Politics & Government

Kansas back in budget hole after missing May revenue estimates by $74.5 million

The Wichita Eagle

Kansas missed revenue estimates for May by $74.5 million, putting the state in a budget hole again for the fiscal year that ends June 30.

The miss comes after the state lowered revenue estimates by $177 million in April. It wipes out a projected ending balance for the year and leaves a more than $50 million budget hole.

“They lowered the bar but continue to trip over it,” said Senate Minority Leader Anthony Hensley, D-Topeka.

Senate President Susan Wagle issued a statement that said, “Legislators are just as upset about the state’s downturn in revenue as all Kansans. With session adjourned and the budget passed and signed into law, the Governor will have to determine how to address the shortfall.”

Gov. Sam Brownback, who made $97 million in cuts to Medicaid and other state services last month, will have to make more budget cuts before the end of month to keep the state fiscally solvent.

The bulk of the May underperformance can be attributed to individual income tax receipts, which came in $58.9 million short, or 22.1 percent below estimates, and corporate income tax, which came in $12.5 million short, or 42 percent below estimates.

Revenue Secretary Nick Jordan blamed this on slow growth in the state’s major industries.

“Large company layoffs and struggles in the aviation, oil and agricultural industries point to an overall sluggish economy which contributed to lower-than-expected revenue receipts,” Jordan said in a statement. “This is a trend reflected throughout the region.”

Scott Drenkard, director of state projects for the Washington-based Tax Foundation, a think tank that studies tax policy, disputed that explanation. He pointed to the state’s income tax exemption for owners of LLCs and some other businesses, which he said had encouraged tax avoidance

“I’m not getting calls from other states in the region about how large their revenue projections have missed the mark again. This is a problem unique to Kansas,” he said. “It is not nearly as much a story in other places, and that’s because, for the most part, revenue projections are on point or they’re off by a little bit, such that it’s manageable and does not throw the budget into peril.”

Brownback has tasked Shawn Sullivan, the budget director, with conducting “a full, independent review with outside experts to evaluate current procedures related to revenue estimating and budgeting” to determine why the state’s current process “fails to provide accurate estimates.”

Hensley said the state is living in a permanent budget crisis and criticized Republican leaders for their unwillingness to have a tax debate during the 2016 session, which officially ended Wednesday. Hensley predicted that lawmakers would have to look at taxes if lawmakers return to Topeka later this month to address a Kansas Supreme Court order for more equitable school funding. One solution for that would require nearly $40 million.

The Kansas Association of School Boards called the poor May revenue a setback for efforts to put more money into schools.