Davis criticizes the governor’s plan of using income tax cuts and exemptions to spur job growth as a “failed experiment” that hasn’t met Brownback’s lofty promises of a “shot of adrenaline to the heart” of the state’s economy.
▪ Kansas jobs have risen at a more or less steady pace, between 1 and 2 percent a year, since the recession bottomed out in early 2010, regardless of who’s in the governor’s office.
▪ Kansas saw its highest post-recession percentage of job growth in 2011, the year before Brownback and the state Legislature slashed business taxes in an effort to spur job creation.
▪ The only year since the recession that Kansas job growth beat the national rate was 2010, former Gov. Mark Parkinson’s first and only full year in office.
▪ Kansas has yet to return to its peak private-sector employment of 1,136,400 jobs, which came in March 2008 under then-Gov. Kathleen Sebelius. In July, the most recent month of final data, the bureau showed Kansas with 1,129,800 jobs, 6,600 jobs south of the 2008 peak.
▪ In comparison to neighboring states, Kansas has consistently beaten Missouri in percentage of job growth, but trailed Oklahoma, Nebraska and Colorado.
To understand job creation, you need to understand that the Bureau of Labor Statistics actually releases results from two job surveys every month, said Malcolm Harris, an economist and professor of finance at Friends University in Wichita.
One is called the Current Population Survey, or Household Survey, which is based on a national sampling of 60,000 households by the Census Bureau and is used to calculate the overall unemployment rate.
The other is called the Current Employment Survey, also known as the Payroll Survey, which gathers data from a sampling of 554,000 business establishments, representing about a third of total nonfarm employment.
According to Harris, there are some significant differences between the two.
The biggest is that the Household Survey is more generous in its definition of a job. It includes people who work on their own farms, unincorporated self-employed people, unpaid relatives who work in a family business and workers who are absent from their jobs without pay.
The Payroll Survey excludes all those groups except for agricultural loggers.
By and large, politicians in campaign mode tend to cite from whichever survey makes them look better.
In the current election, Brownback has used the Payroll Survey for his claim of 55,000 new jobs on his watch, which is what the survey shows. He has used numbers from the Household Survey, which includes unpaid and family workers, to bolster his claim that more Kansans are working than ever before.
While the Payroll Survey showed Kansas employment peaking in 2007, employment figures derived from the Household Survey indicate that state employment was at its highest in May of this year at 1,423,784. From May to July, that number dropped by about 400 workers.
“Wall Street follows the Payroll Survey because it’s less noisy, it doesn’t jump around as much,” Harris said.
Results of the Payroll Survey come in two basic flavors, raw data and seasonally adjusted to smooth out spikes like the Christmas season, when stores hire large numbers of temporary and part-time workers.
The Eagle’s analysis of employment is based on the Payroll Survey of private-sector jobs, seasonally adjusted, the numbers Brownback cites for his job-creation claim.
One thing that the data shows clearly is that Kansas job numbers are tied closely to what happens in the national economy.
The highest rates of job growth in the past 20 years were 1995-97, during a period of national and state prosperity, with Bill Clinton in the White House and Bill Graves in the Kansas governor’s office.
In those three years, Kansas job growth ran at 2.7, 3.3 and 4.8 percent, adding more than 100,000 jobs to the economy in three years before tapering down to more normal levels going into the decade of the 2000s.
At a recent campaign appearance, Brownback’s running mate, Lt. Gov. Jeff Colyer, referred to the decade from 2000 to 2010 as “the lost decade” for job growth.
By one measure, it was. About 24,000 fewer people in Kansas were working in January 2010 than in January 2000.
But the data shows that Kansas actually grew jobs in five of those 10 years.
The big declines came almost entirely from two significant national events: the slowdown – particularly in the aviation industry – that followed the 9/11 terrorist attacks in 2001 and the Great Recession that began in 2008.
The biggest dive came in 2009, when the state lost almost 56,000 jobs in a single year, the deepest decline in 20 years.
Kansas’ job turnaround actually began in February of 2010 on Parkinson’s watch, the labor statistics show. The state added 13,400 jobs that year for a growth rate of 1.3 percent, barely edging the national rate of 1.2 percent, the data shows.
During Brownback’s three full years in office, the state added 20,500 jobs in 2011 (1.9 percent), 11,700 jobs in 2012 (1.1 percent) and 17,000 (1.5 percent) in 2013. In the first half of this year, the state has added 6,400 jobs.
So far this year, Kansas trails the national job creation rate .6 percent to 1.2 percent.
Since the recession, Kansas has seen, at best, mixed results in job creation compared to neighboring states, the Payroll Survey shows.
▪ Missouri – This state is the bright spot for Kansas. Largely owing to Kansas City-area business migrating over the state line, Kansas has beaten Missouri on percentage job growth for four years straight. The best year for Kansas was 2011 when its jobs increased 1.9 percent to Missouri’s 1.1. This year, Missouri could be making a comeback. The statistics show a 1.4 percent job increase there for the first half of the year, compared to .6 percent in Kansas.
▪ Nebraska – Unique among the neighboring states, Nebraska didn’t lose any jobs during the recession and has been consistently adding jobs at 1.7 to 1.9 percent a year since 1999. Kansas hasn’t beaten Nebraska’s job growth since 2007, but might pull ahead this year based on a downward trend in Nebraska employment for the first half of 2014.
▪ Colorado – The Rocky Mountain state was hit harder than Kansas by the recession but has rebounded much faster, beating Kansas on job numbers since 2010. Its best year was a 3 percent increase in jobs in 2013, compared to 1.5 percent in Kansas.
▪ Oklahoma – Also harder hit by recession, Oklahoma has beaten Kansas in recovering jobs over the past four years. Last year, the Sooner state grew jobs at a 2.3 percent clip compared to Kansas’ 1.5 percent.
Despite the heavy influence of the national economy, state policies do make a difference in job creation, said Martin Perline, a professor of labor economics at Wichita State University.
The centerpiece of Brownback’s job creation effort was eliminating income taxes for owners of limited liability companies, sole proprietorships and corporations organized under Subchapter S of the federal tax code. Profits from those businesses are passed through to the owners, who pay the taxes on their personal income returns.
But after Brownback’s changes to tax policy, those business owners no longer pay state income tax at the business or personal level, the theory being that they’ll pump that extra income into their business and hire more employees, creating more jobs.
Perline said that’s true but only to a degree.
A recent report by the Nelson A. Rockefeller Institute at the State University of New York showed that Kansas income and sales tax collections, the bulk of the state’s general fund, were down almost 22 percent the second quarter of this year – far and away the biggest drop in the nation.
In a shortfall situation, state government has to either raise other taxes, which negates the effect of cutting income taxes, or cut spending, Perline said.
“If you cut expenditures, you’re going to wind up cutting public jobs,” Perline said.
The Payroll Survey numbers show that government employment in Kansas has dropped by about 6,800 jobs since Brownback took office.
Cutting government jobs means cutting public services, Perline said. That, in turn can lead to private-sector job cuts because business decision-makers demand a standard of living that includes quality schools, highways, parks and other amenities.
Brownback and the economic adviser who guided his plan, former Reagan Administration adviser Arthur Laffer, says that economic growth will eventually offset the initial state revenue shortfalls.
“Tax policy, particularly, tax policy takes time for it to have its impact,” Brownback said. “I think what you have to look at is your long-term trend cycles and your states.
Perline said historical examples show that tax cuts will create jobs, but not enough to cover the lost tax revenue.
Brownback, however, said he remains committed to his plan and believes it will bear fruit.