Kansas is home to tornadoes and the Land of Oz. It is home to more cows than people. It is also the site of a massive, failed experiment in tax policy. When Kansas passed large tax cuts several years ago, Gov. Brownback described it as a “live experiment.” There is now plenty of evidence that the experiment has failed.
Public schools in Kansas might not open in the fall. The Kansas Supreme Court has ruled once again that Kansas must significantly increase its school funding. That’s a problem because the state continues to grapple with a massive budget deficit. It turns out that 2+2=4 and if you cut taxes, you collect less revenue. Having less money coming into state coffers makes it hard to pay for things like schools. It also makes it more likely that politicians will try to raid the pension fund to fill yawning holes in the state budget.
Last year, Gov. Brownback skipped a $97 million payment to the Kansas Public Employee Retirement System (KPERS), but promised to pay it back in September 2016, plus 8% interest. In his budget this year, Gov. Brownback not only said he would never repay the money he “borrowed” from the pension fund last year, but he proposed to cap pension payments going forward. Clearly Gov. Brownback’s word is about as good as his tax policy.
Not making the full annual contributions to the pension fund is pretty much the single worst thing a state can do to its pension system, other than closing it altogether. Pension funds succeed because workers and their employers, in this case the State of Kansas, both contribute to the pension fund each year and then those combined contributions are invested by professionals and generate revenue for the pension system. In a report released last year, we detailed how successful pension systems make their annual payments. By skipping contributions to KPERS for consecutive years, Gov. Brownback is seriously undermining the health of the pension fund.
Kansas is caught in a whirlwind of problems right now. Since Gov. Brownback’s tax plan has been such a miserable failure, the state isn’t bringing in enough money to pay for basic services, such as public education. The state supreme court has now issued multiple rulings that the state must fix its school funding formula and significantly increase its education funding levels. While skipping payments to the pension fund may offer short-term budgetary relief, in the long run it actually makes the problem worse because the pension fund won’t earn investment returns on those missed contributions and the funding level will worsen. The solution is simple: Kansas needs to change its tax laws so it can collect enough revenue to pay for basic services and meet its obligations to public employees and retirees.
