Kansas' economy has mostly recovered from COVID-19. Where do experts say we go from here?

Andrew Bahl
Topeka Capital-Journal
Despite global supply chain issues, Kansas' economy has largely recovered from the COVID-19 pandemic, experts say. Investments in child care and other fields could help keep the momentum going.

In 2020, the early days of the COVID-19 pandemic brought massive uncertainty, not the least of which being an economy plunged into turmoil not seen since the Great Recession. 

Six months later, things were looking up — but many economists predicted a recovery that could continue to lag for some time, particularly for middle class and poor residents.

But 2021 has answered many of these questions — while bringing along with it a set of new ones.

Kansas' economy has effectively recovered from the pandemic, despite a worker shortage and concerns about inflation brought on by supply chain struggles in everything from automobiles to electronics to food.

Nationally, the stock market, retail sales and industrial production have returned to where they were before March 2020. And growth has lifted the state's agriculture sector by 300% in recent months, a boon for farmers and ranchers.

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But barriers remain to the state reaching its economic potential, experts say. A rash of older workers retired during the pandemic and ensuring they are adequately replaced could hinge on a range of factors, from increasing child care options to better attracting and retaining younger workers.

"A year ago, it was all down and dismal," said Donna Ginther, director of the Institute for Policy and Social Research at the University of Kansas. "Today, things are looking up with Kansas' recovery."

How will workforce concerns impact Kansas' economy going forward?

The economy in Kansas has recovered from the initial shock of the COVID-19 pandemic, which hit the state in full force in early spring of 2020. 

In the second quarter of 2021, Kansas' gross domestic product, a measure of economic strength, grew faster than in the U.S. as a whole and employment is up 1.7% since August of 2020. 

This has been bolstered by high prices for farmers and ranchers, with agriculture making up a key part of the state's economy. And the flood of funds from the American Rescue Act Plan have come on top of other federal aid, meaning Kansans often have full bank accounts and a desire to get out and spend.

But average Americans are likely more familiar with the phrases "labor shortage" and "inflation" than they were pre-pandemic and Kansas isn't immune to those pressures, which have frustrated shoppers for everything from cars to electronics and has created a political firestorm over who is at fault. 

Household items are becoming increasingly scarce due to supply chain snafus and those same issues are prompting inflation.

But Ginther noted that one of the most popular assumptions for a lack of workers — expanded unemployment benefits and other federal aid programs, established in the early days of the pandemic — was, in fact, a myth.

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Instead, the state's economy was in some sense a victim of its own success. Soaring stock markets made older Kansans still in the workforce more comfortable with retiring, not wanting to risk contracting COVID-19.

"Retirement started looking better and better and we have had our own great retirement in the state of Kansas," Ginther said.

The departure of baby boomers from the workforce has been feared for some time — and has hit the private and public sectors alike.

Holding onto and replacing these workers is an object of much angst for all employers. In the private sector, experts said there was merit to a system where bonuses would be awarded for retention, not just new workers who are hired. That could buy time to weather the economic tensions.

Kansas' broadband problems have persisted in many corners of the state. High prices have blocked out accessibility in the state's urban cores of Topeka, Wichita and Kansas City, Kan. and rural areas have proven too costly for investment.

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With private sector employees wanting flexibility to work from home, adjusting that will be a way to make the state more competitive — and prevent residents from leaving rural and frontier regions of Kansas.

And public employers wondered if a deferred retirement program, allowing older workers to collect both a pension and a lump sum when they retired could keep older workers around.

"We are struggling with entry level to executive level positions right now, struggling even to get applicants," Maury Thompson, deputy county manager for Johnson County, said. "We're just having a tremendous exodus of the workforce."

Policymakers plan child care solutions to ease economic barriers

Senate Minority Leader Dinah Sykes, D-Lenexa, second from left; Sen. Brenda Dietrich, R-Topeka; and Rep. Susan Concannon, R-Beloit, discuss potential policy options to boost the Kansas economy at a conference hosted Thursday at the University of Kansas' Institute for Policy and Social Research.

There is broad agreement among officials that one of the biggest problems facing the economy is the cost and scarcity of child care — something that won't be a surprise for working parents.

In fact, the cost of infant care in Kansas has risen to sky-high levels. A year of services now costs more than in-state tuition at the University of Kansas or Kansas State, Ginther said. 

And that's when parents have child care options in their community at all. Kelly Davydov, executive director of Childcare Aware of Kansas noted over 300 child care facilities have closed in the state since the COVID-19 pandemic began. Most of those have been home-based centers, the smallest sites which often are most accessible for families.

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Davydov noted there is a need for a diverse array of child care options in a community, as some families need different options based on the developmental needs of their kid or their cultural and environmental preferences.

Access issues — which affect rural and urban areas alike — make the discussion over improving quality even more complicated.

"When access becomes an issue then quality becomes a moot point — when there is nothing to choose from, there is nothing to choose from," Davydov said.

Experts say that improving the cost and availability of child care in Kansas would go a long way to bringing workers back into the labor force.

Roughly 300,000 women left the labor force in September, meaning the child care question is one leaders need to resolve if they want to help ease the shortage of workers, economists say.

Legislators broadly agree on the need for action, though concrete solutions have yet to be hammered out. One route could be to provide a state-backed subsidy for child care workers, increasing their pay in an effort to keep more employees on staff and facilities open.

Another option could be spurring on public-private partnerships or incentivize businesses to offer their own child care options with tax credits.

And officials say it is imperative to connect families with child care subsidies that already exist, with only 6% of eligible families using a Department of Children and Families-run program to offset child care for low-income families or situations where a parent is in college or job training courses.

"The dollars we invest from pre-natal to five (years old) are just exponential on what we save later on, whether it is in corrections or special ed in schools," said Senate Minority Leader Dinah Sykes, D-Lenexa.

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Federal funds to power programs once state, local governments have a plan

Federal funds, provided under the American Rescue Act Plan, could be called upon to offset some or all of these ideas.

Kansas has made little progress in using its share of $1.6 billion in direct aid from Washington. The state-level panel charged with allocating funds is in the midst of a listening tour in a handful of Kansas communities in a bid to hear from residents on how they want the money spent.

House Speaker Ron Ryckman, R-Olathe, a member of the Strengthening People and Revitalizing Kansas Executive Committee, noted they would be looking for ways to ensure they get the most bang for their buck in appropriating the federal money.

That could include local governments matching funds or creating public-private partnership to stretch the money further.

"We truly have a once in a lifetime opportunity, to look back 10 years from now and say ‘What did we do for our state?’ in all the areas we’re discussing," Ryckman said Monday at a listening tour stop in Wichita. "But know when we say yes to something, we are saying no to other things."

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Gov. Laura Kelly told reporters earlier this week she wanted the money to go to "all things infrastructure," though no formal blueprints or suggestions from her administration have yet been released on the matter.

And local governments themselves say they feel better positioned to spend the money than their allotment under the CARES Act, which was designed as a stop-gap measure to stop acute economic and health care woes last year.

Now, officials say they can think bigger on issues ranging from sewer and water utilities to child care — a way of ensuring the economic rebound isn't short lived in Kansas.

"We learned what works, what were roadblocks, where to go when we've identified the needs, who can get it done and how to spend those dollars effectively," Thompson said. "It is a huge advantage."

Andrew Bahl is a senior statehouse reporter for the Topeka Capital-Journal. He can be reached at abahl@gannett.com or by phone at 443-979-6100.