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Kansas’ June tax collections nearly $33M more than expected

Kansas collected nearly $33 million more in taxes than anticipated in June and ended its 2019 budget year with record cash reserves, good news likely to intensify Democratic Gov. Laura Kelly's battles with Republican lawmakers over state finances.

The state Department of Revenue's report released Tuesday was the 24th in 25 months in which tax collections exceeded predictions in the state's official fiscal forecasts. Tax collections were nearly 6.3% higher than during the 2018 budget year.

Top Republicans in the GOP-controlled Legislature want to cut taxes for individuals and businesses that are automatically paying more in state income taxes because of changes in federal tax laws at the end of 2017.

Kelly vetoed two Republican tax bills this year. She argued that they would "decimate" the budget after lawmakers in 2017 reversed deep state income tax cuts that were championed by former GOP Gov. Sam Brownback and followed by serious budget problems.

"I don't think by any stretch that, because we lost two different tax bills to her this year, it stops us next year," said House Majority Leader Dan Hawkins, a Wichita Republican. "The governor stepped in the middle and made it to where the people of Kansas are paying up."

The state collected nearly $782 million in taxes in June, when it was projected to take in a little more than $749 million, for a surplus of almost 4.4%.

The state collected nearly $7.5 billion in taxes during its 2019 fiscal year, or $191 million more than anticipated, for a 2.6% surplus. Tax collections were $440 million more than they were during the 2018 fiscal year.

Revenue Secretary Mark Burghart acknowledged in a statement that the federal tax changes were a factor in the surge in tax collections. Unanticipated personal income tax collections account for the bulk of the surplus revenues.

The state's tax code is tied to the federal tax code. While federal rates dropped, Kansas benefited from changes that discouraged thousands of filers from claiming itemized deductions and other provisions.

Meanwhile, expanding the state's Medicaid health coverage to as many as 150,000 additional people remains a priority for Kelly. Top Republicans in the Senate this year blocked a House-passed plan that she favored, arguing that it could prove costly, despite the federal government's promise to pick up 90% of the cost.

"We had money in the budget to expand Medicaid this year," Kelly said in a statement Tuesday.

The state is likely to have ended June with $1 billion in cash reserves, well above the previous high watermark for the June 30 end of a budget year — $935 million in 2007.

However, long-term projections from the Legislature's nonpartisan research staff predict that spending will outstrip tax collections over the next few years and cause those reserves to melt away by 2023.

"And with economic uncertainty on a national scale, we have to be cautious," Kelly said.

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