Tax revenue in April dropped 45 percent from a year ago, the Kansas Department of Revenue announced Wednesday.
The state’s revenue for the year is $92.9 million less than projected earlier this month.
The unexpected news weighed heavily on a joint committee of senators and House members who worked late into the night, trying to hammer out a budget in a wrap-up session that started Wednesday.
“It’s certainly impacting decisions. I mean any decision that would have included more spending is out the window obviously,” said Sen. Ty Masterson, R-Andover.
The state has taken in $480 million less overall than it had by this point in the last fiscal year.
The governor and other Republican leaders attributed the April drop to federal tax changes. Democrats called that claim ridiculous and said the revenue numbers showed the governor’s tax cuts are unsustainable.
“What we are seeing today is the effect of tax increases implemented by the Obama administration that resulted in lower income tax payments and a depressed business environment,” Gov. Sam Brownback said in a statement.
“The failed economic policies of the Obama administration are affecting states throughout the nation. It is more important than ever that we continue our focus on growing jobs and creating a business-friendly environment that benefits Kansans,” Brownback said.
Secretary of Revenue Nick Jordan said the drop was related to federal changes in calculating capital gains on investments and other income.
“This is an undeniable result of President Obama’s failed economic policies of increasing taxes and over-regulation,” he said. “Our state coffers are seeing the effect of poor policy decisions at the federal level which have seen a 7.6 percent drop in exports and a slow rate of inventory replenishment.”
An economic report released in March by the Governor’s Council of Economic Advisors showed Kansas lagging the nation and neighboring states in several economic categories.
Democrats said the dismal numbers were evidence of the governor’s failed tax-cutting plan.
“I think this is really further proof that the Brownback tax plan is failing,” said House Minority Leader Paul Davis, D-Lawrence, the likely Democratic nominee for governor. “It is drying up state revenue that is needed to fund the public schools and deliver the critical state services the public counts on.”
Personal income tax revenue has decreased by $508 million compared with this point last fiscal year. That category also accounted for the discrepancy between Wednesday’s numbers and estimates released earlier in the month. Income tax revenue was $89.6 million lower than expected.
Annie McKay, executive director for the Kansas Center of Economic Growth, questioned Republican leaders’ claims.
“We just changed where the bar was going to be two weeks ago. And we missed that mark by $90 million,” McKay said, noting that the governor’s office framed the April estimates as a sign the tax cuts were working. “I’m not sure how our economy tanks in two weeks.”
McKay disputed the governor’s analysis that the decrease in revenue could be attributed to anything other than the state’s own tax policies. But she said there are still two months left in the fiscal year and the state needs to see how it performs in May and June before the impact of the tax cuts can be fully assessed.
“I don’t know that we would run screaming to the hills that the sky is falling. But I think this is certainly worrisome about what May and June will hold,” she said.
House Speaker Ray Merrick, R-Stilwell, said in a statement that lawmakers would make prudent decisions about the budget in light of the revenue numbers.
Sen. Laura Kelly, D-Topeka, one of the Democrats on the joint budget committee, said the Legislature created the crisis when it passed what she considered to be radical tax cuts.
Kelly showed an analysis by the nonpartisan Kansas Legislative Research Department that projects the state would have to cut $143 million from its budget in 2016 to come to a zero balance. And additional cuts would be needed each year thereafter through 2019.
“You add all of those together and you come up with $1.48 billion in cuts to come to zero. Just to come to zero, because we have to have a balanced budget,” Kelly said.
Rep. Annie Tietze, D-Topeka, said it’s time for Kansas lawmakers to take responsibility for their own policy decisions rather than blaming Washington.
“Doesn’t there come a time when they say the great experiment is not working, that things really are bad in Kansas rather than turning a blind eye to all this? We need to take responsibility for what we do,” Tietze said.
Rep. Pete DeGraaf, R-Mulvane, summed up the Republican stance poetically.
“There are a natural consequences for being in an ocean, in a sea, that belongs to Obama,” he said.