It was a bad month at a bad time for Lawrence sales tax collections.

Sales tax collections in Lawrence were down 5.3% from a year ago, according to the August report recently released by the state. That decline was significantly higher than the statewide average, which checked in at a decline of 2.1% for the August reporting period.

But the more troubling number is Lawrence’s year-to-date sales tax collections. With this latest decline, Lawrence’s overall sales tax collections for 2024 have barely grown at all. Lawrence sales tax collections are up 0.7% for the year.

When you take into account a special type of sales tax called a use tax — charged primarily for online purchases — Lawrence’s collections are up 0.84% for the year.

Here’s where the bad timing part comes in: Lawrence city commissioners next month will be asked to approve a 2025 city budget that assumes sales and use tax collections in 2024 are going to end the year 2.7% higher than they were a year ago. With each passing month, that projection is looking less and less likely. That could lead to another budget shortfall.

There are only four reporting periods left in 2024. In order for Lawrence’s tax collections to end the year up 2.7% — and thus meet budget — the city is going to have to have some really strong months to end the year. How strong? Each of those months will need to produce about 6.5% more revenue than it did a year ago. In other words, a switch needs to flip in the Lawrence economy where consumers go from spending roughly the same amount of money they did a year ago to spending about 6% more than they did a year ago.

It is not impossible to think that could happen, but such results will be made more difficult by the fact that Lawrence won’t be hosting KU home football games in 2024 due to construction at the stadium. That’s millions of dollars in sales that will be happening in Kansas City — the temporary host of KU football games — instead of Lawrence this fall.

City commissioners in the weeks ahead must decide whether they want to stick with that 2024 sales tax projection. The decision could have implications both on the 2024 and 2025 budgets. If the city sticks with the projection and sales taxes don’t pick up in 2024, the city likely will end the year with a budget deficit. How much of one? If growth continues at that 0.84% pace, the city would face a budget shortfall of just less than $1 million for 2024.

That would be a shortfall over and above what the city already has recognized. The city earlier this year recognized that sales tax revenues were going to come in about $8 million short of its original budget, which was made in the summer of 2023. It adjusted its budget downward by about $8 million based on its reading of the market. In reality, it may have needed to adjust it downward by $9 million. The next four months will tell.

The city has reserve funds to cover an additional shortfall, if it comes to that, but city administrators are expressing some concern about how much the city has been dipping into those reserves.

The problem in 2024 could create a budget problem for 2025. The city bases its estimates for 2025 sales tax collections on how much it expects to collect in 2024. For example, the city is expecting sales taxes to grow by 3.2% in 2025. To get an actual dollar figure for the budget, the city takes what it expects to collect in 2024 in sales taxes and adds 3.2% to that figure. Thus, the 2025 budget number is only as good as the 2024 projection. If 2024’s projection is off by $1 million, the city’s 2025 budget already starts out in a hole.

That creates a quandary for city commissioners. Do they want to cut $1 million out of the city’s sales tax projections for 2025? That would make a tight budget even tighter. Where would they cut $1 million in spending?

Or, do they want to make no changes and hope for the best? The best-case scenario is that the economy takes off for the rest of this year and grows by about 6% and the city ends the year where it expects. Then, 2025 just needs to grow by about 3%, and all will be well.

If the 2024 surge doesn’t happen, though, it gets dicey in 2025. If 2024 ends the year much like it does now, consumers would need to increase their spending by about 5% in 2025 in order for the city to meet its budget. Not impossible, but also no small feat.

As I’ve said before, predicting the future is hard, but that’s the business the city is in when it comes to budgeting for sales taxes. A big miss on sales tax projections is a big reason why the city is considering its largest property tax rate increase in at least 50 years.

Whether the city finds itself in a similar situation next year may hinge on what budget decisions commissioners soon will make.

For those of you keeping track at home, here’s a look at year-to-date sales tax totals for some of the largest retail markets in the state.

• Shawnee: up 1.8%

• Kansas City: up 1.5%

• Olathe: up 1.1%

• Lawrence: up 0.7%

• Topeka: up 0.4%

• Lenexa: down 0.6%

• Merriam: down 0.6%

• Salina: down 1.5%

• Sedgwick County: down 1.7%

• Statewide: up 0.6%