Topeka State budget officials in Kansas issued a gloomy report Monday that says total revenues flowing into the state are expected to fall 3.5 percent next year, creating an even bigger budget hole for lawmakers to fill when they return next week to wrap up the 2015 session.
The report, known as the Consensus Revenue Estimates, predicts the state will collect only $5.7 billion in revenue in the fiscal year that starts July 1, the smallest amount since the depths of the Great Recession in 2010, when the state collected only $5.2 billion. It’s also $700 million less than the state collected in fiscal year 2012, the last year before Gov. Sam Brownback’s massive income tax cuts took effect.
That projection for fiscal year 2016 is $98.2 million lower than budget officials had previously estimated in November. The projection for the following fiscal year calls for modest growth, to $5.77 billion. But that is still $100.8 million less than the earlier forecast.
Budget director Shawn Sullivan said the downward revision was mainly due to smaller-than-expected growth in “consumption taxes,” including retail sales taxes, as well as a decline in corporate income taxes. Despite that, he said, the Brownback administration has no plans to reverse its tax policy, which calls for shifting the state’s reliance away from income taxes and onto consumption taxes.
“We will work with the Legislature to structurally balance the budget and hopefully continue the trend towards lower income taxes as we move from a tax on productivity to a consumption-based tax,” Sullivan said.
But Senate Democratic Leader Anthony Hensley, of Topeka, said the declining revenues were a direct result of the governor’s tax policies.
“Just as we anticipated it would be, the consensus revenue estimate report is grim, all because of Sam Brownback’s failed economic experiment,” Hensley said in a statement released via email. “These numbers mean that the budget will be unfairly balanced by raising taxes on low and middle income Kansans while protecting wealthy Kansans who benefit from Brownback’s income tax cuts.”
By law, the final budget that lawmakers adopt this session must balance to the newest estimate, including providing for some amount of cash reserve left over at the end of the year.
So far, neither chamber of the Legislature has passed a comprehensive budget bill for the next two years, although they have approved a bill funding K-12 public education, and Republican leaders in the House said they are committed to fully funding that plan.
“We’ve committed to giving schools stable and predictable funding through the block grants, including the additional $126.2 million in new money added to schools for equalization as directed by the courts last spring,” House Speaker Ray Merrick, R-Stilwell, said in a statement.
Meanwhile, House and Senate negotiators have tentatively agreed on a budget plan to fund most of the rest of state government. But based on the new revenue estimates, officials said, that plan would require roughly $400 million to $410 million in additional revenue next year.
Brownback has already proposed about $210 million in new revenue, mainly through increases in alcohol and cigarette taxes. But Republican legislators so far have given that plan a cool reception.
Sullivan said the administration will release its own proposed budget amendments on Thursday, when the House Appropriations Committee is scheduled to meet. And while he would not divulge complete details of that plan, he said part of it will call for a reduction in state Medicaid spending to reflect lower estimated costs in that program.
And despite the gloomy revenue picture, Sullivan said the Kansas economy was showing positive signs, pointing to growth in private-sector jobs, average weekly wages and the state’s relatively low unemployment rate.
Asked how the administration can fund state government effectively with less money than it had available eight years earlier, Sullivan said it was a matter of setting priorities.
“It’s a balancing act between continuing what we believe is job growth, wage numbers, unemployment and funding the core services that are in the budget,” Sullivan said. “So that will need to be weighed as this final budget and revenue package are contemplated.”
Lawmakers are scheduled to return to Topeka on April 29 to finalize the budget and wrap up the 2015 session.