Kansas Budget Deep In The Hole and Unemployment Insurance "Trust Fund" About To Run Dry

Add Kansas to the list of states with huge budget problems about to get worse. Please consider Unemployment Woes Complicate Kansas Budget Debate.

A need for Kansas to raise money to cover payments to unemployed workers has created a new problem for legislators and groups hoping to prevent budget cuts across state government by raising taxes.

The state expects its Unemployment Insurance Trust Fund to run out of money by mid-February and to borrow funds temporarily from the federal government to keep benefits flowing. Kansas law requires businesses to refill the fund, which triggered a $209 million increase in their payments for this year.

Meanwhile, Democratic Gov. Mark Parkinson and the Republican-controlled Legislature are wrestling with a projected budget shortfall of nearly $400 million for the fiscal year that begins July 1.

The unemployment fund isn't part of the state's general operating budget, but its problems are dampening enthusiasm for increasing taxes to close the gap. It's also bolstering the resolve of legislators and groups opposed to higher taxes.

Parkinson and his allies argue that schools, universities, social services, prisons and other programs face crippling cuts if legislators don't raise taxes.

The governor has proposed increasing the sales tax from 5.3 percent to 6.3 percent for three years. He'd also boost the cigarette tax by 55 cents a pack, to the national average of $1.34 and quadruple the tax on other tobacco products, to 40 percent.

Even fellow Democrats don't like the sales tax increase. For months, they've been talking about closing sales tax exemptions and reversing tax breaks granted in recent years, especially to businesses.

But some 69,500 businesses began receiving notices from the state Department of Labor about exactly how much more they'd be required to pay into the unemployment trust fund in mid-December, less than a month before legislators opened their 2010 session.

"I wish that we did not have to go back to businesses and ask them to increase their unemployment fund contributions," said House Minority Leader Paul Davis, a Lawrence Democrat. "I don't know exactly how that will play out if there's a push in the session to raise revenue."

Companies paid $198 million in 2009, and the Department of Labor said they must pay $407 million this year.

It's not just the total increase -- 106 percent -- upsetting businesses. Department of Labor officials acknowledge the largest percentage increases are being imposed upon businesses with few or no layoffs in recent years because of how Kansas law operates.

In Wichita, were GLMV Architecture formed this year from the merger of two firms, the combined business has been told it must pay nearly $46,000 more than its two predecessor firms did last year, a jump of 743 percent.

"People are trying to create jobs, and increasing our taxes is not going to help anything," said Patricia Koehler, president of JR Custom Metal Products Inc., in Wichita. "We're going to be taxed to death."

Mark Parkinson Unfit For Governor

Clearly Mark Parkinson is unfit to govern. Perhaps he knows that because he has bowed out of the gubernatorial race.

Parkinson and his allies argue that schools, universities, social services, prisons and other programs face crippling cuts if legislators don't raise taxes.

That my friends, is complete B***S***.

Schools, universities, prisons, etc, can lower wages they pay across the board and keep as many workers as they want. Not a single job has to be lost in theory. In practice, however, there are many useless bureaucrats who don't contribute anything but overhead.

Let me start by asking how many administrators the schools and universities have, and the salaries thereof. I bet there is fertile ground for massive cuts in education that would probably improve the system. I also suggest Kansas (and every other state) look at what pension benefits for the public sector costs. Privatizing prisons would be a good idea. Anything to dump unions would be a good idea.

Private sector benefits and wages are nowhere near what the public sector gets. Until public sector wages are in line with private sector, the union clowns and their supporters are way out of line to ask for tax hikes.

Enough Is Enough

Regardless of where you live, don't vote for any candidate for any office who wants to raise your taxes. People and businesses are already taxed to death.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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