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Business climate of Kansas

8/24/2014

"Falsehood flies, and the truth comes limping after it."

"Falsehood flies, and the truth comes limping after it."

Jonathan Swift, November 1710.

As the general election campaign hits high gear, it's time to provide some "limping" truth as a counter to the expected all-out exercise in hyperventilation and distortion. All involved will work hard to persuade us their candidate is the only one to improve our well-being, while the opposition is sure to bring us economic calamity and woe.

Beginning January 2011 as Sam Brownback started his term as governor, the U.S. Census Bureau's Bureau of Labor Statistics found non-farm employment in Kansas was 1,335,500 workers, an increase of 14,200 (1.1 percent) from the lowest post-2008 employment number 10 months earlier. In the 42 months of the Brownback Administration between January 2011 and June 2014, net non-farm employment grew by 49,200 to 1,384,700. This is 3.7 percent in three-and-a-half years. Increased employment in the current administration has averaged 1.06 percent per year -- no better than it was before the Brownback "experiment" began.

Other measures can improve understanding of the economic realities of Kansas. Just as the national economy has an overall measure -- gross domestic product -- there is a gross state product. According to a July Survey of Current Business published by the U.S. Department of Commerce's Bureau of Economic Analysis, Kansas -- in the 15 years between 1997 and 2012 -- averaged annual GDP growth of 2.2 percent. Kansas officials use Colorado, Nebraska, Iowa, Missouri and Oklahoma frequently for economic comparison. During those 15 years, only Colorado had a higher average rate than Kansas. In 2013, Kansas' rate of economic growth was only 1.9 percent, and only our neighbor to the east, Missouri, out of the comparative group, performed more poorly.

What about personal income -- the primary thing that is taxed? According to the Bureau of Labor Statistics, between January 2010 and January 2011, Kansans' per capita personal income jumped more than 8 percent. But from 2011 until 2013, the rate of growth dropped dramatically. Per capita personal income for 2011 was $42,079; 2012's value was $43,015; and 2013's was $43,916.

Across this period during which the governor's tax cutting and pro-business policies were supposed to be raising Kansas's economic metabolism, the pulse rate of personal income expansion slowed to just 2.15 percent per year. In other words, taking at face value the current administration's assertions regarding impending economic growth measured by new enterprises and new jobs, per capita personal income barely kept up with inflation. Growth in income was supposed to provide more revenue at lower tax rates -- it hasn't.

The second-term road map the governor unveiled last week promises growth in jobs for Kansans at the rate of 25,000 for each of the next four years associated with growth at Fort Leavenworth, urban opportunity zones and the promotion of "iconic" new small businesses in Kansas.

If Leavenworth's government jobs expand (recent announcements reference cutback evaluations) or a global market for Kansas-made ruby slippers materializes, they will be loudly claimed by Brownback and the Republican dominated Kansas Legislature. In the economic development game, business promotion specialists are said to "shoot at anything that flies and claim everything that falls."

The decline in Kansas tax revenues (down more than $700 million for the fiscal year just ended) has been well-documented in other sources. Some critics allege it's problematic only to the extent our governor and Legislature lacked equal enthusiasm for slashing state spending.

The dirty little secret is what government does in the way of tax policy and improved "business climate" only slightly affects the direction of overall economic growth. The limping truth, however, will arrive in January with a general fund budget that must be made hundreds of millions smaller.

Mark Peterson teaches political science at the college level in Topeka.

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