Morning Joe,” Brownback called the tax cuts “a real-life experiment.”

“It truly was an experiment in a way,” Goossen said, “because Kansas cut taxes sharply in one great big swoosh, and predicated on the hope that that would improve the economy. And our economy grew a little bit, but it was meager, and compared to states surrounding us, compared to national averages, we grew less than the states that did not cut taxes.

“There just simply isn’t any correlation with the tax cut that happened in Kansas and economic growth. If anything, it correlates to a stagnation in Kansas.”

False narratives

Heidi Holliday, executive director for KCEG, said it is important to study the fallout from tax cuts because truth matters and the “misguided policy still has its defenders.”

“We want Kansans to be on the lookout for false narratives, particularly around economic policy,” Holliday said. “Our state should focus on investments in great schools, affordable health care, solid infrastructure and thriving communities. The Brownback tax plan created years of entirely unnecessary struggle for Kansas. Those crucial investments weren’t made, and we are only now rebuilding.”

Kansas Secretary of State Kris Kobach, who is seeking the Republican nomination in this year’s governor’s race, immediately denounced last year’s partial reversal as the largest tax increase in state history. In a campaign stop in Topeka last week, Kobach vowed to roll back taxes and make additional cuts at state agencies.

A spokesman for Gov. Jeff Colyer, who welcomed the 2012 tax cuts with a handshake after Brownback signed them into law, didn’t respond to a request for comment. Shawn Sullivan, the chief operating officer for Colyer and the budget director under Brownback, also didn’t respond to an interview request.

Every state provides the same services, Trabert said, and taxes are a measure of how efficiently government operates. Kansas could have cut taxes without cutting services, he maintains, by improving from “morbidly inefficient” to “grossly inefficient.”

Johnson said it is always appropriate to push lawmakers to seek efficiencies, and he wouldn’t argue there are more to be found.

“We do have to decide together what we want to accomplish, whether that’s with roads, whether it’s with education, all of those things, and we won’t fully agree on that,” Johnson said. “Any two of us will have a different picture on how much we might want to invest in those areas.”