Kansas Resolves Budget Impasse

February 18, 2009

While state budget eyes are on California, where a budget impasse remains unresolved, Kansas yesterday reached a budget agreement whereby Democrats agreed to reduce spending and Republicans agreed to permit borrowing from other state funds:

The bill [Governor Kathleen] Sebelius signed erases the state’s $200 million current-year budget deficit and gives lawmakers a head start toward eliminating $1 billion worth of red ink in next year’s budget.

Because of a cash-flow problem, the state had only $10 million in its checking account Monday morning — not enough to cover payroll, tax refunds and other state bills.

Sebelius had proposed borrowing the money from other state funds, but Republican leaders balked. They called on her to sign their budget reduction bill to ensure the state would have money available to repay the internal loans.

There had been some talking of suspending tax refunds (again like California) but that has been mooted by the new budget.

Meanwhile, Arizona’s state treasurer publicly announced that there will be no problems sending out state tax refund checks. He says news about California and Kansas had prompted inquiries to his office, and that’s probably true for other states as well.

Yesterday, I spoke about the Tax Foundation’s state budgets report at the Heritage Foundation, and will be speaking on it at other venues in the near future. Check out that report here.

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A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.

A tax refund is a reimbursement to taxpayers who have overpaid their taxes, often due to having employers withhold too much from paychecks. The U.S. Treasury estimates that nearly three-fourths of taxpayers are over-withheld, resulting in a tax refund for millions. Overpaying taxes can be viewed as an interest-free loan to the government. On the other hand, approximately one-fifth of taxpayers underwithhold; this can occur if a person works multiple jobs and does not appropriately adjust their W-4 to account for additional income, or if spousal income is not appropriately accounted for on W-4s.