Published on -5/7/2014, 9:07 AM
Lest anybody consider this newspaper's position regarding Kansas Gov. Sam Brownback's massive income tax cuts as liberal sour grapes, we will let others offer their perspective.
Not other newspapers, of course. That could be seen as more left-wing nonsense. Nor will we examine the talking points of the reigning conservative faction of the Grand Old Party. The governor and complicit legislators obviously believe the cuts will boost the economy -- they wouldn't have passed these laws otherwise.
Instead, we'll head straight for the non-partisan, unbiased center known as Moody's Investor Services. Moody's is a leading provider of credit ratings, research and risk analysis. According to its website, the company tracks debt in more than 115 countries; 11,000 corporate issuers; 21,000 public finance issuers; and 76,000 structured finance obligations.
Moody's weighed in last week on the state of our state, and the news was not all that great. On the same day the Kansas Revenue Department was reporting $92 million less than forecasted two weeks earlier, Moody's downgraded the state's bond rating. The Kansas issuer rating dropped from Aa1 to Aa2; notched ratings went from Aa2 to Aa3, and KDOT highway revenue bonds slipped from Aa1 to Aa2.
Moody's did say the current outlook for Kansas is stable, and the Aa2 rating is warranted because of low unemployment, moderate debt levels, a diverse economy and history of strong governance. Still, the downgrade affects more than $2.8 billion of outstanding bonds. It also renders suspect the unwavering belief of Topeka's ruling class that Laffer dreams will come true as job-creators trickle down their gains to the masses.
The downgrade was attributed to the tax cuts that don't have accompanying spending cuts, the fact the state isn't making required contributions to already-underfunded pension system, using one-time events to balance the budget, and that compared to other comparable states, Kansas' economic recovery is "sluggish."
It could get worse.
In order to meet revenue projections by the end of the fiscal year June 30, the state needs to collect between $800 million and $900 million. The Kansas Legislative Research Department suggests the state could end up more than $200 million off target by that date.
Moody's reported the state's credit rating could go down even further. The agency will track negative fund balances, overly aggressive growth assumptions, non-recurring budgetary measures, delays in payments, and an increase in unfunded pension liabilities.
"The state's ability to impose budget cuts over time may be limited in several areas: by court mandates in K-12 funding, by federal program mandates in Medicaid and by state legal requirements (for) pension funding," the report said.
The downgrade is a "warning sign," said Duane Goossen, a former state budget director who now serves as vice president for fiscal and health policy at the Kansas Health Institute. "It's a report card on how the state is handling its finances."
The report card is not good, regardless of political ideology.
Editorial by Patrick Lowry