Topeka ? After a historic drop in tax collections, spanning three years, the state’s revenue picture is looking a little brighter. But problems still remain.

State budget experts Tuesday announced that revenues were expected to increase during the current fiscal year by 11.4 percent over last year, which saw a 7 percent drop in revenues.

The increased tax collections are due to an improving economy and a 1-cent increase in the state sales tax that took effect July 1, members of the Consensus Revenue Estimating Group said on Tuesday.

“We’ve stopped dropping downward,” said State Budget Director Duane Goossen said. “That’s really good news.”

Alan Conroy, director of the Kansas Legislative Research Department, said, “We’re certainly headed in the right direction.”

The state collected $5.2 billion in revenue in the last fiscal year, and is expected to collect $5.8 billion in the current fiscal year, which ends June 30, 2011.

But the projected increase would only bring the state up to 2007 revenue levels — which is before the recession hit.

And state government still faces significant budget challenges because it’s estimated the number of Kansans who will qualify for Medicaid assistance will increase, and the loss of federal stimulus dollars, which are expiring.

The state is using nearly $500 million in federal stimulus funding this year and when legislators return in January they won’t have that money to spend in the next fiscal year.

Much of the stimulus money has been used to prop up education funding.