Government & Politics

Kansas expects budget shortfall around $350 million this fiscal year

The financial forecast in Kansas took another turn for the worse Thursday as state officials projected an almost $350 million budget hole for the current fiscal year.

The state was already on pace for a roughly $75 million budget shortfall four months into the new fiscal year because it missed monthly tax collection benchmarks.

No solutions — such as budget cuts — were offered Thursday about how Kansas will close the gap. Gov. Sam Brownback’s administration said the Republican leader would wait until January to present a plan to legislators.

The latest news came from the state’s consensus estimating group, a collective that includes members of Brownback’s administration, the state’s legislative research department and economists from Kansas universities. The budget hole expanded because the group revised revenue estimates downward by $345.9 million for the rest of the current 2017 fiscal year.

“I would guess this is probably close to the largest, if not the largest” revision, said Raney Gilliland, the state’s legislative research director.

Kansas Budget Director Shawn Sullivan had said earlier this year that Brownback would not be making across-the-board cuts despite the economic climate.

He said Thursday that Brownback will present a plan to legislators in January, and wouldn’t say what the governor planned to do given the dire financial news.

“We’re obviously in a very challenging economy and, as a result, challenging budget situation that we’ll have to deal with for this year and the next two years,” Sullivan said.

He also said tax collections have been hurt by the struggling agriculture sector and lower prices on some products.

“Basically, all the different categories that we as a state collect sales tax on, the prices are decreasing nationally,” Sullivan said.

The state’s largest counties are still showing growth when it comes to sales tax collections, Sullivan said, but smaller counties are struggling. An uptick in the projected unemployment rate also played into the group’s downward outlook for the future. Revenue is expected to drop by $443.7 million in fiscal year 2018, prompting a projected budget shortfall for that year of $582.6 million.

“I don’t think with some of the struggles that we’ve seen, that we’re going to see much of anything turn around in the next year or two,” Sullivan said.

The 2016 campaign season in Kansas focused heavily on the state’s financial struggles in recent years, with moderate Republicans and Democrats alike pointing to the governor’s earlier tax cuts as a reason for the lagging revenue numbers. Shortly before the election, Brownback continued to stand by the 2012 tax cuts, which took around 330,000 limited liability companies off the state’s tax rolls. The governor’s cuts also trimmed income tax rates and decreased the number of tax brackets.

Brownback has also described Kansas as being in a rural recession and lamented the struggles of the oil, gas and agriculture industries in the state.

Gilliland said the state’s tax policies do play a role in the current situation. But he emphasized that the state’s tax policy was just part of the larger economic picture.

“I think it’s a combination of factors,” Gilliland said. “I don’t think it’s a one or the other kind of thing.”

When bad budget news struck this time last year, Brownback’s administration almost immediately outlined budget adjustments to meet the problem.

The state has often struggled financially in the years since the tax cuts took place. The administration has answered some of those problems in the past by transferring money from the transportation department and waited to contribute to its state pension system to help keep the budget balanced.

This time, Sullivan said no immediate action would be taken.

Sen. Laura Kelly of Topeka, the ranking Democrat on the Senate budget committee, called the governor’s decision to wait until January to solve the problem “chicken.”

“I think it’s really a demonstration of very weak leadership that the governor is going to leave this all to a brand-new Legislature,” Kelly said.

John Skubal, an Overland Park moderate Republican elected to the Legislature on Tuesday, described the shortfall number as significant. Skubal was one of a handful of freshmen Kansas Republicans who defeated conservative Republicans by campaigning against the state’s financial policies.

“I’m not in favor of moving from crisis to crisis,” Skubal said. “I’m in favor of a long-term solution, which means that we have to look at all taxing entities and then we have to figure out what we’re going to do. If they want us to go ahead and do that, that’s what I was elected to do. I’m elected to govern. I’ll do the best I can.”

And even given the shortfalls of recent months, the new state senator said he hadn’t expected to come into office with something like this sitting in front of him.

“No, no,” Skubal said. “And I don’t think anyone would tell you anything any different.”

Hunter Woodall: 785-354-1388, @HunterMw