Stronger individual and corporate income tax receipts and slumping sales tax collections in Kansas led analysts Thursday to reduce this fiscal year's state revenue forecast and craft a three-year outlook offering little wiggle room for large spending hikes or tax cuts.
Gov. Laura Kelly jumped on the April revenue report produced by state agency officials in collaboration with university economists as evidence of need to restrain demands to burn through revenue. After years of budget woes, state revenue surged after the 2017 Legislature eliminated an income tax exemption for 330,000 businesses and raised individual income tax rates.
"Kansas has been on a roller coaster for the last eight years and we must allow adequate time to recover and rebuild," Kelly said. "Kansans elected me to bring fiscally conservative and responsible principles back to our government. I take that responsibility very seriously."
In March, Kelly vetoed a Republican-sponsored bill that would have devoted about $500 million over three years to lowering tax obligations of multinational corporations and wealthy individual tax filers while also lightly trimming the state's sales tax on food.
The GOP-led House and Senate didn't try to override the governor on the tax veto, but could consider an alternative bill when lawmakers return to Topeka on May 1.
J.G. Scott, acting director of the Kansas Legislature Research Department, said the consensus group's revenue estimate for this fiscal year was expanded by $25 million for both individual and corporate tax collections. The projection of sales tax receipts in the fiscal year ending in June was cut $15 million, but he wasn't certain why consumer spending had cooled at a time of wage growth in Kansas.
"We do have some concern over sales tax. Whether than is a trend or not is something we will have to look at," Scott said.
Total tax receipts in the current fiscal year was adjusted downward by $73 million to $7.2 billion. However, that figure was dramatically influenced by the 2019 Legislature's decision to make an immediate $115 million payment to the Kansas Public Employees Retirement System.
Kansas revises revenue numbers each April to update reports developed in November. The Legislature and governors make use of the adjusted figures to complete the new government budget for the fiscal year starting July 1.
Over the current and next two fiscal years, a period covering 27 months, the estimating group said total tax revenue would climb $162 million while other revenue sources would decline by $147 million.
"We really hope we can stabilize this thing for a year or two and really then our projections and trends will be much more clear," said Larry Campbell, who serves under Kelly as state budget director.
The Kansas gross state product estimate for 2019 was raised to 2 percent from 1.8 percent. Personal income this year had been pegged at 4 percent, but that was lowered to 3.9 percent for the current and next two fiscal years.