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Kansas’ Credit Rating Goes Down the Tubes

The fiscal picture in Kansas continues to darken as the state reels from Governor Sam Brownback’s budget-busting tax cuts. Governing magazine reports:

A major rating agency on Tuesday downgraded Kansas’ credit rating for the second time in two years because of the state’s budget problems.

S&P Global Ratings dropped its rating for Kansas to AA-, from AA, three months after putting the state on a negative credit watch. S&P also dropped the state’s credit rating in August 2014. […]

Kansas has struggled to balance its budget since Republican Gov. Sam Brownback successfully pushed the GOP-dominated Legislature to cut personal income taxes in 2012 and 2013 in an effort to stimulate the state’s economy.

Brownback rode the Tea Party wave to become governor of Kansas in 2010, promising to make it a national example for the promise of doctrinaire small government conservatism. But he never had a plan to pay for the front-loaded tax cuts that were supposed to grow the economy and force the government to shrink.

As we’ve said before, Brownback’s “starve-the-beast” approach doesn’t make much sense for Republican policymakers in deep red states. First of all, the biggest obstacles to growth in Republican dominated states often have more to do with regulations—like licensing, zoning, and tort laws—than with punitive tax rates. Moreover, Republican-legislatures and governors should be able to promptly implement cost-saving measures like public pension reform. Serious state leaders should focus on stimulating growth and cutting costs, and then on returning the dividends to taxpayers in the form of lower tax rates.

The reverse approach—front-loading tax cuts, and hoping spending will shrink down the line—might make sense in certain circumstances. But as Sunflower State Republicans are learning the hard way, it also runs the risk of further undermining vital public services, ballooning the debt, and raising borrowing costs. That’s not an especially appealing model for reform.

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