State government spending in Kansas increased 42.2 percent from fiscal years 2004 to 2008. But some activist and advocacy groups say that’s not enough to meet the demand for government support and services..

For example, one organization, Kansas Action for Children, issued a report recently that calls for a state tax system overhaul to collect more taxes to close the budget gap between revenues and spending.

The report claims the level of state spending hasn’t really increased because the tax burden is relatively unchanged since 1960.

According to the child advocacy group's report, “The long-term solution to avoid increasing budget gaps is to update and modernize the Kansas tax system in a way that accurately reflects the current economy and generates sufficient revenues for state funding needs.”

But that's contrary to the views of some taxpayer groups. “We have a spending problem, not a revenue problem,” said Dave Trabert, president of the Flint Hills Center for Public Policy, which underwrote reporting for this analysis. “It’s astounding that anyone could say that a 42 percent spending increase over a four-year period isn’t enough to meet the government’s needs. What about taxpayers’ needs?”

The report says state and local taxes, as a percent of personal income, have increased from 10.5 percent in 1960 to 12.1 percent in 2008. The report says this 15 percent increase “refutes claims that the level of spending has increased in Kansas.”

However, personal income in the report’s calculation includes employer payments for social security, medical insurance and pensions — money not available to the individual to pay taxes. By using personal income available to pay state and local taxes, the tax burden actually increased from 12.3 percent in fiscal year 1960 to 16.7 percent in fiscal year 2008.

When asked about the discrepancy, April Holman, author of the Kansas Action for Children report, said the data she used in the report has been used for quite some time in reports like this and was never meant as a measure of disposable income.

Republican State Rep. Jason Watkins, of Wichita, says Kansans know taxes have gone up because they see it in their family budgets. “If you compared Kansas income with spending, reasonable people would agree that state spending has outpaced personal income by a large margin.”

Dr. Art Hall, executive director of the Center for Applied Economics at the University of Kansas School of Business, also has fundamental disagreements with the report. “Government services are not based on the economy; they’re based on effective use of money for what is required,” Hall said.

“The unspoken part here is the implication that we’re spending all of these dollars as effectively as possible. And nobody would believe that.” According to Hall, about 15 to 20 percent of tax money spent in every budget line nationwide is wasted.

When asked about cutting spending to help close the budget gap, Gary Brunk, president of Kansas Action for Children, said, “I think we have to have a database approach to policy effectiveness. There are plenty of programs that are ineffective and should be defunded. And there are others which work and need to be funded better. I don’t think that process would reduce our need for funding though.”

Funding for K-12th grade education accounts for more than half of state spending. With little or no performance gains produced by dramatic increases in school spending, school choice may offer an opportunity for closing the budget gap, according to Hall.

“We might be able to get better performance," he said. "Giving all the increased money to the current structure isn’t logical when it’s possible we could be spending each one of these dollars twice as effectively. For example, does it make sense to have 300 school districts?”

“We’re in a down budget year so state government has to respond,” Watkins said. “The harder state government tries not to act like the average household or business, the worse it’s going to be. You can’t have what you can’t pay for. Does that mean that some class sizes are going to be a bit bigger? Maybe. That’s up to the districts to figure out.”

Several organizations with strong lobbying efforts make it difficult for state legislators to initiate open discussions on alternatives to simply increasing school funding. “It’s not enough to raise taxes; they want an ever-increasing share of people’s income,” said Trabert. “That’s a crystal clear insight on the beliefs of big government proponents.”

Competition is the answer, according to Hall. “Without it you have no clue what’s going on. We have no confidence that the dollars are spent well. So saying we need more is completely illegitimate reasoning.”

Hall agrees that the state’s tax system needs to be updated, but tax exemptions criticized by the Kansas Action for Children report are important and part of good tax policy. Kansas began to exempt personal property in the 1960s. “People were going nuts trying to determine the value of odds and ends.” In the 1980s, business inventories were exempted and recently business machinery and equipment was exempted.

Hall said he thinks certain business exemptions are good for the state. “The more you tax something, the less of it you get,” Hall said. “It’s good tax policy to not tax capital investment.”

- Paul Soutar

_________________

Paul Soutar is an Investigative Reporter with the Flint Hills Center for Public Policy. For details, visit http://flinthills.org. This analysis was edited for publication by Kansas Liberty. 

The Week in Review