State forecasters see slight revenue growth, but big budget deficit still looms
Topeka ? Kansas budget officials said Thursday that they expect revenues to grow only slightly over the next two years, although their forecast was a bit rosier than the last round of estimates issued in November.
Overall, the Consensus Revenue Estimating Group raised its estimate of total tax collections for the upcoming fiscal year by $43 million and by $62 million for the year after that.
Those numbers represent minuscule changes from the last set of estimates issued in November, when the group slashed estimates for the current fiscal year by $355 million, or nearly 6 percent.
“Up is better than down,” Kansas Budget Director Shawn Sullivan said of Thursday’s report.
The basically “flat” report Thursday means that when Kansas lawmakers return to the Statehouse on May 1 they will still need to raise about $889 million in additional revenue over those two years to avoid having to make major cuts in state spending.
And that does not include any additional money that may be needed to respond to the Kansas Supreme Court’s recent ruling declaring school funding constitutionally inadequate.
The Consensus Revenue Estimating Group is made up of university economists and state budget officials from both executive and legislative agencies. The estimates reflect recent trends in state tax collections as well as forecasts about job growth and other economic indicators.
For the most recent estimates, the group said it sees little change ahead in the sagging agricultural and energy sectors of the economy. It also said the state’s unemployment rate, currently at a low 3.7 percent, is expected to rise slightly over the next two years.
Raney Gilliland, director of the Legislature’s nonpartisan Research Department, said the employment trends could affect the next round of forecasts that will be issued in November 2017.
“Storm clouds on the horizon that might warrant our consideration come November, we are noting a decrease in manufacturing employment in the Wichita area,” he said. “In addition to that, there have been other layoffs, bankruptcies, closures or possible closures across the state, but especially here in Topeka.”
Still, Gilliland said, the group is predicting slight growth in individual income tax collections over the next two years because the downward trend in average hourly wages that were seen in November have begun to slow down.
The new estimates also forecast only about 1.4 percent growth in retail sales tax collections over the next two years. Sullivan said that’s largely due to the fact that retail prices for things like used cars have been going down while costs have been rising for things such as health care that the state does not impose sales taxes on.
Overall, the report said the state can expect to collect $5.8 billion from all tax sources in the upcoming fiscal year and a little more than $5.9 billion in the following year.
Lawmakers will use those numbers to build the state’s budget for those years. It will also factor into discussions about how large of a tax increase lawmakers may seek.
Sullivan said Gov. Sam Brownback does not intend to ask for any new tax legislation, but lawmakers are almost certain to try to pass one anyway. In March, Brownback vetoed a tax bill that would have raised a little more than $1 billion in new income taxes over the next two years. The House voted to override that veto, but the Senate fell three votes short of the two-thirds majority required for an override.
Senate Democratic Leader Anthony Hensley, of Topeka, reacted to Thursday’s report, saying it shows the state still has what he described as a “self-inflicted budget crisis.”
“All of this makes it more imperative to override Brownback’s veto on a revenue plan,” he said.