Forecasts of reduced tax revenue indicate that the state’s massive income-tax cuts aren’t yet acting like “a shot of adrenaline to the heart” of the Kansas economy, as Gov. Sam Brownback promised.
And in other bad news for the administration, more than 50 Kansas counties are suing the state over millions of dollars in oil and gas taxes.
The new revenue estimates released Wednesday lowered the state’s projected tax collections for this fiscal year by $29 million, or 0.5 percent. So far this fiscal year, which began July 1, the actual collections are $27 million less than projected – so the new estimates expect that decline to stabilize.
Let’s hope so.
The more that tax revenue comes in below estimates, the bigger the budget hole in coming years. And that hole was already projected to be in the hundreds of millions of dollars – without even counting the expected Kansas Supreme Court order to increase education funding, perhaps by more than $400 million.
The revenue estimates follow recent news that half of the counties are suing the state over reduced distributions from the Oil and Gas Valuation Depletion Trust Fund. This fund helps protect counties from drops in tax revenue as oil and gas production declines, and the counties receive a payment each October. This year’s payment was $7.4 million less than what the counties say they are lawfully due.
Brownback has been after this money to help pay for his income-tax cuts. In 2012, he vetoed a bill passed unanimously by the Legislature that would have given the counties control of the fund. Then earlier this year, he tried to end the trust fund program.
Lawmakers blocked that move, but as a compromise, they agreed to temporarily reduce the distribution for two years.
Those reductions weren’t supposed to occur until next year, the counties contend, but the Brownback administration implemented the cut with this October’s payments. As a result, the counties received about half the money they were expecting.
“It’s somewhat hard for me to see how they could have made that decision,” John Frieden, an attorney representing the counties, told Associated Press. According to the lawsuit, the state’s duty to pay the full amount this year is “plain and unambiguous.”
Sedgwick County received about $25,000 in October, instead of the expected $50,000, but it is not among the counties that are suing. Some other counties have been shorted more than $100,000. No wonder they are suing.
Lawmakers have said that they will work to make sure the counties are paid in full. But Brownback officials are unlikely to release the money without a fight – especially if the state tax collections continue to disappoint.