One month does not an economic recovery make. Still, it was encouraging that the state collected significantly more tax revenue in August than expected. That also may be an indication that raising the statewide sales-tax rate isn't causing the economic damage some predicted.
The state collected nearly $38 million more in taxes than anticipated in August, according to a preliminary report released last week by the Kansas Department of Revenue. The biggest share of that increase was $26 million more in retail sales-tax collections than expected.
"Higher than expected revenues this month is another clear sign that Kansas is on the road to recovery," Gov. Mark Parkinson said in a statement. "August is the first month where we can adequately gauge the impact of the bipartisan budget passed this last session, and it appears that the modest sales-tax increase has not depressed the spending habits of Kansans, as some opponents suggested."
Parkinson may be reading too much into the August numbers. The accuracy of tax estimates tends to fluctuate from month to month. July tax collections, for example, were slightly below the estimate. Also, August is a relatively low tax-collection month. September will be a better gauge of how the state's economy is doing.
But the revenue results are promising. And at least so far, the sales-tax increase doesn't seem to be dampening consumer spending.
That may be partly because even after the statewide sales tax increased from 5.3 to 6.3 percent in July, the Kansas sales-tax rate is comparatively low.
A new study by the Tax Foundation, based in Washington, D.C., found that Wichita's combined state and local sales-tax rate of 7.3 percent is the 77th highest of 107 U.S. cities with populations greater than 200,000. Birmingham and Montgomery, Ala., have the highest combined sales-tax rate of 10 percent. Anchorage, Alaska, and Portland, Ore., are the only large cities that have no sales taxes.
Kansas certainly isn't out of the budget woods. A couple of bad collection months could send its budget out of balance, perhaps forcing Parkinson to make more allotment cuts.
Kansas also faces a significant budget challenge next fiscal year in that it will lose about $400 million in federal stimulus money that has helped fund Medicaid and K-12 education. So just to keep funding flat, the state would need significant tax revenue growth.
Other states are facing similar challenges, if not much worse. According to a July 2010 report from the National Conference of State Legislatures, 33 states project budget gaps for fiscal year 2012 and 23 states for fiscal 2013.
But after two years of bad revenue news, the August numbers are a big relief. And it is understandable if Kansas officials are breathing a bit easier.