Persistent evidence of economic distress in the Kansas agriculture and energy sectors combined Thursday with emerging anxiety in banking and manufacturing to temper enthusiasm about low unemployment and an uptick in personal income.
A group of state university economists, officials of Gov. Sam Brownback’s administration and the Kansas Legislature’s research staff emerged from a closed-door meeting with predictions state tax revenue would increase slightly in the next two fiscal years. Puny growth in collections means lawmakers will be challenged to close an anticipated $900 million state budget shortfall through June 2019.
“The energy and agriculture sectors continue to drag down our economy,” said Shawn Sullivan, budget director for Brownback and part of the consensus revenue estimating group.
Modest crude oil price increases are expected in 2018 and 2019, the forecasters said, but reduction in well production could blunt any gain and undercut state severance tax collections.
The Kansas Department of Agriculture predicted net farm income would be negative this year compared to 2016. Wheat, corn, soybeans and sorghum are expected to yield below zero net income per acre this year.
Raney Gilliland, director of the Kansas Legislative Research Department and an estimating group member, said the total value of Kansas crop production would fall to the lowest level since 2009. Weakness in commodity prices is damaging rural banks engaged in heavy farm lending, Gilliland said.
“There are 13 problem banks in the state, 11 of those in small rural communities,” he said. “Of the 210 state chartered Kansas banks, 48 have farmland or agriculture production loans greater than 300 percent of capital, and another 77 have greater than 100 percent of capital associated with agriculture.”
Gilliland said the forecasters agreed to a slight upgrade in the 2017 estimate for Kansas personal income growth from 3.9 percent to 4 percent. The estimate of expansion in Kansas gross domestic product was lowered from 1.9 percent to 1.8 percent.
In terms of the state’s unemployment rate, the relatively low figure of 3.7 percent in 2017 was expected to grow to 3.8 percent in 2018 and 4.2 percent in 2019. Concern was expressed by the estimating group about the 2.5 percent shrinkage in Wichita-area manufacturing from February 2016 to February 2017 and business bankruptcies and closures likely to occur in the Topeka region, Gilliland said.
“There are some storm clouds on the horizon that might warrant our consideration,” he said.
In 2014, Brownback pledged to create 100,000 new jobs if elected to a second term as governor. The state is about 35,000 jobs short of the pace needed to meet that ambitious campaign goal.
Contact reporter Tim Carpenter at (785) 393-2621 or @TimVCarpenter on Twitter.