Kansas lowers its revenue expectations

Kansas lawmakers will need to find a combination of about $400 million in tax increases or spending cuts for next year, according to the state’s budget director, in the face of revised revenue estimates.

The state lowered revenue expectations for the next two years by about $200 million on Monday, about a week before lawmakers are set to return to Topeka for their wrap-up session.

In January, Gov. Sam Brownback proposed slowing scheduled income tax cuts and raising taxes on alcohol and tobacco to close a projected budget shortfall. These new numbers widen the budget hole the state needs to fill.

The state updates its revenue projections every six months. Under the new projections, the state will have a $143 million deficit even if every piece of the governor’s $211 million proposed tax plan passes. The state would be on pace to face a $91 million shortfall the following year as well.

Budget director Shawn Sullivan said lawmakers would need to pass about $400 million in tax increases – including the ones the governor proposed – to leave the state with a healthy cash balance in 2016 and 2017. Or they will have to make up the difference in spending cuts.

“Unfortunately, with the revision of revenues downward it does make balancing the budget more of a challenge than it already was,” Sullivan said.

He said lawmakers want to safeguard education funding, the largest item in the budget, leaving few options to fill the hole aside from raising taxes.

“There’s about a $400 million target. … The sentiment of those legislators I’ve talked to is they’re going to leave K-12 alone. That takes off 50 percent of the budget,” Sullivan said.

“We’ve already made a lot of changes, policy proposals to the Medicaid program in our budget. That’s another 20 percent. So that doesn’t leave a lot to reduce.”

Rep. Marvin Kleeb, R-Overland Park, who chairs the House Taxation Committee, said in an e-mail that Republican lawmakers “are committed to holding schools harmless” in the process of filling the remaining budget hole.

“We also will continue to meet our pension and social service obligations and leave a prudent ending balance,” Kleeb continued. “To accomplish all of that, we are going to look at all revenue options and pursue the fairest and least harmful route that will accomplish the goals and meet the needs of the citizens of our state.”

Lower oil and gas prices have contributed to the lower revenue expectations. Expectations for oil and gas severances taxes were lowered by about $100 million for 2015 through 2017.

In addition, sales tax revenue estimates were lowered by $30 million for each year from where they were in November. Overall, tax revenue expectations were lowered by $276 million for 2015 through 2017.

The Kansas economy is growing at a slower rate than the national average, said Raney Gilliland, director of the state’s Legislative Research Department. Personal income is also growing at a slower rate in Kansas than in other states, he said.

Despite that, Sullivan said that there are positive signs from the private sector. He touted that the state’s unemployment rate had been consistently below 5 percent for more than a year, which he said was a sign that income tax cuts the governor signed into law in 2012 were working.

Democrats, on the other hand, blame the state’s fiscal woes on Brownback.

“The Brownback tax plan is a failure and is endangering the future of the State of Kansas,” House Minority Leader Tom Burroughs, D-Kansas City, said in a statement. “We cannot afford to stay the course any longer. We must commit to generating a dependable revenue stream that is able to provide the resources necessary to reinvest in Kansas communities. … Kansans deserve nothing less.”

Individual income tax projections were sharply lowered when the state last adjusted its revenue outlook, in November. This time, however, the income tax projections remained unchanged.

The state is expected to bring in $2.28 billion in individual income taxes for fiscal year 2015, which ends in June, and about $5.8 billion in total tax revenue.

By comparison the state took in $6.4 billion tax revenue in 2012 before the governor’s tax plan went into effect.

This story was originally published April 20, 2015 at 2:55 PM with the headline "Kansas lowers its revenue expectations."