Kansas tax revenue tumbles for fourth consecutive month

State collections $11 million below October estimates; annual shortfall hits $72 million

Posted: November 2, 2015 - 4:03pm
By Tim Carpenter

Tax revenue flowing into the Kansas general treasury fell short of experts’ prognostications for the fourth consecutive month, elevating prospects of Gov. Sam Brownback ordering mid-year budget adjustments, officials said Monday.

Collections were $61 million below official expectations in July, August and September, but that weakness spilled into October. The Kansas Department of Revenue reported the state took in $11 million less than predicted last month.

The trend intensifies pressure on Brownback to respond to shortfalls in the budget adopted by lawmakers in June following a contentious session. It ended when Republican lawmakers joined with the governor to embrace spending cuts, amnesty for tax dodgers and tax hikes on cigarettes and general sales in a bid to stabilize the current fiscal year’s budget.

A cushion of about $70 million built into the budget has vaporized, and some legislators have predicted the deficit could bulge to $100 million.

In October, the state’s individual income tax receipts beat estimates by $13 million. That good news was engulfed by inflated expectations for revenue from oil and gas production, as well as taxation on general sales. These two categories were $23 million short of projections.

“Sales and use tax receipts have continued to follow the sluggish national trend and fell short of expectations, negating gains in individual income tax receipts,” said Nick Jordan, secretary of the revenue department.

Brownback has authority to respond promptly by shifting cash or ordering deeper cuts in spending prior to arrival of the 2016 Legislature in January. After winning re-election in 2014, he took quick steps to blunt a deficit of more than $200 million and worked with the 2015 Legislature to close a remaining deficit in the neighborhood of $500 million.

State government in Kansas has struggled to meet revenue targets following action by Brownback and conservative Republicans in 2012 and 2013 to reduce individual income tax rates and repeal an income tax on owners of 330,000 businesses.

Politically, Brownback has sought to gradually eliminate the income tax in Kansas. It is a process the governor and allies portray as a “glide path to zero.” Brownback would prefer to finance state government through increases in consumption taxes. On July 1, the statewide sales tax jumped from 6.15 percent to 6.5 percent.

“The fact sales tax revenue was below estimates, even after Republicans passed a massive sales tax increase, is an indication of just how much Kansas families are struggling under the Brownback tax plan,” said House Minority Leader Tom Burroughs, D-Kansas City. “A tax plan that is overly dependent upon a sales tax is neither responsible, equitable nor sustainable.”

Other Democrats and moderate Republicans opposed to the Brownback administration’s supply-side economic philosophy argue the approach drained a surplus from the state treasury and mired the government in crisis mode.

“There’s no doubt we are on the ‘glide path to zero,’ ” said Senate Minority Leader Anthony Hensley, D-Topeka. “The question is, what reaches zero first: Income taxes on the wealthy? Our state’s cash on hand? Or, Sam Brownback’s approval rating?”

On Friday, analysts and economists from the Brownback administration, the Legislature and three state universities are expected to downgrade the revenue projection for the fiscal year ending June 30. The revised forecast becomes the basis of the governor’s new $6 billion budget plan to be delivered outside of the next legislative session.

The gap in the current fiscal year stands at $72.3 million, based on traditional methods of calculation. The figure shrinks to $57.3 million, if measured by a new formula promoted by the state revenue department that takes into account collections from interest, insurance premiums and other sources.

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