Kansas taxes slightly less than expected in July; Moody's bond rating sees stable outlook

MarketsAssociated Press

Kansas reported Friday that it collected slightly less in taxes this month than expected, and officials attributed the $3.7 million shortfall largely to a national softness in consumer spending affecting sales tax revenues.

The Department of Revenue released preliminary tax-collection figures for July a day after Republican Gov. Sam Brownback's administration announced $63 million in changes to the state budget to make a deficit less likely. The adjustments were timed to help Kansas as it attempts to sell $1 billion in bonds to bolster its public pension system, and Moody's Investors Service described the outlook for the debt as stable.

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The state collected $417.6 million in taxes this month, when officials had predicted $421.3 million. The shortfall is only 0.9 percent, but officials expect the state's $15.4 billion budget to leave less than $80 million in cash reserves at the end of June 2016, even with Brownback's budget changes.

The state's budget problems arose after the Republican-dominated Legislature slashed personal income taxes in 2012 and 2013 to stimulate the economy. Legislators this year increased sales and cigarette taxes to balance the budget but counted on Brownback making $50 million in budget cut.

Revenue Secretary Nick Jordan noted that income tax collections in July were better than expected. Personal income tax collections exceeded expectations by $3 million, or 2 percent, at $153 million.

Sales tax collections were $3.9 million less than expected, at $189.1 million, a shortfall of 2 percent.

"It's a national trend," said department spokeswoman Jeannine Koranda. The department has said for months that consumers across the country are not spending as much as expected.

Other tax collections varied from predictions. House Minority Leader Tom Burroughs, a Kansas City Democrat, said he's concerned that the state had lower-than-anticipated tax collections in the first month of its fiscal year.

"We continue to see fiscal mismanagement under Republican leadership," he said in a statement.

Meanwhile, state officials prepared for a marketing tour next week to promote bonds for the Kansas Public Employees Retirement System.

The state expects to earn more from investing the funds raised by the bonds than it will pay over their 30-year life. The law authorizing the bonds limits the state to paying investors 5 percent or less in interest.

"I don't think we'll have any problem selling them," said Tim Shallenburger, a former state treasurer and the president of the Kansas Development Finance Authority, the agency handling the bonds.

Moody's assigned a rating of Aa3 to the bonds, one notch below the existing Aa2 rating for Kansas. That's a standard decrease when a state's legislature must appropriate money for annual bond payments.

But even as Moody's called the outlook stable, it raised concerns about the state's budget issues.

In a report, it said: "Kansas' economic recovery has been slower than many of its peers, and growth so far in 2015 has been disappointing."


This story has been corrected to show that the budget adjustments announced Thursday were $63 million, not $50 million.



Kansas Department of Revenue: http://bit.ly/1tLKHt8


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