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Better Service, Better Price Balancing Tax Reform with Quality Service. Dave Trabert President, Kansas Policy Institute. Low-Burden States Outperform. Source: Bureau of Labor Statistics; Bureau of Economic Analysis; Census Bureau; Tax Foundation.

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better service better price balancing tax reform with quality service
Better Service, Better Price

Balancing Tax Reform with Quality Service

Dave Trabert

President, Kansas Policy Institute

low burden states outperform
Low-Burden States Outperform

Source: Bureau of Labor Statistics; Bureau of Economic Analysis; Census Bureau; Tax Foundation

controlled spending low taxes
Controlled Spending = Low Taxes
  • Unusual amounts of severance tax or tourism isn’t the secret to low taxes. States could be awash in oil revenue and still have a high tax burden if they spent more.
  • Low-burden states are large, small, coastal, inland, northern, southern, with and without plentiful natural resources…and they all keep spending under control.
controlled spending low taxes1
Controlled Spending = Low Taxes

Source: National Assoc. of State Budget Officers, Census Bureau. All state funds excluding federal funds and spending associated with bond issues.

2012 spending per resident budget
2012 Spending Per-Resident (budget)

Source: National Assoc. of State Budget Officers, Census Bureau. All state funds excluding federal funds and spending associated with bond issues.

kansas spent 25 billion all funds above inflation population growth
Kansas Spent $25 Billion (All Funds) above Inflation & Population Growth

Source: BLS, Census, Kansas Legislative Research Fiscal Facts

less spending not less service
Less Spending, Not Less Service
  • The goal is to provide the same or better service at a better price.
  • Across-the-board cuts aren’t the answer. Customers won’t come (or stay) for lower prices and lousy service.
  • Better Service, Better Price implementation requires leadership and full cooperationfrom everyone involved.
managing the transition
Managing the Transition
  • Thoughtful, effective spending reduction takes time.
  • Sales tax increase and/or elimination of income tax deductions aren’t necessary.
  • Multiple cash options exist to ‘buy time’ while implementing a comprehensive spending review.
cash options to buy time
Cash Options to ‘Buy Time’
  • State agencies began FY 2013 with $3.4 billion in positive-balance unencumbered cash reserves. Some is definitely not available but only a small portion is needed to balance the budget.
  • General Fund balance was $504 million. The rest is scattered across 1,460 other state funds.
cash options to buy time1
Cash Options to ‘Buy Time’
  • Don’t increase sales tax transfer to the highway fund.
  • $325 million in sales tax will be transferred to the highway fund this year. Money has been swept back in many years because KDOT had it in reserves.
  • $487 million is scheduled to be transferred in 2014. Keep the extra $162 million in General Fund until it’s proven that it’s necessary. Full efficiency audit of KDOT/KTA and needs/wants analysis of T-Works should be conducted first.
cash options to buy time2
Cash Options to ‘Buy Time’
  • Require school districts to use carryover cash as authorized by HB 2261 by considering it ‘local effort’. Total authorized is $114 million.
  • Carryover cash balances only increase when more money is collected than spent..
  • Districts began FY 2013 with $889 million in operating carryover cash. That’s a $431 million INCREASE since 2005.
better service better price
Better Service, Better Price
  • Taxpayer-focused review of everything done by state government.
  • Eliminate anything that’s no longer effective or necessary. Agencies recommendations based on how they measure effectiveness.
  • Find ways to provide everything else at a better price.
priority based budgeting
Priority-Based Budgeting
  • Agencies prioritize every program / service based on effectiveness. Bottom-up cost reductions avoid harmful across-the-board cuts.
  • Assign direct costs to programs and everything else to Overhead.
  • Least-effective programs considered for elimination or reduction. All others reviewed for efficiency opportunities.
privatization
Privatization
  • Every agency must identify functions and programs than cannot be privatized.
  • Create a Privatization Commission of experts in various fields to work with agencies on developing RFPs that protect service quality.
  • Cities, counties, states and universities across the nation are using privatization to save money, enhance services and even fund capital projects.
general efficiency review
General Efficiency Review
  • Create a State Efficiency Commission comprised of private sector experts in logistics, communications, purchasing, finance, IT, etc. to work with agency staff (‘agency’ include universities).
  • Review discretionary spending; have agencies explain how services would be impacted if some discretionary spending is reduced. (travel, memberships, consulting, advertising, etc.)
reduce targeted subsidies
Reduce Targeted Subsidies
  • Corporate welfare (crony capitalism) is rarely reviewed because much of it is tax expenditures instead of a budget line item.
  • Company / industry specific subsidies aren’t effective. They shift costs to other taxpayers, a higher tax burden has negative economic impact and subsidies create competitive disadvantage for those not receiving them.
  • Tax reform is a universal incentive.
lower cost is not lower quality
Lower Cost is not Lower Quality
  • Domestic migration is a good measure of citizens’ acceptance of service quality.
  • The ten highest-burden states lost 4.6% population due to DM between 1998 and 2012; the nine lowest-burden states (excluding Louisiana) gained 4.8%. Kansas lost 2.9%
  • If even there are some services that might be perceived to be of less quality, citizens are still deciding that low-tax states offer them the better ‘deal’.
spending doesn t drive achievement
Spending Doesn’t Drive Achievement

States among the Top Twenty composite scores for 4th Grade and 8th Grade Reading and Math using a multivariate analysis (2011 NAEP)

Source: Census Bureau; National Assessment of Educational Progress. Current spending excludes capital and debt; 2010 is most recent.

conclusion
Conclusion
  • Tax reform is necessary to avoid going over our own fiscal cliff. It’s about economic growth and job creation.
  • States that spend less, tax less…and grow more.
  • Service reduction isn’t a trade-off for tax reform.
  • Better Service, Better Price is the way to implement tax reform so everyone benefits.
contact info
Contact Info
  • KansasOpenGov.org
  • KansasPolicy.org
  • (316) 634-0218 Wichita office
  • (913) 213-5038 Overland Park office
  • (316) 993-4667 mobile
  • Dave.Trabert@KansasPolicy.org