Editorial: Missing the mark
Kansas officials shouldn’t be too quick to blame the messenger for inaccurate revenue estimates.
It can’t be an easy job to accurately estimate how much revenue a state will collect in a given time period — and that process must be even more difficult in a state like Kansas, whose tax policies have undergone significant change in a relatively short time.
During a recent press conference to outline additional spending cuts for the current fiscal year, Budget Director Shawn Sullivan didn’t seem particularly satisfied with the work of the state’s Consensus Estimating Group, which is responsible for predicting state revenue. In fact he said he planned to look at how other states handle their estimates and see how Kansas might improve its process.
His frustration is somewhat understandable. Over the last year, monthly tax collections have come up short of the group’s estimates 10 times and exceeded the estimates only twice. Some of the estimates were only slightly off, but in four months, revenues were at least $20 million below expectations. Because the revenue estimates are the official basis used by lawmakers when they are formulating the state budget, such shortfalls have a serious impact on the state’s bottom line, forcing the governor to cut expenditures or dip into state reserves.
Why has the Consensus Estimating Group had so much trouble getting it right? The official group is made up of representatives of the Division of the Budget, Department of Revenue and Legislative Research Department along with one economist each from Kansas University, Kansas State University and Wichita State University. The group evaluates a number of economic indicators in making their estimate. Are they misreading the data or being too optimistic in their predictions? Are they in denial over the actual effect of the huge income tax cuts?
Any of those could be true, but it also seems likely that significant shifts in the state’s tax structure has made it more difficult to make accurate estimates. The traditional “three-legged stool” that spread state tax burdens fairly equally among property, sales and income taxes has been upset. Income taxes were cut; sales taxes were raised to try to take up the slack, and it’s understandable that such changes would alter revenues in ways that are difficult to predict.
It doesn’t hurt for Sullivan to look at what other states are doing and see if there are ways for the Kansas group to improve its accuracy, but state officials may also have to concede that new tax policies — not the tax estimators — are the primary source of the problem.