December tax collections are a disaster

There is no way to sugarcoat it: State tax collections in December were a disaster. And unless tax revenue exceeds estimates the remaining six months of this fiscal year, the state is facing more budget cuts and – likely – more raiding of its highway fund.

Tax collections were $35.2 million less than expected last month. Of particular concern, individual income taxes were nearly $26 million less than estimates, and retail sales taxes were off by $14 million – indications that the Kansas economy isn’t as strong as Gov. Sam Brownback has been claiming.

But what makes the numbers even more disastrous is that the state dramatically lowered its revenue forecast the month before. In November, revenue estimators predicted the state would collect $159 million less in taxes this fiscal year than they previously estimated.

Because the Legislature and governor had already burned through most of the state’s cash reserves, the Brownback administration was forced to authorize $123 million in fund sweeps and transfers, including another $50 million from the highway fund. But that barely was enough to keep the state from running out of cash by the end of June.

The December shortfall more than wipes out that projected ending balance, which means more cuts and transfers likely will be required.

That’s just this fiscal year. Based on current estimates, next year’s budget could be short $200 million or more.

And that doesn’t count the likelihood that the state will lose the school finance lawsuit and be ordered to significantly increase K-12 funding. Nor does it factor in that the Kansas Highway Patrol, the corrections system and the mental health hospitals are experiencing personnel shortages in part due to low wages.

Meanwhile, Brownback spent much of last month claiming that the Kansas economy was much better than it appeared. He also said there would be no need for more tax hikes or deep spending cuts in 2016.

“I think we’re going to be in good shape,” he told Associated Press.

It was reminiscent of Brownback’s claim during his 2014 re-election campaign that “the sun is shining in Kansas, and don’t let anybody tell you any different.” Then less than a week after the election, new revenue estimates revealed the state needed to cut at least $280 million in planned spending just to get to zero.

Perhaps the December drop is a fluke and tax collections will come in higher than expected in coming months. Kansans should certainly hope so, because the alternative is ugly and painful.

This story was originally published January 5, 2016 at 6:07 PM with the headline "December tax collections are a disaster."