TOPEKA – Kansas collected $30 million less in taxes than anticipated last month, though officials said Tuesday that larger-than-expected income tax refunds were most of the reason.
The state Department of Revenue reported that tax collections were almost $418 million in August, compared with the official projection of $448 million. The shortfall for the month was 6.8 percent.
Since the current fiscal year began in July, tax collections have fallen nearly $36 million short of expectations, or 4.1 percent, at $834 million.
But Revenue Secretary Nick Jordan cautioned against reading too much into the August figures because the state made $22 million in unanticipated corporate and personal income tax refunds during the month. Also, premium tax refunds to insurance companies were nearly $5 million greater than anticipated.
Jordan stressed that the state withheld 6.7 percent more from workers’ paychecks for personal income taxes in August than in August 2014 and that sales tax collections were greater, even when the tax increase was factored out. The data includes “a lot of positive signs” in the economy despite the shortfall in tax collections.
“It’s always dangerous to look at one month and extrapolate that out over a year,” Jordan said during a Statehouse news conference.
The state increased sales and cigarette taxes in July, and Republican Gov. Sam Brownback’s administration later announced $63 million worth of budget adjustments to lessen the chances of a deficit in the state’s $15.4 billion budget. But with August’s tax collections short, the state would have a cushion of roughly $50 million in cash reserves in July 2016.
The state’s budget problems arose after the GOP-dominated Legislature slashed personal income taxes at Brownback’s urging in 2012 and 2013 in an effort to stimulate the economy.
State Sen. Laura Kelly, of Topeka, the ranking Democrat on the budget-writing Senate Ways and Means Committee, said monthly tax collection figures continue to show that the tax cuts were “reckless.”
“It’s just continuing to be a problem,” Kelly said. “We are not generating the revenue that we need to from our taxes to support the services that we’re required to provide.”
The budget changes announced by Brownback’s administration included capturing savings in some state agencies and sweeping unused fees into the state’s main bank account, which helped boosted revenues and offset the lower-than-anticipated tax collections in August. When all receipts are considered, the state was about $6 million short for August and $11 million short for the previous two months.
The bulk of the unanticipated tax refunds in August were attributed to incentives designed to spur economic development. One company received a corporate tax refund of nearly $14 million from a 10 percent credit against investments in Kansas facilities. State officials declined to name the firm.
Jordan and budget director Shawn Sullivan said the unanticipated refunds could represent “a timing issue,” in which the state’s fiscal forecasters anticipated them coming later.
The figures for August were the first since the Department of Revenue revised how it reports the numbers.
Previously, it issued a preliminary report on the last working day of the month but did not include figures for insurance premium taxes, which are collected by the state Insurance Department, or other non-tax revenues. Department officials said they wanted to produce a more complete picture of state revenues.