Jonathan Shorman
January 30, 2015

State revenue plunged in January, falling $47 million below expectations that had been lowered just months earlier. The grim number will complicate efforts to close Kansas’ budget shortfall — which already stands at $279 million.

Friday’s numbers, however, could push the shortfall to more than $320 million. The Department of Revenue said tax refunds as well as drops in sales and use tax revenue contributed to the revenue figures — which were 8.4 percent off projections — and cited weaker-than-expected receipts from the Christmas season.

But the department also touted that the state had sent out $22 million more in tax refunds in January 2015 compared with January 2014.

“We are glad that Kansas taxpayers are getting their refund checks earlier than last year, unfortunately that negatively affects our tax receipts for this month,” Revenue Secretary Nick Jordan said.

Senate Minority Leader Anthony Hensley, D-Topeka, scoffed at the explanation that weaker Christmas sales helped explain the shortfall.

“They’re not blaming Obama this time; they’re blaming it on Santa Claus,” Hensley said.

Republican Gov. Sam Brownback has called on Kansas to move toward taxes on consumption (such as sales tax) and away from taxes on production and income. Sales tax receipts were $8 million less than estimated this month, however.

Annie McKay, director of the Kansas Center for Economic Growth, which is critical of Brownback’s economic policy, said extra cash Kansans have because of reduced income taxes is not translating into additional sales tax revenue.

“For every dollar we leave in the pocket of a Kansan, we don’t get that dollar in sales tax,” McKay said.

Absent from the department’s release on the figures was any mention of continuing cuts to income tax rates. The rate cuts were the centerpiece of Gov. Sam Brownback’s policy agenda during his first term.

Figures released by the department show individual income tax receipts were $35,473,000 short of expectations for the month, or a difference of 13.4 percent.

In addition, oil severance revenue was off by 20 percent, or about $1.6 million. The administration had previously anticipated a drop in severance revenue because of falling oil prices.

“These numbers are like a financial nightmare, and it’s a nightmare that will end tragically if the governor doesn’t wake up soon,” House Minority Leader Tom Burroughs, D-Kansas City, said.

“There are only so many excuses and short term fixes available, but the governor has tapped most of them out,” Burroughs said. “How much worse does it have to get before Governor Brownback admits his failed economic experiment is leading to a meltdown of every public service upon which Kansans depend?”

The state’s consensus revenue estimating group — including economists from state universities and government representatives — lowered revenue expectations in November. The group projected revenue to fall $279 million short of what had been previously expected for the current fiscal year, which ends in June.

The shortfall caused Brownback to cut spending at some state agencies by 4 percent. In addition, he has requested lawmakers approve about $253 million in fund transfers, including $158 million from the state highway fund.

Earlier this week, Shawn Sullivan, the state budget director, indicated the state will face cash flow problems by mid-February unless the Legislature approves the fund transfers.

“These numbers couldn’t come at a worse time with the state two weeks away from not being able to pay its bills,” Hensley said. “Gov. Brownback’s inadequate approach does not solve the problem. It only perpetuates what we already know — his economic experiment has failed. It’s time for real solutions.”

House Speaker Ray Merrick, R-Stilwell, indicated in a statement that legislation currently under consideration to authorize the fund transfers will change, saying lawmakers are working to add “additional contingencies.”

Asked for clarification, Merrick spokeswoman Rachel Whitten said in an email: “Ending balances. It is in the works.”

Even after lawmakers deal with the current fiscal year shortfall, Kansas still faces a $436 million shortfall in the next fiscal year that will constrain legislators as they work to pass a budget.

Brownback has proposed to drop the lowest bracket from 2.7 percent to 2.66 percent in January 2016, but block reductions in state income taxes scheduled for 2017 and 2018 unless growth in state tax receipts exceeds 103 percent of the previous fiscal year’s receipts.

In addition, the governor also has proposed hiking cigarette and liquor taxes. Under his plan, the per-pack tax on cigarettes would rise from 79 cents to $2.29.

Read more from the Topeka Capital Journal here.

KendraTOPEKA CAPITAL JOURNAL: Revenue falls $47 million short in January