2013 Newsletter Header
March 10, 2013 - In This Issue:
  • Nationally, 90% of small business owners pay a professional tax preparer because of confusing tax codes. *National Federation of Independent Business
  • 81% of small business owners think spending cuts should take priority over tax increases to reduce the U. S. deficit.  *National Federation of Independent Business
  • Economic activity in Kansas
    • Johnson County produces 50%
    • Sedgwick/Butler produces 25%
    • The remaining parts of state produce 25%
  • KS Unemployment rate 5.4%
    CPI-Midwest 1.8%
  • Mediator for the school finance lawsuit should be known this week

Last week the order of business in the Legislature was limited due to Turnaround. We did not have session on Monday or Tuesday to allow the clerical staff time to process the large amount of legislation passed before the halfway point deadline. Starting next week, the pace will quickly pick up again as we complete our work through the end of the session. Over the next few weeks the Senate will focus on legislation passed by the House.
House and Senate to Begin Heavy Lifting


In addition to working on the House bills passed over to us we will work on the budget and tax policy.  This year we have to match up the budget and the Governors proposed tax plan.  The major work will center around paying for the $800 million in tax cuts effective January 1, 2013 and the Governors proposed additional billion dollar tax cuts for years 2014-2018,  The analytical work gets a bit difficult. We are working on a two year budget for the first time, however with the proposed additional tax cuts we have to do some pro forma projections out through 2018.  Projections are never 100% accurate, so we have to have safety nets and triggers in place to keep essential services from being negatively affected.  As we work through the tax policy and the budget the Kansas Legislature will consider a holistic view of our state's taxpayer income to formulate a plan that best suits the needs of all Kansans.


Here is a recap of the tax policy passed in 2012 and what the Governor is further proposing in 2013.

Where Does All The Money Go?

This year's budget work will be tied to the Tax policy in a big way.  The plan is for the Senate to pass a tax plan and make the budget fit.  The plan for the House is to pass a budget and make the tax plan fit.  Initially I thought this was nuts.  However, it should give us many variables to work with once the Budget and Tax Bills get in Conference Committee.


Below are the major budget components of state taxes and state spending. 

It does not take much analysis to realize that government will basically increase spending as tax receipts increase.  I sometimes refer to all the program requests as "Infinite demand, limited resources."  It also does not take much analysis to realize that government is slow to respond to recessions.  Both in the 2002 and 2008 recessions it took a while to match up expenses with reduced tax collections.  The good news is that Kansas balances its budget. The federal government does not.

Testimony Heard in Senate Commerce Committee

Art Hall, Executive Director of Center for Applied Economics, Kansas University School of Business gave a 1 hour testimony on the Kansas economy.  The testimony covered demographic changes, urbanization, and productivity.


An interesting graph he presented was the population change in the U.S.

The blue area represents population declines. It is occurring all across the plain states.  Dr. Hall was clear to the committee that this population change is a long run economic adjustment and not an economic decline.  What is going on in most of Kansas and other plain states is a pattern of urbanization also known as regionalization. The urbanization and regionalization patterns become apparent by the 1930's.


Productivity growth tends to happen in geographic areas characterized by greater population density.  Productivity growth is the key driver of higher per-worker payroll.  This is made very clear with the population shifts to Johnson County.  As was mentioned in the quick facts Johnson County produces 50% of the economic activity in Kansas.

A goal and objective of the Rural Opportunity Zones is to create just a scenario in Western Kansas.  If one region is successful in creating population density economic and productivity will increase.  Re-shoring of manufacturing is returning to the U.S. and Kansas. This could be an opportunity for a single rural region to build up population density and economic productivity.

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Kathy Vance, Treasurer

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