Kansas beat revenue estimates for the month of January by $24 million on the strength of sales tax and corporate income tax revenue.
That’s 4.6 percent above the state’s estimates for the month.
The Kansas Department of Revenue announced the numbers the same hour that lawmakers were weighing the governor’s plan to close the state’s projected shortfall for the current budget year, which now stands at about $320 million when the January revenue is counted.
Brownback has proposed tapping a long-term investment fund and lowering the state’s annual payment to its pension system as ways to get the state through June, when the fiscal year ends. The January revenue performance will help.
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“Well, certainly $24 million is going to be great. It’ll help us complete this year, but it’s certainly not getting us out of the basement yet,” said Sen. Carolyn McGinn, R-Sedgwick, the Senate’s budget chair.
It’s the third month in a row that the state has surpassed revenue estimates. Kansas lowered those estimates in November after struggling to meet them for the past two years.
Budget director Shawn Sullivan said changes to the revenue estimating process in the second half of 2016 have improved the accuracy of the estimates. He also said the state has not made any major changes to tax policy in the past year and a half, which has made revenue easier to estimate.
Sen. Laura Kelly, D-Topeka, the ranking Democrat on the Senate budget committee, said the state has lowered the bar enough that it finally “tripped over it.”
“We have lowered our expectations so much on this and now we have experience with these tax cuts that it was easier for the estimating group to come up with real figures, or realistic figures,” Kelly said.
“So yeah, we’re making them now. That’s great. It still doesn’t dig us out of the hole and it doesn’t solve our long-term problems.”
Corporate income tax revenue came in at $10.5 million, or 131.6 percent, above estimates for the month. Corporate income tax had lagged estimates in Kansas and many other states for much of 2016.
Sales tax receipts came in $13.6 million, or 6.7 percent, above estimates in January. Individual income tax revenue was roughly $600,000, or .25 percent, above estimates for the month.
Acting Revenue Secretary Sam Williams credited the state’s strong performance for January to holiday sales that were counted in January instead of December.
The state has collected nearly $3.4 billion in tax revenue so far this fiscal year.
Gov. Sam Brownback’s proposal for filling the state’s current budget hole includes tapping a $362 million long-term investment fund and paying it back over seven years, reducing payments into the Kansas Public Employees Retirement System by $85.9 million for the year and reducing an extraordinary needs fund for public schools by $13 million.
McGinn said the reduced pension payments gave her the most pause of the governor’s proposals.
“We have fixed KPERS twice … and every time we get it fixed the KPERS director tells us if we would just leave it alone and not touch it we’ll get back to being whole, and I don’t think we need to be touching it anymore,” McGinn said.
The state’s unfunded pension liability is $8.5 billion. Brownback’s plan, which would reduce state payments in the short term, would delay paying that down by 10 years, costing the state an additional $6.5 billion through 2043.
“The governor’s proposal? I don’t like any of it,” Sen. Dan Kerschen, R-Garden Plain, said when asked what portions of the plan he could vote for.
“I think we’re doing a complete rewrite. I don’t know what else to do,” he said.
Sullivan said the Brownback administration wanted to minimize budget cuts in the current fiscal year, noting that an anticipated Kansas Supreme Court ruling on school finance could still create more upheaval for the budget.
“It’s very difficult to make (budget) cuts in the middle of a fiscal year. We have certainly done that – seven times since 2015. But it’s difficult to make cuts particularly when the Supreme Court’s decision, you can assume, is coming any time,” Sullivan said.
Kelly said lawmakers will “have to scrap pretty much everything in the governor’s plan” except for his recommendation of tapping the long-term investment fund to avoid cuts to K-12 education this year.
Mark Tallman, spokesman for the Kansas Association of School Boards, said school districts would prefer the governor’s plan over cuts to funding or a proposal floating around the Capitol that would force them to use their own cash reserves.