THE FISCAL LANDSCAPE: The Center for Budget and Policy Priorities projects that states – including Kansas – will lose a total of about $500 billion in revenue due to the economic impact of COVID-19. The Consensus Revenue Estimating group has met and reduced estimates of revenue collections in Kansas by nearly $1.3 billion over fiscal years 2020 and 2021.
There is a big hit in Kansas in FY 2020 – a reduction of $927 million – thanks in large part to the delay in income tax filing from April to July. This moves those collections – expected to be somewhere between $600 and $650 million – into FY 2021. Since the FY 2020 budget was estimated to have a rather large ending balance, the budget is still okay for this year with an ending balance of about $200 million going into FY 2021 that begins July 1.
Job losses mean that personal income tax collections are expected to be down by about $915 million over two years. Further reductions are anticipated in sales tax collections, thanks to so many businesses being closed. Reduced collection of severance taxes on oil and gas, thanks to the historically low price of oil at this time, is also expected.
All states are facing the reality that there will be a loss of revenue in FY 2021. Even with a $200 million ending balance and the 2020 income tax collections moved to FY 2021, Kansas is expected to have a deficit of some $653 million in FY 2021.
TAKING ACTION: Governor Laura Kelly has taken some immediate actions including stopping all new hires by state agencies unless the new position is specifically to deal with the COVID-19 pandemic, halting pay increases and eliminating discretionary spending. In addition, Republican legislative leaders are demanding she present a plan for re-opening the state and the economy.
NEA and KNEA are working at the federal and state levels to develop plans for organizing and advocacy around ensuring that future stimulus/stabilization funding is fully available for schools. In the coming days, your voice – the voice of our members – will be amplified as we send you alerts and “asks” for taking action. Now is the time to stay aware and stay connected to KNEA as we push information to you.
OTHER ISSUES: “Re-opening” protests are being organized by extreme right-wing organizations with the backing of deep-pocketed donors – some allegedly funded by Koch and DeVos money. While many working Kansans are struggling and understandably want to go back to work, some of these protests appear to be using the frustration of working Americans in order to further political agendas. A closer look at national polling indicates strong majorities of Americans oppose taking reckless action to just return to “business as usual” because doing so would likely expand the spread of the disease and grow the fiscal crisis in scope and duration. While it appears efforts to “flatten the curve” of infection rates have yielded some positive results, medical experts want states to stay the course and only open up once widespread testing is available and the curve is indeed flattened. To do otherwise is to risk new outbreaks that would overwhelm healthcare providers and extend the crisis.
Is Our Economic Trouble a “U,” a “V,” or a “W?”
Periodic economic downturns usually follow a pattern that is shaped like a U although with sides that are less straight. During a typical recession, the economy declines and eventually goes into a trough, staying low for a period before a slow recovery. This is what the “Great Recession” of 2008-09 looked like. The monetary system and businesses need to grind back up the recovery side.
But sometimes, the pattern can be more like a V. In this case, the drop is precipitous but the recovery can be quick. Such was the case after 9/11. There was a quick economic drop due to the immediate crisis and as that crisis was overcome, the economy quickly picked back up. Many economists believe that this time is more likely to be a V recovery. The COVID-19 crisis caused a fast, precipitous drop in economic activity but once the crisis is dealt with and businesses re-open, the recovery is likely to be quick. Obviously this is what we all hope will happen.
But what happens if we don’t appropriately deal with the cause of the pandemic? What happens if, in our desperation to “get back to normal,” we don’t get the underlying cause under control? You’ve probably seen some analogies lately: what if you’re feeling a little better, so you stop the course of antibiotics that your physician prescribed? What if you notice the parachute has slowed your drop so you take it off?
What we don’t want is a W recovery; one in which we rush back to business as usual because things appear to be better. If we don’t contain the spread of the disease, we risk getting a partial recovery followed by another collapse.
STRUCTURE, SAFETY & SUPPORTS: We know this hurts. We want our kids in school, we want to go back to our classrooms, we want our restaurants open for business and we desperately want a haircut. But more than that, we must be dedicated to stopping the virus and achieving our V recovery. Teachers have undertaken monumental efforts to connect with students and have learned new modes of delivering instruction – all while taking care of their own families.
NEA and KNEA are working everyday to ensure that when the crisis has abated, kids will return to a structured learning environment which is a safe and healthy place to gather and with the supports needed for teaching and learning.
U.S. Senate Passes a 4th Stimulus Package; House to Vote Thursday
Meanwhile in Washington, D.C., the U.S. Senate has passed a fourth stimulus package and has sent it over to the U.S. House for a likely vote on Thursday. President Trump has said he will sign the bill.
The new bill provides $500 billion in additional aid, $331billion of which goes to the Payroll Protection Program, or PPP, which provides loans that can be forgiven to small businesses that continue to pay their employees. The provision, intended to help small businesses and their employees – think local restaurants, for example – was created in a previous bill but has come under fire when it was revealed that cash-wealthy companies were getting much of the relief and small “mom-and-pop” businesses were missing out as the fund was depleted. Notable among those who got relief were Ruth’s Chris Steakhouses and Shake Shack. Under intense social media pressure, Shake Shack later returned the $10 million they received and issued a statement saying they never intended to deprive small businesses of the help.
The new stimulus bill also includes $75 billion for hospitals and $25 billion for coronavirus testing.
Missing from the bill is any funding to help states fill budget gaps caused by lost tax revenue. Kansas, as we reported above, is losing $1.3 billion in revenue over fiscal years 2020 and 2021; nationally, the Center for Budget and Policy Priorities estimates that the states have lost about $500 billion in revenue. Without assistance to fill those gaps, states will face extreme challenges in meeting the needs of their people – everything from support for education and public safety to averting furloughs and layoffs of workers needed to keep cities running.
While the Democrats in Congress proposed such relief in the current bill and Trump has indicated a willingness to provide such relief in a subsequent bill, Senate Republicans have so far indicated opposition to the idea.
So Far, Federal Money is Restricted to Efforts Specifically to Battle COVID-19
The truth is, the federal government is stepping up to provide stimulus funds – four bills so far totalling in the TRILLIONS of dollars. But another truth is that the federal money comes with some apparent restrictions.
Kansas is expected so far to receive $1.25 billion in federal stimulus money and is facing a $1.3 billion budget shortfall due to the economic impact of efforts to contain the spread of the virus. It would appear that the state budget would be safe…except that the federal money is not available for plugging the lost revenue hole in the state budget.
Kansas State Budget Director Larry Campbell noted that while states have some say in how the money can be used, it is clear that it can’t be used to “just supplant revenue declines.” Essentially, the funding is intended to be used on efforts to battle the virus. The state is waiting for more guidance from the U.S. Department of the Treasury to determine how much flexibility they have.
Kansas, of course, is not alone in this problem. States are looking at up to $500 billion in revenue shortfalls across the country and are hopeful that Congress will pass additional support specifically to plug budget holes and offset cuts to programs that would otherwise be necessary. Governors and state legislatures would obviously like to avoid having to make cuts to education, social services, and public safety and are looking to Congress for help.
The National Conference of State Legislatures (NCSL) has asked Congress to provide $300 billion in relief specifically to offset budget losses and U.S. Senators Bill Cassidy (R) of Louisiana and Bob Menendez (D) of New Jersey have proposed legislation providing $500 billion in relief.
It is important to remember at this time that the states have two jobs to accomplish: They must fight the spread of the virus AND provide for the needs of their citizens.
YOU can help! It’s time to contact the members of the Kansas Congressional Delegation!
Kansas – and all the states – desperately need the help of Congress. So far, congressional members have worked to provide support to small businesses, hospitals, and some large industries. They have taken action to provide additional unemployment insurance. They have given money to the states specifically to fight the spread of the disease.
Now we need help to preserve the services our citizens depend on; services that include education, the social service safety net, health care, and public safety. The states need help to offset the declines in revenue caused by the economic impact of fighting this virus.
We need you to contact U.S. Senators Jerry Moran and Pat Roberts of Kansas and our members of the U.S. House – Representatives Roger Marshall, Steve Watkins, Sharice Davids, and Ron Estes. Thank them for their efforts to protect small businesses and provide unemployment relief. Then urge them to support all efforts to provide relief for state budgets. Kansas cannot afford to be forced to make cuts to education, social services, health care, and public safety at this very difficult time.