State’s new tax projections trim budget shortfall to $900 million

In this November 2016 file photo, the governor’s budget director Shawn Sullivan, left and Raney Gilliland, director of the Kansas Legislative Research Department, are pictured on Thursday at the Kansas Statehouse. (November 2016 file photograph/The Capital-Journal)

The state government’s projected budget shortfall for the next two years shrank from about $1 billion to about $900 million Thursday after a key biannual revenue analysis predicted better than anticipated tax receipts.

 

Members of the state’s consensus revenue group — which brings together legislative researchers, university economists and representatives of Gov. Sam Brownback in the Division of Budget and the Department of Revenue — offered cautiously optimistic projections that followed multiple downward revisions in recent years.

When asked whether Kansas had turned a corner, officials were hesitant to draw conclusions.

“It would be nice if I could say that positively, but you know, you can’t predict everything that might happen in the future,” said legislative research director Raney Gilliland. “I certainly hope that we have. We certainly attempted to incorporate as much information as we can into these revenue estimates.”

Gilliland said that, percentagewise, the upward trend in tax sources is “very low” and that there is “no information to indicate to us that we will make great strides in growth” in the foreseeable future.

The latest tax projections are critical because lawmakers returning in May from a three-week break have yet to tackle the looming 2018 and 2019 revenue shortfalls by passing budget and tax bills for the coming years.

Though Thursday’s news narrows the projected budget hole to about $900 million, that figure doesn’t include extra spending on public schools. In March, the Kansas Supreme Court found the state’s K-12 funding unconstitutional, which could prompt several hundred million more in state aid for schools in coming years.

Inaccurate predictions of tax revenue and lackluster monthly revenue receipts have been a political sore point in years following 2012 tax cuts — fueling critics who accuse conservatives, including Gov. Sam Brownback, of undermining the state’s fiscal stability.

Monthly receipts have at times come up tens of millions of dollars short of expectations. Officials have cited underperforming sales tax and unfavorable trends in the energy and agriculture industries among factors contributing to the state’s revenue woes.

Budget director Shawn Sullivan said he believes Kansas has “started to see some positive growth since November, December of the last year.”

“Looking at our sales tax growth, income tax,” he said, “it seems that they are trending the right way, but you never know.”

Sullivan reiterated he would like to see the annual springtime revenue estimate pushed back from April 20 to early May so the analysis can factor in information regarding state income tax receipts to boost accuracy.

The past five biannual revisions pulled tax estimates downward for their respective fiscal years. The reductions were about $200 million in November 2014, $90 million in April 2015, $160 million in November 2015, $175 million in April 2016 and $350 million in November 2016.

Kansas’ revenue shortfalls in recent years prompted midyear budget rollbacks and internal government transfers and lending. Attempts at a solution emerged from a record-long 2015 legislative session, which hiked cigarette and sales taxes, but the problem continued.

Thursday’s revisions projected $62.5 million more in 2017 tax receipts and about $43 million and $51 million for 2018 and 2019, respectively. Percentagewise, those changes represent 1.1, 0.9 and 0.7 percent increases respectively.

Senate Minority Leader Anthony Hensley, of Topeka, said this “doesn’t change anything.”

“We still have a self-inflicted budget crisis, inherently unfair tax policies, and underfunded schools,” he said in a news release. “The Legislature has a monumental task ahead of us when we return on May 1 because Sam Brownback refuses to take any responsibility.”

House Speaker Ron Ryckman, of Olathe, also issued a statement.

“As we work to right-size government for all Kansans,” it said, “we must continue to craft legislation that fosters an environment of innovation and ingenuity in both rural and urban Kansas, while funding core services.”

Mark Tallman, a lobbyist for the Kansas Association of School Boards, questioned the significance of the higher tax estimates in the context of the state’s overall budget.

“It’s slightly better than going down,” he said, comparing to past downward revisions, but added, “It’s $50 million in a $6 billion general fund, so what are we saying?”

Kansas also had faced a nearly $300 million budget shortfall in the current fiscal year ending June 30, which lawmakers and the governor resolved this month by digging into a long-term investment fund. In the current and next fiscal year, the state will take about $360 million from that fund.

 

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