Topeka Tax revenues flowing into state coffers came up short of expectations again in October, pushing the state’s general fund to the brink of a projected negative ending balance, a point at which Republican Gov. Sam Brownback may be forced to make midyear spending cuts, state officials said Monday.
The Kansas Department of Revenue said total taxes in October were $10.9 million short of official estimates. That brings the cumulative total shortfall for the fiscal year to $77.9 million.
That’s almost exactly the same amount as budget officials had expected the state to have as an ending balance at the end of the fiscal year.
Furthermore, budget officials are scheduled to meet Friday and release new, updated revenue estimates, and it is widely expected that those will show a downward revision from the last estimates, which were released in August.
Brownback’s press secretary, Eileen Hawley, would not comment on the possibility of another round of “allotment” cuts. But Rep. Boog Highberger, D-Lawrence, said he is already bracing for the likelihood that lawmakers will have to make major adjustments when the 2016 session begins in January.
“Those results are disappointing but not surprising,” Highberger said of the latest report. “My understanding, based on the most recent numbers I’ve seen, is that even if we meet revenue estimates the rest of the year, we’re already going to end up in negative territory. So we’re looking at more cuts or another tax increase.”
Revenue Secretary Nick Jordan said the October shortfall was due mainly to sluggish sales tax receipts, which he said were part of a national trend.
“Sales and use tax receipts have continued to follow the sluggish national trend and fell short of expectations, negating gains in individual income tax receipts,” Jordan said in a statement.
During the 2015 legislative session, Kansas lawmakers raised the state sales tax by four-tenths of a percent, to 6.5 percent, but actual receipts have fallen below projections every month since that higher rate took effect July 1. The last time sales tax revenues met projections was in April, when they came in $330,000, or 0.2 percent above estimates.
That decision reflected Brownback’s stated policy of shifting the state away from a reliance on income taxes and toward more reliance on so-called “consumption” taxes, including sales taxes.
Legislative Democrats were quick to pounce on the negative revenue report.
“The fact sales tax revenue was below estimates, even after Republicans passed a massive sales tax increase, is an indication of just how much Kansas families are struggling under the Brownback tax plan,” House Minority Leader Tom Burroughs, of Kansas City, said. “A tax plan that is overly dependent upon a sales tax is neither responsible, equitable, nor sustainable.”
Senate Democratic Leader Anthony Hensley, of Topeka, said the numbers were a reflection on Brownback’s policy of trying to phase out income taxes while shifting the burden of funding state government onto sales taxes.
“There’s no doubt we are on the ‘glide path to zero.’ The question is what reaches zero first: income taxes on the wealthy, our state’s cash on hand, or Sam Brownback’s approval rating,” Hensley said.
According to the Kansas Department of Revenue, sales and compensating use taxes — sales taxes paid on out-of-state purchases — were $20.9 million below estimates in October. That was partially offset by individual income taxes, which came in $13.2 million above estimates.
Severance taxes on oil and gas extraction also fell short by about $3.7 million, a result of decreased production due to declining prices.
According to the Department of Revenue, individual income taxes came in $13 million over the estimates in October. But that gain was negated by a $20.9 million shortfall in sales and compensating use taxes, which are sales taxes paid on out-of-state purchases.
For the entire fiscal year so far, sales taxes have come up $34.3 million short, and individual income taxes have fallen $25.5 million short of expectations.