Kansas misses revenue estimates by nearly $45 million

Kansas faces a more than $60 million shortfall after the state missed revenue estimates for September and legislative leaders want the governor to act swiftly to address the issue.

Tax revenue was $44.7 million below expectations for the month, a miss of 7.9 percent. The state has missed tax revenue estimates by $67.7 million over the first three months of the current fiscal year, plunging the state back into a budget hole.

“We’re in the red,” said Senate President Susan Wagle, R-Wichita.

Kansas was expected to have $5.6 million in its general fund at the end of the fiscal year in June if the state hit revenue estimates, but after three months of misses the state is on pace to have a more than $60 million budget gap. Budget cuts will likely be necessary to fill the budget gap in the short term.

Gov. Sam Brownback had previously said he does not plan to release his budget plans until the Legislature convenes in January, but legislative leaders from both parties say he should act before then.

“In this situation, clearly the longer he waits, the worse it gets,” Wagle said.

Wagle said Kansas law is clear that the governor needs to act promptly. She cited a statute that says whenever “it appears that the resources of the general fund ... are likely to be insufficient to cover the appropriations made,” then the budget director shall begin the process of across-the-board cuts, known as allotments, to “assure that expenditures for any particular fiscal year will not exceed the available resources of the general fund or any special revenue fund for that fiscal year.

The governor does not plan to make across-the-board cuts or push up his timeline, according to his spokeswoman, Eileen Hawley.

“We are not planning to implement allotments,” Hawley said in an e-mail. “When the Legislature returns in January, we will present them with a workable structured budget for them to consider.”

Senate Minority Leader Anthony Hensley, D-Topeka, also said Brownback should be upfront with Kansans about his budget plans.

“If Sam Brownback believes himself to be a fiscal conservative, then he needs to get our financial house in order. ... I believe he should take action now as opposed to waiting until after the elections,” Hensley said.

Hensley said Brownback “refuses to take ownership of the issue.”

Rebecca Proctor, executive director of the Kansas Organization of State Employees, the union that represents state workers, said it would more fair to both state workers and citizens if the governor outlined possible cuts as soon as possible.

“State employees from all agencies, if you speak with them, will tell you they’re already running on bare-bones budgets,” Proctor said.

She said that any additional cuts “will have impact on fundamental state services, and I think all Kansas citizens deserve to know where those cuts are targeted, where those cuts might be, especially ahead of our upcoming election, because that could really inform people’s thoughts on what kind of people they want to elect to be in our Legislature in 2017.”

The September revenue miss was driven primarily by corporate and individual income taxes, which were a combined $31.2 million, or 10 percent, below estimates. Sales tax also fell short, coming in at $9.4 million, or 4.7 percent, below estimates for the month.

“The significant contributors to less-than-expected September receipts were individual estimated payments related to capital gains and the stock market; a continued regional trend of low corporate tax receipts and sales tax receipts,” Revenue Secretary Nick Jordan said in a statement. “Withholding tax receipts, which are an indicator of jobs and income, continues to perform above the previous year.”

Kansas has missed revenue estimates for 10 of the past 12 months. Jordan will join budget director Shawn Sullivan on Tuesday to discuss proposals for improving the accuracy of the state’s revenue estimating process.

Rep. Ron Ryckman, R-Olathe, the House budget committee chairman, acknowledged the challenges facing the state in a Sunday evening e-mail to Republican lawmakers, which was obtained by The Eagle. In the e-mail, Ryckman said that the groundwork has already been laid to right the state’s finances, citing an efficiency study published last year.

“We cannot promise quick fixes, but we should not understate the long-term value of seeking an efficient and accountable government,” Ryckman said.

He touted the recommendations from the study already implemented, such as the establishment of a new rainy day fund, and encouraged his colleagues “to have an open dialogue acknowledging the necessary complexity and balance required of the solutions we seek.”

This story was originally published October 3, 2016 at 4:11 PM with the headline "Kansas misses revenue estimates by nearly $45 million."