The shift away from Gov. Sam Brownback’s tax philosophies when the Legislature increased Kansan income taxes this week convinced Moody’s Investors Service to revise the state’s outlook from negative to stable.
“The revision of the outlook to stable and the upgrade on the income tax bonds is the result of a significant income tax increase the state passed earlier this week,” Moody’s noted. “The additional revenues from the tax increase will reduce the state’s fiscal problems to more manageable dimensions that are consistent with similarly rated states.”
Assessing Kansas as a “slow-growing state with above-average long-term liabilities,” Moody’s called the Legislature’s move in repealing Brownback’s tax rollbacks that started in 2012 a “major step forward” for Kansas.
“The tax increase enacted this week was a major step forward in the state’s willingness to utilize its resources to balance its budget and service its long-term liabilities,” the company wrote in its report.
Further upgrades, Moody’s noted, could come from improved pension funding and stronger economic growth.
To continue underfunding pension liabilities could result in a downgrade.