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More Fiscal Headwinds in the Sunflower State

Regular Via Meadia readers know that we often describe America’s woefully underfunded state and local public pension systems as characteristic of “blue model” governance. The conditions that set the stage for the crisis—the prevalence of secure lifelong employment at a single institution, generous benefits packages, heavy regulation, and politically powerful unions—first came into place during the heyday of the blue social model, or the 1950s economic system that many modern Democrats now wax nostalgic for. And, not coincidentally, many of the states and localities facing the most acute crises of governability—in particular, union capture of the political system, and pension-driven fiscal insolvency—have traditionally been controlled by Democrats.

But that doesn’t mean that Republicans aren’t capable of creating or exacerbating blue model crises of their own. Kansas Governor Sam Brownback’s starve-the-beast tax-cutting regime has left the Sunflower State unable to support its basic infrastructure and educational obligations, and imperiled the stability of its public worker retirement programs. Pensions and Investments reports:

Moody’s Investors Services revised the outlook of Kansas’ issuer rating to negative from stable, the ratings agency announced on Tuesday, citing in part the underfunding of the state’s pension plans.

The rating remains at Aa2, but Moody’s said in a statement announcing the action that “the revision of the state’s outlook to negative from stable reflects the ongoing difficulties it is having restoring structural balance to its budget and getting on a path to sounder funding of its pension liabilities.”

As we’ve said before, aggressive, front-loaded tax-cuts are probably the wrong avenue for pursuing limited government objectives in a GOP-controlled state like Kansas. Instead of cutting taxes and hoping that the resultant fiscal shortfall will force government to shrink in the future, red reformers should focus on uprooting regulatory barriers to growth—NIMBY zoning restrictions, guild and licensing rules protecting entrenched interests, onerous tort laws—and on lowering the cost of government by streamlining bureaucracies and reforming public pension systems. Once these policies deliver growth and savings—but not before—the dividends should be returned to taxpayers in the form of tax cuts.

The doctrinaire right-wing governance of Kansas has, by virtually all measures, yielded disappointing results. It’s time for the state’s Tea Party leaders to start looking at different approaches if they want to go beyond protest politics and reform government in a lasting and productive way.

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