State's new forecast for revenue is rosier

TOPEKA — Kansas officials and economists issued a new, more optimistic fiscal forecast for the state Friday, predicting that tax revenue will grow by almost 5 percent during the next budget year.

The projection is expected to intensify a debate over cutting income taxes. It came hours after a new group, Kansans for No Income Tax, began a two-day, five-city bus tour to build public support for eliminating the tax.

Gov. Sam Brownback and many of his allies in the GOP-controlled Legislature are already receptive to the idea, believing it will stimulate the economy and spur offsetting growth in sales and other taxes.

Brownback's administration also is developing proposals to overhaul the distribution of aid to public schools and the state's Medicaid program, covering health care for the needy.

The forecasters acknowledged uncertainty about the economy's future, but their predictions remained positive. They increased their estimate of tax collections for the 2012 fiscal year, which runs through June, by 3.5 percent to a little more than $6 billion, or $205 million more than previously expected.

They also projected the state would take in $6.3 billion in taxes during the 2013 fiscal year, which starts July 1, an increase of $293 million over the current fiscal year.

The new forecast is important because the governor and legislators use the numbers in their budgeting.

Brownback didn't hint about how the numbers would affect the proposals his administration is developing. Earlier this year, he won cuts in spending that included a reduction in aid to public schools.

"The latest revenue projections show the power of economic growth and controlling spending," he said in a statement. "It proves the long-term solution for our state involves more jobs and limited government."

Positive projection

The forecast was issued by budget director Steve Anderson and members of his staff, Department of Revenue officials, legislative researchers and economists from the state's three largest universities. Neither Brownback nor legislative leaders participated in its creation.

Alan Conroy, the Legislative Research Department's director, said forecasters expect the state's unemployment rate to decline slightly in 2012, after hovering around 7 percent this year. Also, the state is withholding more in income taxes from paychecks this year than last, suggesting growth in payrolls.

Conroy also named issues that could stall the state's economy, including energy costs and Greece's financial crisis.

Joan Wagnon, the Kansas Democratic Party chairwoman and a former state revenue secretary, said she is confident the forecasters are nonpolitical but described the projected growth in tax revenue as "pretty steep."

"I think that's a rather optimistic revenue growth," she said. "The economy doesn't seem to support that kind of revenue growth."

Group opposes income tax

The kickoff for the Kansans for No Income Tax bus tour drew about three dozen people to the Statehouse — a mix of Republican legislators and political aides and advocates for limited government or for replacing income taxes with taxes on consumption.

Ashley McMillan, the group's president, acknowledged that its backers don't yet agree on any one proposal. The group planned to wrap up its tour today in Wichita, with a gathering from 3:30 to 4:30 p.m. in the parking lot of Lawrence-Dumont Stadium, 300 S. Sycamore St.

"We started this organization to take the conversation out of the bubble that surrounds Topeka and move it out to folks throughout the state of Kansas so they can actually talk about what our state can look like if we do not have state income tax," she said.

Wagnon said eliminating income taxes could force the state to raise money in other ways — possibly by eliminating sales tax exemptions, cutting programs or decreasing public school aid, which consumes more than half of the state's tax dollars.

But advocates insist eliminating the income tax would not hurt middle-class or poor Kansans or force service cuts.

Led by conservative Republicans, the House earlier this year approved a bill to phase out individual income taxes and cut corporate income taxes. The cuts would have started when overall state revenue grew. The plan stalled in the Senate but is likely to get another look from legislators next year.