New Kansas revenue forecast says state faces $279M budget shortfall by July, bigger gap later

Economic IndicatorsAssociated Press

Kansas will face a $279 million budget shortfall by July, far worse than state officials had thought before a new revenue forecast Monday that will force Gov. Sam Brownback and legislators to consider spending cuts.

The state will also be required to close an even bigger additional gap — $436 million — during the following 12 months, according to the new forecast.

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Aides to the Republican governor, who narrowly won re-election last week, said his administration will work in the next weeks to find savings while trying to protect funding for schools and core programs. But a Democratic leader called the new projections "devastating."

Brownback and many Republicans in the GOP-dominated Legislature are not publicly rethinking aggressive cuts in personal income taxes enacted in 2012 and 2013 to stimulate the economy. The state cut its top rate 26 percent and exempted the owners of 191,000 businesses from income taxes altogether, and further reductions are promised, including a decrease in the top rate next year.

"I would say the economy's growing — when you look at wages, when you look at jobs from new and expanded businesses, when you look at small business income," Shawn Sullivan, the governor's budget director, said during a Statehouse news conference announcing the new forecast. "We continue to cut taxes every year, which is a great thing."

The new forecast revised previous revenue projections made in April for the current budget year, which began in July, dropping the prediction for total general revenues by $206 million, to less than $5.8 billion. The state also faces previously unanticipated costs for social services, public schools, and public employee pensions, driving up the figure for its spending commitments past $6.4 billion.

After eating through $380 million in cash reserves, the state still would have to close a 4.3 percent budget gap by July. An unofficial projection previously put the shortfall at $14 million.

The new forecast followed short-of-the-mark tax collections in the spring, summer and fall.

The forecast also made the first revenue projections for the fiscal years beginning in July 2015 and July 2016.

For the next fiscal year, the new projection was $5.8 billion in revenues — short of the nearly $6.2 billion that legislative researchers had been assuming in their unofficial forecasts. The projected shortfall of $436 million is about 7 percent, and higher than the $282 million gap estimated unofficially.

The new revenue projection for the fiscal year beginning in July 2016 is a little less than $5.9 billion — again, short of the nearly $6.4 billion legislative researchers had assumed. But the new forecast assumes that spending by that time will be in line with the lower revenues.

The projections also assume Kansas will continue to see modest economic growth, said Raney Gilliland, director of the nonpartisan Kansas Legislative Research Department.

During the governor's race, Democratic challenger Paul Davis argued the tax cuts championed by Brownback were wrecking the state's finances. Senate Minority Leader Anthony Hensley, a Topeka Democrat, predicted the state will have to cut spending on schools and social services and divert money from highway projects.

"There is absolutely no good way out of this," Hensley said. "You can't find enough efficiencies or growth to make up these devastating numbers."

The new forecast was drafted by legislative researchers, members of Brownback's budget staff, Department of Revenue officials and university economists. Governors and legislators must use the "consensus" numbers in budgeting.



Summary of the new forecast:


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