Editorial: Revenue trends

Repeated shortfalls in predicted state revenues are creating a challenging situation for the official state estimators.

Today, analysts and economists from the Brownback administration, the Legislature and three state universities are scheduled to put their heads together once again and try to predict how much revenue the state will bring in between now and June 30, 2016, the end of fiscal year 2015.

So far, the group’s predictions have been missing the mark.

Last April, the experts known as the Consensus Revenue Estimating Group, dropped their estimates for the current fiscal year by $98.2 million. Based on those estimates, legislators passed new revenue measures, including higher sales and cigarette taxes, to shore up the state’s coffers and provide a cushion of about $70 million, and the estimators adjusted their estimates accordingly.

Now, five months into the fiscal year, the state’s revenue shortfall stands at $77.9 million and the chairman of the House Appropriations Committee is saying he expects the state to have to make about $100 million in budget adjustments to avoid a negative balance at the end of the fiscal year.

The higher sales tax is helping, but not as much as the estimating group had expected. Overall tax receipts were about $11 million short of estimates in October, with sales and compensating use taxes falling $20.9 million below estimates. Individual income tax receipts were above $13.2 million estimates, thanks in part to a tax amnesty program that ran from Sept. 1 through Oct. 15.

Every month, state revenue officials cite different reason for missing the estimates. Sluggish sales and use tax receipts are part of a national trend, Revenue Secretary Nick Jordan said last week. August’s shortfall was blamed on unexpected income tax refunds paid to several Kansas businesses. In September, the department pointed to a “dramatic drop in oil, gas and farm income across the Midwest states.”

These probably all are valid factors that make it difficult to precisely estimate how much tax revenue the state will take in from month to month. However, in most years, revenues ebb and flow above and below the estimates from month to month. What’s troubling about the current situation in Kansas is the steady trend of revenue shortfalls despite the corrective action taken by legislators earlier this year.

When the estimators meet today, they are expected to once again lower their revenue estimates for the rest of this fiscal year. Their predictions will guide adjustments for the current year as well as serving as the basis for next year’s budget plan. It will be interesting to see whether the group can find any basis for optimism about the state’s ability to meet its financial obligations.