Forbes called it “fiscal snake oil.” The New York Times editorial board: “ruinous.” Just a few weeks ago, late night talk show host Seth Meyers weighed in, “Even when you buy couch cleaner, they tell you to try it on a small patch of fabric first and that’s what happened here. Kansas was the small patch of fabric and not only did the cleaner not work, the couch exploded.”
Kansas is falling into deeper debt. State agencies are underfunded. Important early childhood education programs are under siege. And now, Kansas is borrowing from its pension fund to pay bills. Why? Because the state refuses to change course on Gov. Sam Brownback’s disastrous 2012 tax policy. Brownback slashed taxes for the wealthy and business, claiming it would be a “shot of adrenaline” to the heart of the Kansas economy. That shot never came. What did were enormous budget deficits, deep cuts to services the residents of Kansas rely on, and negative job growth. What’s worse? Instead of admitting failure, the state’s elected officials continue to pile one bad financial decision on top of another.
Since 2012, Kansas has seen its bond rating downgraded twice. By the end of the 2014 fiscal year, Kansas ran up a deficit of about $300 million and revenue collections fell short of expectations, triggering additional spending cuts. Brownback took millions from transportation, public health and youth education programs; increased taxes on cigarettes and liquor; and continued funneling highway and pension funds to temporarily fill budget holes. Brownback and the Republican-controlled Legislature are still chipping away at the state’s budget and infrastructure, as they desperately look for any possible way to salvage what is clearly a failed policy. And yet, revenue estimates are expected to be lowered, again, in the coming week.
This session, in a mockery of fiscal conservatism and responsibility, the House and Senate sent a bill to Brownback that will allow him to skip up to $100 million in payments to the Kansas Public Employee Retirement System (KPERS) to help balance the budget.
Kansas’ pension systems have struggled since the Great Recession, and the state’s lack of financial discipline will make the situation worse, not better. Changes to the KPERS in 2012 increased both state and employee contributions into the system and the system had begun to make progress. Funding levels increased to 64 percent at the end of 2014, up from 56 percent at the time changes were enacted. Now, as employees continue to pay out of each and every paycheck, the state is arguing it should be able to skip its payments. This will cost teachers, social workers, and nurses who are depending on KPERS for their retirement and taxpayers, who will have to pay back skipped payments plus 8 percent interest.
If there’s anything we know about stability in pension systems, it is that states that pay their bills have financially healthy or well-funded pension systems. States that skip their payments — the equivalent of an individual consumer skipping credit card or mortgage payments — are states that have debt.
Kansas needs to abandon Brownback’s failed policies and start investing back into its people, not robbing them of their hard-earned benefits. If employees don’t have the option to skip out on their bill, the state shouldn’t either.
- Bailey Childers, National Public Pension Coalition, and Annie McKay, Kansas Center for Economic Growth