Kansas Governor Proposes Using Pension Money to Cover Budget Gap Created by His Tax Cuts

By David Sirota, International Business Times

16 December 14

n 2012, Kansas Gov. Sam Brownback signed a landmark bill that delivered big tax cuts to high income earners and businesses. Less than two years after that tax cut, the state's income tax revenues plummeted by a quarter-billion dollars -- and now Brownback is pushing to use money for public employees’ pensions to instead cover the state's ensuing budget shortfalls.

Brownback's proposal: Slash the state’s required pension contribution by $40 million to balance the state budget. But Kansas already has one of the worst-funded pension systems in the nation. The state was also recently sanctioned by the Securities and Exchange Commission for not accurately disclosing the shortfalls.

Brownback, an icon of tea party economics who was re-elected in 2014, defended his proposal to divert money from the Kansas Public Employees Retirement System (KPERS), telling the Wichita Eagle: “It’s kind of, uh, well where are you going to go for the funds? And I don’t like it, but it’s kind of what’s your other option if you don’t hit K-12 and higher ed with allotments?”

Brownback joins fellow Republican Gov. Chris Christie in coupling large tax cuts and credits with cuts to actuarially required pension payments. In New Jersey, Christie slashed required pension payments while signing legislation expanding tax credits to corporations, and doling out a record amount of corporate tax subsidies. Many of those subsidies have flowed to firms whose executives have made campaign contributions to Republican political organizations. Last week, New Jersey pension trustees filed a lawsuit against Christie for not making legally required contributions to the state's pension system.

Both Brownback and Christie promoted their tax cuts as instruments to boost economic growth. A recent review of federal data by the Kansas City Star found Kansas "trails most other states when it comes to job growth.” Likewise, an investigative series by Gannett newspapers recently found “New Jersey's job growth rate [is] the second worst in the nation. ... New Jersey's middle class has lost billions in income through layoffs, salary cuts and wage freezes [and] more than 100,000 job seekers have been unemployed for months on end.”

Illinois followed a somewhat similar path. For years, lawmakers did not make the full actuarially required pension payments, causing severe funding shortages in the state's pension system. While lawmakers said there was little money to meet pension obligations, Democratic Gov. Pat Quinn signed a corporate tax cut in 2011 that is projected to cost the state more than $370 million a year in lost revenue. Two years after signing that bill, as pension funding gaps swelled, Quinn signed legislation slashing public employees' retirement benefits. An Illinois judge last month ruled that the legislation violated the state's constitution, though the ruling is being appealed.

Kansas, New Jersey and Illinois have each seen their credit ratings downgraded in recent years. That could end up increasing costs for the states when they borrow money.