Kansas might have to pay more to borrow money in the future after a national ratings agency cut the state’s bond rating in response to sharply lower tax revenues.
Moody’s Investors Service last week chopped Kansas’s bond rating from Aa1 to Aa2, its third-highest rating. The change came after state budget officials said tax revenues had dropped 45 percent from a year ago; so far this year, Kansas has taken in nearly half a billion dollars less than it did in the last fiscal year.
Officials attribute the drop to the effects of the “fiscal cliff,” when wealthy Americans moved billions of dollars in income into 2012 in order to avoid paying higher taxes if Democrats and Republicans hadn’t come to an agreement on Bush-era tax cuts.
That gave states a windfall of millions, if not billions, of additional dollars in the last fiscal year that was otherwise expected to show up this year. That is, people cashed in their stock in 2012 to pay lower rates on their 2013 taxes, rather than waiting until 2013 to pay higher rates on their 2014 taxes. Now, those tax revenues aren’t around to come in when they were initially expected.
But the lower tax revenue is partly on Gov. Sam Brownback’s (R) shoulders. Brownback and sympathetic Republicans in the state legislature enacted sweeping income tax cuts this year that have sent revenue collections lower.
In a statement, Brownback laid blame with the Obama administration. “What we are seeing today is the effect of tax increases implemented by the Obama administration that resulted in lower income tax payments and a depressed environment,” he said, according to the Kansas City Star.
Moody’s also said its analysts were concerned about the budget impacts of more than $100 million in new spending on schools ordered by the state Supreme Court and millions the state will have to spend on pension services. Kansas carries $16.7 billion in unfunded pension liabilities.
Twenty-nine states have bond ratings higher than Kansas.
Brownback’s popularity ratings have suffered during his first term in office. He faces state House Minority Leader Paul Davis (D) this November in an under-the-radar contest in an ordinarily ruby-red state. Davis criticized Brownback’s tax cuts as the source of the downgrade.