The Budget Blog

The governor’s long-term budget projection

By Duane Goossen

January 25, 2012

The recently released budget proposal from Gov. Sam Brownback includes something new: a long-term projection for the State General Fund. The projection, which goes all the way out to fiscal year 2018, has drawn the interest of legislative committees and has been part of the briefing packet put out by the Division of Budget.

Does a long-term projection make sense? What questions should be asked about it? What does it say about future expenditures for health programs?

During this session, the Legislature will consider major proposals on school finance, Medicaid and tax policy. If enacted, these proposals will have a relatively small effect on the next budget but much larger implications for future years. A long-term projection can help everyone understand the future financial effect of policy decisions, so the Governor’s Budget Office should be commended for developing this. Hopefully such a projection will become a regular part of future budget reports.

However, any long-term budget projection is based on assumptions of what might happen in the future. The projection could look very different if the assumptions are changed, so critical questions should always be asked about how the projection was put together.

Look at the governor’s long-term projection below from page 23 of Volume I of the Governor’s Budget Report.

Governor's Budget

The first portion of the chart is devoted to a projection of revenue, with the key line labeled as “Taxes.” The Taxes line shows a reduction in receipts in FY 2014 reflecting an expectation that the sales tax rate will drop, and then grows rather modestly into the future. However, the Taxes line does not try to model what would happen if the governor’s income tax proposal were implemented. What would the projection look like with the tax plan? What would the projection look like if revenue grew more robustly as it has after past recessions?

Under expenditures, Aid to K-12 Schools is projected to grow only about 2 percent per year and Higher Education expenditures are almost flat, growing only $10 million per year. Are those realistic growth rates? Should legislators hold rates at that level?

The costs of Human Service Caseloads (mostly Medicaid expenditures) are very likely underestimated in the projection, which has caseload costs almost $160 million lower in FY 2017 than in FY 2013. Human service caseload costs normally go up, sometimes substantially. The governor’s proposed Medicaid plan has been billed as something that will lower the growth rate, but will the plan realistically drop costs by $160 million from where they are now?

The KPERS line shows ever-larger employer contributions required by current state law. How would that change if a new KPERS plan were to be implemented?

The All Other Expenditures line has almost no growth built in. Should the assumptions allow for normal inflation? Does this reflect any expectation of salary increases for state workers? Is it realistic to project little or no growth for state health programs (other than Medicaid) and for state hospitals, which are part of the All Other Expenditures line?

This long-term projection gives one picture of how things might be in the future, but that picture could look very different if the governor’s tax plan was included or if different assumptions were made about future costs.