Kansas revenue expected to rise, but school funding demands loom

Kansas will collect about $222 million more than previously projected over the next two years, even as state officials cautioned against too much optimism.

The anticipated revenue growth provides lawmakers additional funds as they wrestle with how to respond to a Kansas Supreme Court decision that found the state’s school funding formula inadequate.

Still, the anticipated revenue falls far short of the $400 million to $600 million in additional school funding some think will be needed to satisfy the court.

State officials produced a new revenue forecast Thursday that will guide the governor and Legislature during the budgeting process next year. Under the forecast, the state will take in about $102 million more in tax revenue during the current fiscal year, which ends in June. Estimates for next year’s tax collections were increased by $122 million.

After years of shrinking forecasts and budget cuts, Thursday’s forecast was the second this year to project rising revenue. State budget and legislative research officials produce forecasts each April and November.

“More is better than less, but we shouldn’t quite throw a party yet,” said state budget director Shawn Sullivan. “We remain cautious going forward.”

Kansas is now projected to have an ending balance of about $280 million at the close of the current fiscal year in June, and a $355 million ending balance in the next year. Those figures do not take into account any increased dollars lawmakers may approve for schools.

Senate Majority Leader Jim Denning, an Overland Park Republican, noted that despite ending balances in the $300 million range, the state still has obligations in future years. For example, he said, the state has previously deferred pension payments that will come due.

But the school funding concerns also loom. The Supreme Court ruled the current funding formula inadequate in October. The justices gave the Legislature until the end of April to respond. Attorneys for the plaintiff school districts that have sued for more funding contend up to $600 million in additional funding may be needed, though the court has not specified an amount.

A school funding increase of that size would be about twice the amount of the projected ending balance next year, Denning noted.

“So we’re still, we’re in a healing phase, but to say that that ending balance, that’s going to go to schools — that’s the legislative process and we have many, many resource needs,” Denning said.

Sen. Laura Kelly, a Topeka Democrat, said she is hoping people don’t jump to the conclusion that the higher revenue projections means the school funding issue is solved.

“We have a lot of work to do,” Kelly said.

Thursday’s forecast was the first since lawmakers forced a bill into law this June over Gov. Sam Brownback’s veto that raised income tax rates and ended a tax exemption for certain business owners. The changes were expected to bring in close to an additional $600 million in the 2018 fiscal year.

Asked if the Kansas economy is growing stronger or is flat, Sullivan called it “mixed.”

While some sectors of the economy are showing positive growth, others like agriculture and energy continue to struggle, he said. The amount of oil and gas severance tax the state expects to collect this year was downgraded by nearly 11 percent; next year’s collections were revised down 20 percent.

Kelly said a lot is unknown at the moment.

“I hope that people take to heart the word caution that was used in (Sullivan’s) explanation of these estimates,” Kelly said.

In a sign of that caution, revenue forecasters didn’t change the amount of expected individual income tax revenue — about $2.9 billion this year.

“We have infinite demands and limited resources,” Denning said. “It’s the legislative process that decides what resources get applied to. It’s just that simple.”

This story was originally published November 2, 2017 at 4:17 PM with the headline "Kansas revenue expected to rise, but school funding demands loom."