Unless state tax revenue rebounds, budget cuts could occur
Unless the state revenue situation turns around, the current state budget will not balance and cuts could come soon.
According to figures released Tuesday by the Kansas Department of Revenue, tax collections for October fell $12.7 million below projections, plunging the budget into further danger just days before voters will decide state legislative races.
For the fiscal year, which started July 1, the state has missed the revenue estimate mark by approximately $80 million.
Because the budget started with a razor-thin balance, that means state officials are looking at severe fiscal difficulties and education leaders are on alert because K-12 funding makes up half of the state budget.
The state faced a similar revenue picture one year ago. Tax collections were running approximately $80 million below estimates for the first four months of the fiscal year, state budget experts met and lowered the revenue assumptions for the remainder of the year and Gov. Sam Brownback announced $124 million in transfers, cuts and fund sweeps to keep the bottom line above zero.
On Tuesday, Brownback declined to say what actions he would take this time around. The Consensus Revenue Estimating Group, which sets revenue forecasts, will meet on Nov. 10, two days after the general election, to reassess the state’s fiscal condition and revenue projections. (KASB will conduct a webinar on the new revenue estimates on Fri. Nov. 11).
Kansas has been in budget crisis mode since Brownback and his Republican allies slashed state income taxes in 2012 and 2013. Since then, the sales tax has been increased, budgets have been cut, reserves spent and state payments to schools and the pension system delayed.
Democrats and some Republicans blame the budget ailments on the income tax cuts. Brownback has said the state has been buffeted by economic struggles in oil, gas and agriculture.
In June, the Brownback administration delayed the last school payment of the fiscal year so that the previous fiscal year could close without a deficit. The state also issued $900 million in certificates of indebtedness, which allows the use of agency funds to manage cash flow.
In May, Brownback cut $97 million, mostly to higher education and Medicaid providers. Also in May, the administration announced delaying a $100 million payment to the state pension system.
Last March, Brownback cut $17 million from higher education after tax receipts in February fell $53 million short of estimates. In July 2015, Brownback ordered $63 million in cuts and budget shifts.
The October revenue report released Tuesday showed state income tax collections surpassing projections by 5.2 percent, but sales tax revenues missed by 5.4 percent and corporate income tax fell under estimates by nearly 40 percent.
A news release from Brownback’s Revenue Secretary, Nick Jordan, focused on growth over last year in actual collections for income taxes and said sub-par performance of sales and corporate income taxes was caused by outside forces.
“We are very pleased to see individual income tax receipts continue to grow and particularly strong withholding tax receipts,” Jordan said. “We remain concerned by the larger national downward trend of corporate and sales tax receipts,” he said.
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