Pondering the state's bank account
Published on -2/19/2013, 1:37 PM
The continuing issue for this legislative session is simply "what comes first?"
Do lawmakers assemble a state budget as tightly as possible, and see whether it can meet the responsibilities and needs of the state and then raise or lower taxes? Or do they put together a tax policy of cuts or increases and then make the budget fit within available resources?
Seems like two fairly straightforward choices.
But there's a third factor here that nobody's talking out loud about -- and that is just how much money the state needs to have in its bank account when the taxing/spending decision has been made.
That third factor -- called the state general fund ending balance -- is itself a question those lawmakers at some point need to decide.
Gov. Sam Brownback proposed a budget -- with significant cuts that lawmakers are now assessing, whether he cut too much or not enough -- that winds up with more than $450 million in ending balances. That's the amount that the state plans to have in the bank on July 1, 2014.
Now, it's always good to get back from a date with a little cash left in your pocket, but is $450 million the right amount? There have been years when the ending balance was much more and years when the state ended a fiscal year with less than $1,000 in cash on hand.
Those years, with small ending balances? They were made legal with two lines in appropriations bills that suspended the 7.5 percent ending balance law one fiscal year at a time.
The discussion gets interesting when some legislators believe a fat bank account is a good thing. Who doesn't want a big bank account?
Yet there are legislators who think that if the state has money parked in the bank it's a sure sign that the state took more money from Kansans than it needs, and that is not a good thing.
Do you want your money lounging in a state bank account, or do you want it in your pocket?
Now, a fat ending balance means that there's plenty of money next year to have on hand if revenues drop: Say, those big tax cuts that lawmakers and the governor approved last year reduce revenue so much that the state can't pay its bills. That's a projection -- that taxes were cut too much and revenues are going to drop in coming years, meaning spending cuts or raising taxes.
And, that's where a fat ending balance that will shift from year to year to fill those budget holes is handy.
So ... ending balance? Tax increases? More spending cuts?
It's almost surprising that the ending balance is a big deal for many legislators. While it provides cash on hand at the end of a fiscal year, and of course, some ready cash on hand after a fiscal year starts, it has generally not been enough to tide the state over in months when tax flow is low.
When the cash flow is a little behind the state's due date on bills -- or paying salaries -- the state borrows money, as much as $700 million some years (and repays within the fiscal year, sort of like a payday loan) to make those payments on time. The ending balance? While $450 million sounds like a lot, it's not always coming in the back door in time with payments going out the front door.
We'll see this session just what happens to that ending balance, whether it becomes a factor in the tax/spend discussion.
It hasn't yet.
Syndicated by Hawver News Co. of Topeka, Martin Hawver is publisher of Hawver's Capitol Report. www.hawvernews.com.