An ambitious plan to cut income taxes in Kansas will end up costing the state more money than it initially estimated after a key ratings agency downgraded the state’s debt on Wednesday.
Standard & Poor’s cited structural imbalances created by the tax cut in its decision to slice Kansas’s bond rating from AA+ to AA. That means Kansas will have to offer a higher interest rate to lenders when it issues new bonds.
The package of tax cuts, backed by Gov. Sam Brownback (R) and his conservative allies in the state legislature, was never offset with equal spending cuts, S&P said Wednesday. The lost revenue is expected to eat up much of Kansas’s budget reserves during this fiscal year; S&P said it expected the state to face a $333 million budget shortfall this year.
“In our opinion, there is reason to believe the budget is not structurally aligned,” S&P analysts wrote.
Moody’s has already downgraded Kansas. And so the experiment continues.