••• Tax & Spending •••

Localities need belt-tightening, not a bailout


In weathering the COVID crisis, Congress seems determined to provide counties and cities with hundreds of billions of dollars in a taxpayer bailout. However, data from our 2020 Green Book highlights Kansans are massively over-governed well before the federal relief payments. If Kansas localities do not adjust their spending, the latest federal package will discourage localities from finding efficiencies and spurring a broad-based economic recovery.

Kansans have more local governmental organizations per capita than 47 other states. This over-governance has many unintended consequences. Kansas has the 14th highest rural homestead property taxes, the highest rural commercial property taxes, and the 3rd highest industrial property taxes in the country. Another unintended consequence is the high level of local government employment comprising at most, almost 50% of a county’s workforce. Lastly, despite the large presence of government services, the Kansas economy remains in the bottom half of its peers. More government is no guarantee of a healthy and strong economy.

Check out our annual Green Book here – this is a publication that explores the relationship between government size and economic growth.

A federal bailout to Kansas localities will only exacerbate Kansas’ government problem. It’s likely local governments have not really seen a hit to tax revenues that would call for federal aid. This is because, at the state level, 2020 tax revenues are higher than 2019 levels. Additionally, using Kansasopengov.org, Kansas county and city property tax revenues have increased every year since 1997. In other words, even during the Great Recession, property tax revenues did not fall. When home values fall, local governments are slow to adjust mill rates. While it makes tax revenues more stable, it also results in tax increases. The same is likely true under a COVID environment with many local governments opposed to Truth in Taxation.

Kansas localities shouldn’t use federal aid to merely backfill their general funds but make sensible and modest budget adjustments regardless. For example, the Boston city government froze hiring, cut overtime hours. San Antonio government trimmed their economic development incentives and implemented hiring freezes, cut pay, and furloughs to keep their budget flat.

Kansas localities have a unique opportunity to spur a recovery from economic growth. All it takes is bucking its 20-year trend outlined in our 2020 Green Book. Federal aid or not, cities and counties should adjust spending, and taxes lower to better handle the COVID recession.