Topeka Kansas officials on Friday predicted solid economic growth through June 2012, even as they cut the state's revenue projections for the same period by $32 million and possibly complicated the Legislature's budget debate.
Fiscal forecasters said the new numbers represent good news because some growth in tax collections will partially offset losses in revenues caused by changes in the federal tax code. Had it not been for the federal changes, the state forecasters said, they'd have increased revenue projections.
The changes in the projections are relatively small. The state still expects to take in almost $5.8 billion in general revenues during the current fiscal year and a little more than that during the fiscal year that begins July 1.
"We are pretty optimistic that we're on the right track right now, and I see good things for the future of Kansas in revenues," said State Budget Director Steve Anderson, one of the forecasters. "We see a growing economy."
University economists, legislative researchers, Department of Revenue officials and Anderson and other members of Gov. Sam Brownback's budget staff made the forecast public after a two-hour closed meeting. Lawmakers use the semiannual forecasts in budgeting.
The forecasters reduced their earlier prediction for the current fiscal year by $10 million, or 0.2 percent.
For the fiscal year beginning July 1, they revised the projection downward by $22 million, or 0.4 percent.
Legislators return April 27 from their annual spring break to wrap up their business for the year. The House and Senate must negotiate a final version of a proposed $14 billion budget after having approved separate proposals for the next fiscal year, relying also on federal funds and other sources to help finance state operations.
The final version of the budget is likely to cut the state's overall spending by between 5 percent and 6 percent, largely reflecting the disappearance of federal economic stimulus funds. It also likely will come close to Gov. Sam Brownback's proposal to cut base aid to Kansas' public schools by $232 per student, or 5.8 percent.
With the new revenue projections, the House's version of the budget would leave about $48 million in reserves at the end of the next fiscal year. But the Senate's version would result in a $23 million deficit, something prohibited under the Kansas Constitution.
Senate Majority Leader Jay Emler, a Lindsborg Republican, said his chamber now faces accepting more of the House's budget ideas than it has during negotiations.
"We can't be in the red," he said. "I'm not sure exactly what else will be cut, but something else will have to be cut."
House Speaker Mike O'Neal, a Hutchinson Republican, said the new projections show that the state needs to build up healthy reserves, which he said is a priority for the GOP majority in his chamber.
"With the current economic uncertainty and significant policy changes being made in Washington, it is critical to pass a fiscally responsible budget," he said.
State Democratic Party Chairwoman Joan Wagnon, a former revenue secretary, said the new numbers show that Republican legislators who've advocated additional tax business tax cuts need to stop pushing the idea.
Alan Conroy, director of the Kansas Legislative Research Department, said changes in federal tax laws approved by Congress in December include breaks for businesses for expenses such as the purchase of new machinery. He said they'll cost Kansas about $77 million total through mid-2012 because its tax code is tied to the federal one.
Conroy said the forecasters still worry about the state's unemployment rate, which was relatively high at 6.8 percent in February.
He said they're also concerned that high gasoline prices will dampen other consumer spending, costing the state sales tax revenues. The state does not impose its sales tax on motor fuel.
Yet, he said, the forecasters also expect Kansans' personal incomes to grow about 4 percent during 2011 and about 5 percent next year.
"Clearly, I think, the Kansas economy is starting to come out of the Great Recession," Conroy said. "I think we're pointed in the right directions."
And Anderson said the changes in the federal tax code ultimately are positive because they reward businesses for investments and are likely to create economic growth.
"I'm reasonably optimistic that we're on course for a great recovery," he said.