Topeka New revenue estimates released Friday show Kansas is likely to bring in $159 million less this fiscal year than previously expected, prompting Gov. Sam Brownback’s administration to announce immediate spending cuts and budget adjustments, including another $48 million sweep out of highway funds.
The state’s Consensus Revenue Estimating Group, made up of state budget officials, agency heads and economists from three universities, said that a struggling farm economy, sluggish growth in retail sales and declining oil and gas prices were largely to blame for the downward revision.
Budget director Shawn Sullivan acknowledged that as of Friday the balance in the state general fund was at or near zero. But he insisted the state is not in a fiscal or budgetary crisis, and that the state should not have to delay any payments due to public schools or Medicaid providers.
“One of the things I would (use to) judge whether or not that’s the case is, are we paying our bills, are we paying them in full, and are we paying them on time,” Sullivan said. “And we have. There have not been any late payments since January 2011, as compared to that happening 24 times in the previous eight years.”
Total taxes flowing into the state are now estimated at just over $6 billion for the current fiscal year. That’s only abut $324 million, or 5.7 percent more than the state took in the previous year. But much of that is the result of significant hikes lawmakers approved this year in retail sales and tobacco taxes.
The biggest culprits in that downturn are expected to be retail sales taxes, which have not been meeting projections this year, despite the higher rate; severance taxes, which have fallen due to declining oil and gas prices; and corporate income taxes.
All told, officials said the revised estimates put the state in a projected $118.2 million hole for the current year, which prompted the administration to announce a series of fund transfers and “allotment” cuts. Among the adjustments announced Friday are:
• Sweeping $47.9 million out of the Kansas Department of Transportation’s highway fund.
• Sweeping $9 million out of the Children’s Initiative Fund.
• Reducing pension contributions by $15.7 million, reflecting revised estimates of those costs.
• Reducing Medicaid expenditures in nonmandatory spending by $25.1 million.
• And cutting $3 million out of state subsidies into a fund that draws down additional Medicaid funds for hospitals and nursing homes.
The plan also includes several $14 million in cuts and transfers that will require legislative approval next year, including a $5 million cut to the Kansas Bioscience Authority.
Sullivan said the fund sweep out of KDOT would not affect any major improvement or system expansion projects in the ongoing highway program known as T-Works. But he said it would cause a delay in some of the “preservation” programs that are intended to prevent the need for major repairs in the future.
Legislative Democrats were quick to criticize the administration for what they called fiscal mismanagement of the state’s budget and revenues.
“We’ve just had colossal mismanagement for the last several years by this administration,” said Senate Minority Leader Anthony Hensley, of Topeka.
“We’ve got to go back in and revisit the 2012 and 2013 income tax cut if we’re going to have any future stability within the budget,” he said.
When pressed, Hensley acknowledged that should include both the business and individual income tax cuts that were enacted.
House Democratic Leader Tom Burroughs, of Kansas City, however, continued to insist that Democrats do not need to offer a proposal of their own.
“I don’t think we need to present a plan at this time,” he said. “I think we’ll see what the revenue estimates will be at the end of the year and we’ll move accordingly.”
Republican leaders, on the other hand, tried to cast the revenue numbers in a positive light.
“Kansans are no longer paying the highest work and productivity tax in the Midwest and I am confident we would be in far worse shape had the tax cuts never happened,” Senate President Susan Wagle, R-Wichita, said. “The Kansas Senate is focused on the path ahead — funding core services and making sure the private sector grows, not the government.”
House Speaker Ray Merrick, R-Stilwell, applauded the governor’s actions.
“The American economy is struggling and we’re seeing that here in Kansas,” he said. “The governor recognizes that and made some difficult decisions today. I applaud the efficiencies he found.”