Before the teachers' strikes in red states, we had the parents' strike in Kansas—compelling the Republican legislature to override the vetoes of Republican Governor Sam Brownback, thereby rescinding some tax cuts and using the additional money to better fund the schools. The Kansas Parents Revolt was a harbinger, of a kind, of the current West Virginia-Oklahoma-Arizona-Kentucky Teachers Revolt, and Justin Miller chronicled it in the Summer 2017 issue of the Prospect. Subscribe here.
Near midnight on Tuesday, June 6, a number of Republicans in the Kansas legislature did something that few other elected Republicans had done in years: They acted responsibly. Joining with Democrats, they voted to roll back the huge tax cuts that Republican Governor Sam Brownback had inflicted on the state, which had devastated schools and other essential services while also depressing the state's economy. But after five years of this exercise in trickle-down, the damage had been done.
THE ROBERT B. DOCKING State Office Building looms large amid the sparse downtown Topeka landscape. Built along modernist lines in the 1950s, when government bureaucracy began to expand across the country, the simple concrete and glass structure provides a stark contrast with the Greco-Roman-style Kansas state capitol that has stood across the street since the late 19th century.
The Docking building was at one time home to most of the state government's agencies, such as the Department of Revenue, the Department of Children and Families, and the Alcoholic Beverage Control. Today, the 12-story, 500,000-square-foot building sits nearly vacant—a laminated white sheet of paper on the door reads: “No More Public Services In This Building.” One by one, the alphabet soup of state agencies that once occupied the building moved out, most relocating to rented space in private office buildings.
The decaying, hollowed-out building stands as a grim testament to the blunt-force trauma that Brownback's 2012 tax cuts visited on his state, and to the ensuing budgetary crises that led lawmakers to cut government services to the bone.
For years, Brownback has called for Docking to be demolished rather than renovated. It's an apt metaphor for his approach to government.
The state's health-care system teeters on the verge of catastrophe, as Brownback's privatization of state Medicaid services and further refusal to expand Medicaid has squeezed low-income Kansans and health-care providers alike. Dozens of struggling hospitals across the state are on the verge of closing. “We have to make decisions every day, on which bills to pay. I mean that literally,” one small-town hospital CEO says. Brownback’s decision to cut taxes rather than restore K–12 public education funding has strained both urban and rural school districts, compelling two districts to end the school year early. Meanwhile, he’s ushered in drastic cuts to social services and placed strict work requirements and other limits on welfare programs.
By last year, even Republicans in this heavily Republican state (which Donald Trump carried last November by 21.5 percentage points) had had it with their governor's insistence on turning the Sunflower State into a Petri dish for radical conservative economics. A number of Republican candidates ousted Brownback supporters in legislative primaries, and this year they teamed up with the minority Democrats in the legislature (whose numbers increased after last year's elections) to begin rolling back the Brownback catastrophe. Overturning the governor's vetoes, which required a two-thirds majority in each house, legislators this June voted to repeal the tax cuts enacted by Brownback and a Tea Party–dominated legislature in 2012.
But the devastation has been profound.
IN 2010, SAM BROWNBACK rode the Tea Party wave into the Kansas governorship, pledging to turn the state into a bulwark against President Barack Obama’s big-government liberalism. By 2012, through aggressive backroom politicking, he pressured hesitant moderate Republicans in the legislature to join conservatives in passing a radical tax plan that eliminated the state’s top income tax bracket, drastically slashed rates, and instituted an outright income tax exemption for limited liability companies—a huge tax break for a tiny segment of the population. Conversely, in a nod to “fiscal responsibility,” the plan did away with a number of tax credits that benefited low- and middle-income Kansans. Moderate Republicans in the Senate had thought they’d be able to engineer a less-extreme version of the cuts while in a conference committee with the House. They didn’t, and days later, Brownback signed into law perhaps the most radical version of trickle-down economics any state had ever embraced.
As part of the plan, Brownback instituted a “March to Zero” provision that would incrementally whittle the income and corporate tax rates down to nothing, while placing a 2.5 percent annual cap on state spending growth.
“Today's legislation will create tens of thousands of new jobs and help make Kansas the best place in America to start and grow a small business,” Brownback pronounced when he signed the tax cuts into law on May 22, 2012.
But the governor's push to create voodoo-economic bliss in Middle America never sparked that economic growth. To the contrary,
Brownback's Kansas has produced one of the worst-performing state economies in the country.
While the nation has seen 7.6 percent job growth since 2013, Kansas has lagged far behind, with an anemic rate of 3.5 percent. Brownback has blamed the failure to achieve economic growth—and the resulting revenue underperformance—on downturns in the state's agriculture and oil sectors, which, to be sure, have worsened the crisis on the margins but are not the driving force. Meanwhile, Kansans are fleeing the state in search of greener pastures: A 2015 survey found Kansas to be among the top ten states in the percentage of people packing up and moving away.
Brownback's promise that the cuts—particularly the LLC exemption—would be “a shot of adrenaline” for the Kansas economy will be written on his political headstone.
The LLC exemption, the crown jewel of the governor's tax policy, has allowed some 330,000 independent business owners—almost double the original estimates—to avoid state tax on most, if not all, their income, costing the state roughly $500 million in revenue in 2015 alone. A recent report from a team of researchers who scoured Kansans' income tax returns concludes that the exemption has fueled more tax evasion than job creation.
Though Brownback argued that exempting owner-operated businesses from taxes would increase investment and jobs in the state, the report found no such results. “We can't, to the best of our ability, find support for real responses in terms of economic activity because of the tax cuts,” report co-author and University of South Carolina economics professor Jason DeBacker says. Instead, the policy drove more people to simply reclassify their income as a pass-through to avoid taxation.
The small-business owners who were the intended beneficiaries suddenly had no tax liabilities each year. But with average savings of about $1,000 a month, according to one estimate, it was hardly enough to hire more workers or expand operations. One lawyer in suburban Johnson County told a Kansas City Star columnist in 2014 that he was saving as much as $10,000 a year—as were the 15 other partners in his practice—while the paralegals and other staffers with no ownership stake were still stuck paying income tax. He told the columnist that he planned to use his tax savings for a family vacation to Cancún. “I’m making out like a bandit, and it’s completely unfair,” he said.
Perhaps the most enlightening example of how the exemption worked came when a public radio station discovered in May 2016 that Bill Self, the head coach of the storied University of Kansas Jayhawks men's basketball team, was not paying taxes on about 90 percent of his annual $3 million compensation.
While Self pays taxes on the $230,000 annual salary he earns as an employee of the university, he claims himself as an independent contractor for the additional $2.75 million for “professional services rendered,” as radio station KCUR reported. Kansas Athletics, Inc., which operates the university's college sports, writes a $2.75 million check out to BCLT II, LLC, an entity owned by Self. Thanks to the exemption, Self, the highest-paid state employee, avoids taxation on that income, which would come to about $126,500 each year under the state's current tax brackets. Other well-compensated university coaches in the state utilize LLCs as tax shelters as well. Not even Brownback's staunchest supporters have argued that Self owns the team or that he has used his tax savings to expand its roster.
WHAT BROWNBACK'S TAX CUTS have accomplished is to have created a crisis of catastrophic proportions for state residents. The tax cuts blew an immediate hole in the $6 billion state budget, as revenue levels fell an astounding $713 million from fiscal years 2013 to 2014. Those revenue shortfalls have not abated in the years since. To help plug the hole, Brownback has run through all the state’s reserve funds and has increased borrowing, adding $1.3 billion to the state’s debt. “We are essentially the poorest state by now, with no rainy day fund—nothing in the bank,” says Duane Goossen, the former Kansas budget director for both Democratic and Republican governors.
The severely imbalanced budget led Moody's to downgrade Kansas's bond rating; three months later, Standard & Poor's followed suit.
The hit to the credit rating, though, was an inadequate measure of the damage to Kansans' lives.
Like a number of Republican governors, Brownback refused to expand Medicaid in the state with federal dollars allotted by the Affordable Care Act, blocking 150,000 low-income Kansans from access to medical care and forcing dozens of struggling hospitals to operate in the red, many on the cusp of closure. Four years ago, Brownback privatized the state's Medicaid program, arguing that Kansas should get out of the business of providing health-care services, and allow the private sector to provide less-expensive, higher-quality, and more-efficient care. However, the move has largely led to a crisis among beneficiaries and service providers alike, as access to care has become limited and state payouts to providers have been cut time and time again.
But Brownback's budget cuts greatly compounded the problems created by his failure to expand Medicaid. They compelled the state to neglect the duties it is still in charge of—like enrollment, eligibility, contracts, and performance oversight. “They basically stopped doing all those things,” says Sheldon Weisgrau, director of the Health Reform Resource Project, which educates and assists with the implementation of health reform and ACA services in Kansas. “The functions left to the state can't get done anymore because the state government has been so hollowed out.”
While federal law requires that states process Medicaid applications within 45 days, it can often take between six and eight months in Kansas. Last summer, the governor's office claimed there was a backlog of more than 3,000 people waiting to get on Medicaid. That number was eventually found to be closer to 15,000 people. While the state quickly processes low-cost applicants like children and young adults, Weisgrau says, older people who need more care are on the waiting list far longer.
“What we're seeing is they can't get declared for Medicaid and thus can't get into a nursing home; or people get into a nursing home but don't get approved and the nursing home doesn't get paid,” Weisgrau says. “People have died while on the backlog.”
Because Brownback slashed the number of state workers who determine Medicaid eligibility, those working on re-certifying recipients were shifted to certifying new applicants. Now, Weisgrau says, nobody is working on redetermination. “Typically if you don't get redetermined, you get dropped out of the program. We hear reports from the field from providers who are no longer getting paid for those people,” Weisgrau explains.
Last year, the federal Centers for Medicare and Medicaid Services charged Kansas with violating federal compliance laws, stating that its administration of Medicaid was putting people's health and safety at risk. Brownback's office dismissed the report as a politically motivated potshot from the Obama administration as it was leaving the White House.
Many of the state's rural hospitals, which are more likely to rely on Medicaid and Medicare reimbursements rather than private insurance payments, are struggling to stay open. All told, 34 Kansas hospitals are vulnerable to closing. One of those hospitals is Sumner Regional Medical Center in Wellington, 20 miles south of Wichita near the Oklahoma border. Voters in Sumner County have on multiple occasions voted to tax themselves to help keep the hospital open, most recently in 2016 when they approved a 1 percent sales tax increase.
“We're in true survival mode, constantly,” the hospital's CEO told the Kansas City Star. “If we’re going to go down, we’re going to go down swinging.”
If the Sumner hospital were to close, it could spell disaster for poor and elderly residents who might have a hard time making the trip up to Wichita, even more so for those who face a medical emergency. “Right now, if we lose [Sumner], we have people who live south of that along the Oklahoma border who, by the time an ambulance would get to them and back to a hospital, would have [a trip of] an hour or more,” says Anita Judd-Jenkins, a state representative whose district has three hospitals, two of which, including Sumner, are at risk of closure. “If that were your car wreck or your heart attack, would you not be concerned?”
BY PRIORITIZING HIS trickle-down tax cuts over all else, Brownback has also allowed a long-standing public school funding shortage to metastasize into a full-blown constitutional crisis.
Kansas's public school system is more reliant on state funding than those of most states. More than half the state's general fund is dedicated to funding K–12 public education. For decades, the state and local school districts have battled over funding levels and allocation.
In 2006, Kansas settled a lawsuit with school districts and committed to significant increases in funding over a three-year period. The state did increase funding, but when the Great Recession hit, then-Governor Mark Parkinson, a Democrat, made deep cuts to the education budget. The cuts were supposed to be temporary, but upon taking office in 2011, Brownback opted for his tax cuts rather than restoring the schools' funding. Between 2008 and 2013, state school funding fell by 16.5 percent when adjusted for inflation. In 2015, Brownback cut $28 million more from the state K–12 education budget. A month later, he signed legislation that scrapped the state's long-held school-financing formula, substituting a block-grant system that essentially locked in those cuts for the following two years. Two school districts were forced to end their school year early because they ran out of money.
The failure to restore pre-recession funding has disproportionately impacted urban school districts like Kansas City's and Wichita's.
The state funding formula includes an “equalization” provision that helps even out funding between wealthy school districts that can rely more on a large base of property tax revenue and poorer districts that can't. When the school cuts took effect, however, the poorer districts couldn't take up the slack with higher property taxes.
“Poor districts like ours bore all of the cuts of the recession,” says David Smith, chief of public affairs for Kansas City Public Schools. Meanwhile, the district was growing, and bringing in more at-risk students, who, in the state formula, are supposed to be weighted for additional funding. Of the district's 22,000 students, 80 percent qualify for free lunch. Nearly 45 percent of students are English-language learners. Smith, who also serves as the district's lobbyist in Topeka, estimates that his district has lost out on about $120 million in funding that it should have received by the terms of the pre-recession settlement.
In 2010, the Kansas City and Wichita school districts, as well as two more districts in central and western Kansas, sued the state. In 2015, the state Supreme Court ruled in the school districts' favor and sent the case back to a lower court, which split the case up into matters of “adequacy” and “equity.” Last summer, the legislature addressed the equity matter, which required about $40 million to fix.
That left “adequacy” unaddressed, however. Soon after the opening 2017 legislative session, the court ruled that the state was nowhere near adequately funding its public schools and ordered the legislature to devise a funding formula that experts estimate would require lawmakers to come up with more than $700 million over the next several years.
BY THE TIME BROWNBACK stood for re-election in 2014, more than 100 state Republican politicians—including former Senate President Steve Morris, who had presided over the 2012 tax cuts—endorsed his Democratic opponent, then–House Minority Leader Paul Davis. Brownback insisted all was well, and that his tax cuts were working out just as expected. The full picture of how disastrous the cuts were for the state’s fiscal health had not yet emerged. “The sun is shining in Kansas and don’t let anybody tell you any different,” Brownback pronounced in a campaign ad. He squeaked out a victory, winning by a bare 30,000 votes.
Just days after his re-election, a team of revenue forecasters announced that the state would fall $1 billion short of revenue estimates for 2015 and 2016. In December, Brownback proposed $280 million in total budget cuts. Unwilling to restore tax rates but desperate for revenue, he took nearly $100 million from the highway fund, and reduced the state's contribution to the Kansas Public Employees Retirement System by $40 million.
Throughout all this, Brownback's trickle-down obsessions have continued to play out.
He has called for regressive increases to the sales tax and higher taxes on alcohol and cigarettes. At the same time, he continued his war on progressivity, asking the legislature to institute a flat tax—a proposal that garnered just three votes in a clearly fed-up state Senate earlier this year.
That vote reflected a sea change in Kansas politics. Last August, Kansan Republican primary voters across the state supported a group of moderate challengers to more than a dozen ultra-conservative incumbents in legislative elections. Last November, even as Trump took the state with 57 percent of the vote, Democrats managed a pick-up of 12 seats in the state's House and one in the Senate. Heading into the January session, there was a new legislature with a class of freshmen determined to undo Brownback's damage.
The budgetary implications of that damage were very clear. When the new legislators took their seats at the start of this year, they confronted a proposed budget with close to a $1 billion shortfall over the next two years. Soon after the session began, the state Supreme Court announced its ruling that mandated adequate school funding, which required the appropriation of an additional $750 million over the next several years.
The legislatures of the preceding six years had been complicit in creating these shortfalls, but those legislatures were gone. “The [new] legislature looks a lot like it did before 2010,” when there was a stronger bloc of moderates, says Burdett Loomis, a political science professor at the University of Kansas. “People understand that in order to get things done, you have to run through this moderate [Republican]-Democratic coalition.”
Observers of Kansas politics will tell you that the state's two-party system really consists of four core political factions. There are the ultra-conservative Brownback allies, many of whom rode in on the 2010 Tea Party wave or with the governor's backing in 2012. In the legislature, these Republicans have formed the “Truth Caucus,” the state's counterparts to the far-right “Freedom Caucus” members in the U.S. House. The second group consists of more traditional conservatives, who in no way can be considered moderate but have soured on Brownback's experiment and are willing to vote to undo his tax policies to get the state on more solid fiscal ground.
Then there are the truly moderate Republicans, many of them from Johnson County, the state's wealthiest county, which borders Kansas City and is known for its high-quality public schools. These Republicans have led the battle to restore public school funding, which requires repealing the tax cuts. Last, there are the Democrats, who, with increased numbers and a working relationship with moderates, now have more political leverage than at any point during Brownback's governorship. They've sought to get the tax structure as close as possible to pre-2012 levels and ensure that school funding is restored and increased, particularly to the school districts that lost the most to the cuts.
Passing a budget that accomplished these goals was anything but easy, since overcoming a Brownback veto requires two-thirds support in each house, and the House speaker and Senate president were both staunchly opposed to tax hikes. The moderates' and Democrats' task was eased, however, by a collapse in Brownback's popular support. In 2016, a Morning Consult poll found him to be the least-popular governor in the country, with only 26 percent of the surveyed Kansans approving of his job performance. This year, the only governor less popular with his constituents was New Jersey Governor Chris Christie, bogged down in Bridgegate and the anti-Trump backlash.
IN FEBRUARY, THE NEWLY empowered coalition of moderates, Democrats, and a handful of fiscally worried conservatives passed legislation that repealed the LLC exemption, reinstituted a third income tax bracket, and increased rates, a plan that would have raised enough revenue to fill the budget deficit and put the state on the path to balancing the budget. A month later, in an even more uphill triumph, the legislature voted to expand Medicaid in the state.
Brownback promptly vetoed both measures. The coalition scrambled to whip up the additional votes to override the governor, but failed narrowly on both fronts.
That was a tough introduction to the legislature for Judd-Jenkins, who represents the district with the Sumner hospital. She's a moderate Republican who ousted the conservative incumbent in the 2016 primary, and she came to Topeka to help fix the state's mounting fiscal problems by, in part, expanding Medicaid.
When Brownback blocked the expansion, “It was the most emotional day I've had in the Statehouse,” she tells me. “We are tasked with [helping] the numbers of people in Kansas that are in need. We take care of each other. That's the reason I stayed in Kansas; that's the values I love about us.
“To live in the denial of those numbers, rather than recognition of those numbers … I don't understand—I don't get a concept that wants to not recognize the truth of who we are,” she says.
As legislators headed back to Topeka in the first week of May for a “wrap-up session,” the two numbers that echoed through the building's cavernous atrium were 84 and 27—the number of representatives and senators, respectively, needed to override the governor's vetoes.
Legislators still needed to pass a budget, and they needed to pass a school-financing bill that would meet the state Supreme Court's call for adequate funding. To fund both the budget shortfall and the public school system, they were faced with the necessity of passing a tax reform plan even more far-reaching than the one Brownback had already vetoed. Many wanted to undo Brownback's rate cuts by reinstituting a third bracket, raising rates closer to pre-2012 levels, and most of all, eliminating the LLC loophole. The challenge they faced was how to align enough Democrats and Republicans to vote for a package that was substantial enough to satisfy the former and frugal enough not to dissuade the latter.
Sitting in his third-floor office on the first Monday in May—the start of the wrap-up session—Jim Ward, the Democratic House leader, sounded optimistic about the chances of cobbling together a veto-proof majority. In his first legislative session as the party's House leader, he was shepherding the largest House Democratic caucus in seven years through one of the most consequential moments in the state's history. Along with his colleague, Senate Democratic leader Anthony Hensley, he wielded more leverage in the Topeka statehouse than Democrats have had at any prior point in Brownback's tenure.
I asked if he thought the votes were there. “Yes, I do,” he quickly replied. “Now, whether they're here today or next month ... at some point in time, it'll be who blinks first.”
The optimism wasn't limited to Ward and his caucus.
Many moderate Republicans were fed up with Brownback's intransigence and eager to get something done
—a feeling compounded by the fact that the state's public schools were now at the center of the political battle.
“There's a growing group of us who see things differently [than prior legislatures],” Melissa Rooker, an influential moderate House Republican from Johnson County and a longtime public schools advocate, told me on the first day of the veto session. “I just don't think it gets resolved until the House has proven a few times over that, in this veto session, we're not willing to accept something that will be subpar and leave us with annual battles—because we're tired of it. And it's time to put the budget back on a sustainable path.”
Still, the political gymnastics required to cobble a veto-proof majority were daunting. “It's trying to get a sense for where everyone is and then running that as an option to see if we are getting the right sense of the body,” Steven Johnson, a moderate Republican from a small town in central Kansas who chairs the House tax committee, told me in the capitol rotunda as it was becoming clear that, once again, House leadership would not bring a tax proposal to vote on the floor. “This is a year where I don't think any one of us is driving the bus, so it is work trying to get together to find where we have the necessary majority.”
There was also a sense among many lawmakers that Republican House Speaker Ron Ryckman and Senate President Susan Wagle—both staunch conservatives who didn't want to be associated with any sort of substantial tax hike (Wagle is rumored to be running for Congress in 2018)—were trying to drag out the process and pass a cheaper, short-term alternative.
One month later, Democratic House Leader Ward was still holding out for more funding, having rejected various plans that didn't pass revenue-raising muster. His decision to oppose a substantial tax reform package, which many moderates saw as their best possible chance at a deal, was testing the strength of the coalition. Ward and other Democrats were adamant that the package didn't raise close to enough for schools, which would mean the legislature would need to come back for a special summer session if the Supreme Court rejected the school-financing plan.
As the session spilled into June, the legislature was approaching the record for longest legislative session in the state's history. In the very early hours of June 5, the legislature passed a tax plan that rolled back Brownback's tax policy and would raise about $1.2 billion over the next two years by doing away with the LLC exemption, ending the March to Zero, and reinstituting a third tax bracket with higher rates across the board. One factor that brought Ward and the Democrats on board was that the bill reinstated a number of tax credits benefiting poor and middle-income Kansans (including a child tax credit), which Brownback had scrapped. The legislature also passed a school-financing plan that would direct nearly $300 million more to schools over the next two years while tethering future aid to the rate of inflation.
In a matter of hours, Brownback announced that he would veto the tax rollback.
Later that night, the Senate approved a veto override by a one-vote margin. “I don't want to be disrespectful to the governor. He still believes in it. I don't,” Republican Senate Majority Leader Jim Denning said during the floor debate.
“I firmly believe this wasn't about creating jobs,” said Democratic Senator Tom Holland, who ran for governor against Brownback in 2010. “We should have got off this crazy train a long time ago.”
The heavier lift was in the House, where the tax plan had passed 15 votes shy of the veto override level. This time, however, a number of conservatives who had voted against the bill switched their vote, declaring it time to move on. The override ultimately passed with four votes more than needed. There was no outburst of cheers on the floor when the House vote came in and Brownback's tax cuts were officially wiped away. There was a quiet murmur as lawmakers talked amongst themselves. While it was a major relief for the state, it was just the first step on a long path.
“We will need many years to recover, rebuild the fiscal stability that has been wiped out by Brownback's tax policies,” Rooker told me the day after the vote. “By that I mean, healthy ending balances, catching up on delayed payments, paying off bond debt and raising the capital Kansas needs to maintain and improve our infrastructure.”
Just two days after the cuts were undone, Moody's revised its outlook for the state from “negative” to “stable,” declaring it a “major step forward.”
The lessons of Sam Brownback's disastrous experiment have become all the more important nationally as President Trump, whose economic doctrine is cut from the same cloth napkin on which Arthur Laffer first sketched his supply-side curve more than 40 years ago, tries to advance a similarly radical series of tax cuts in Washington. (Indeed, Brownback flew Laffer out to Kansas in 2012, where he was paid $75,000 to advise the legislature on the wisdom of slashing taxes, promising astounding dividends of economic growth in exchange.) Trump's proposed budget echoes the Kansas experiment, slashing income tax rates for the wealthiest few and calling for a drastic rate cut for pass-through entities—a move that would inflict Brownback's LLC debacle on the nation.
Brownback's should be a cautionary tale, of course, for the Republicans in Congress and the White House. Should they slash the provision of affordable health coverage to cut taxes for the rich, should they decimate government services while eliminating taxes on the wealthiest Americans, all their invocations of trickle-down economics—that the rich will invest their tax savings in job-creating enterprises, a theory disproved again, again, and again—ultimately won't win them popular support. The fate of Sam Brownback—scorned by his state, overridden by his legislature, rejected by his party—should make that crystal clear.
Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives' age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren't made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.