Kansas revenue in April falls sharply below estimates
Topeka ? Kansas tax receipts fell sharply in April, decreasing 30 percent below April 2013, and prompting a round of political finger pointing as lawmakers reconvened after a three-week break to finish the year’s legislative business.
The figures surprised legislative leaders because the drop-off occurred less than two weeks after budget experts and Gov. Sam Brownback’s administration submitted a revenue estimate that indicated state coffers were in good shape for the rest of the fiscal year.
House Speaker Ray Merrick, R-Stilwell, said budget leaders would analyze the new numbers “and make prudent decisions that will continue to ensure that the state meets its funding obligations.”
The revenue figures ignited immediate political fallout.
Brownback, a Republican, blamed Democratic President Barack Obama, saying his “failed economic policies” were affecting states throughout the nation.
A key reason given by Republicans for the decreased revenue totals was that tax collection totals in April 2013 were inflated because Kansans paid capital gains in tax year 2012 to take advantage of more favorable rates that could have expired in 2013. That projected tax increase never happened because of a deal reached between Congress and Obama.
“What we are seeing today is the effect of tax increases implemented by the Obama administration that resulted in lower income tax payments and a depressed business environment,” Brownback said.
Kansas Department of Revenue Secretary Nick Jordan said states nationwide were experiencing similar drops, including Michigan where collections were off 42.6 percent.
House Democratic Leader Paul Davis, of Lawrence, and the likely Democratic challenger to Brownback in November, said Brownback’s tax policies was the cause of the revenue downfall.
“This is certainly cause for alarm and further proof that the Brownback tax plan is not working, and is draining revenues from the state at a very rapid rate that will impede our ability to fund public schools and other critical services,” Davis said.
The Legislature passed and Brownback signed cuts in state income tax rates and repealed state income taxes paid by nearly 200,000 business owners. The state income tax accounts for the largest share of revenue the state receives.
For April, the state collected $226 million in individual income taxes. That was half of what it collected in April 2013, and it was 28 percent less than budget experts thought the state would get in the estimate put out April 17.
For total taxes collected in April, the estimate was $93 million, or 15 percent off.
For the fiscal year, which started July 1, 2013, Kansas has collected $4.5 billion in total tax revenue, which is nearly 10 percent less than what it collected in the previous fiscal year.
The state economy may also be suffering from slow growth in agricultural and aircraft product exports, Jordan said.
In the latest revenue estimate, budget leaders said while the U.S. and state economies continued to grow, the growth has not been as strong as previous post-recession recoveries. “Uncertainty remains as a number of economic indicators are estimated to show only modest improvements over the next few years,” said a memo from the Kansas Division of the Budget and Kansas Legislative Research Department.
On Wednesday, the House budget-writing committee approved a bill that includes additional funding for social services, but excludes a 1.5 percent pay raise for state civil service employees. The Senate is considering its own proposal.
Senate Democratic Leader Anthony Hensley of Topeka said it was hypocritical for Brownback to take credit for revenue increases in January and now blame Obama.
“This isn’t someone else’s fault. It is a self-inflicted budget crisis that is a direct result of Brownback’s failed experiment and the people of Kansas are once again suffering the consequences,” Hensley said.
Earlier Wednesday, officials with the Washington, D.C.-based Center on Budget and Policy Priorities were in Topeka with their report that blasted the Brownback tax plan. The cuts have failed to boost the economy, shifted the tax burden to low- and middle-income Kansans, and caused large revenue losses, the report said.
“The path you have taken the last couple of years is to try an unproven approach to driving economic growth and that is very risky and imprudent,” said Michael Leachman, director of state fiscal research at the center, which is a non-profit think tank that analyzes the impacts of budget policies and promotes the reduction of poverty.