Revenue estimators on Thursday predicted a slightly improved budget outlook for Kansas and boosted predicted revenues by more than $220 million in the next two fiscal years.
The Consensus Revenue Estimating Group meets twice a year to adjust its predictions for Kansas’ tax and revenue collections. Estimators predicted tax revenues for this year would come in $102.4 million ahead of previous predictions and $670 million ahead of last year.
The budget revision was good news for legislators after estimators repeatedly decreased predictions between 2014 and 2016 as revenues dropped off and the state grappled with numerous budget shortfalls. The estimating group boosted revenue predictions this spring. Even with Thursday’s gain, legislators still have to allocate resources to several parts of the budget, including K-12 education.
“Positive growth is better than what we’ve had, but we still need to remain cautious about where we are to ensure that those continue,” said Budget Director Shawn Sullivan.
Sullivan said he thought the state’s economic growth was “mixed.”
The Supreme Court ruled last month the state’s school finance formula was unconstitutional and gave lawmakers until April to come up with a replacement and send briefs to the court. Earlier this week, the Legislative Coordinating Council created an interim committee to study the issue.
With the rosier forecasts, the state will end the next two fiscal years with $280 million and $355 million leftover. They deferred payment of the Kansas Public Employee Retirement System and will have to pay an extra $271 million in the 2020 fiscal year, Sullivan said.
That only leaves an ending balance of about $100 million in 2020 if it’s otherwise similar to those in 2018 and 2019.
“So there’s not that much wiggle room,” said Senate Majority Leader Jim Denning, an Overland Park Republican.
Denning stopped short of saying whether that was enough money to boost expenditures on schools. He said he didn’t want to speak for the Republican caucus.
“We have infinite demands and limited resources, and it’s the legislative process that decides what resources get applied to,” Denning said.
Republicans have also mentioned a possible effort to amend the Kansas Constitution and limit the Supreme Court’s authority over school finance issues.
Topeka Sen. Laura Kelly, a Democrat, said it was better to be in the black than the red, but she didn’t think people should get “too excited.”
“We have a lot of outstanding bills to pay,” Kelly said. “There’s obviously the school finance issue that will run us into millions of dollars. We had KPERS to repay, and we have highways to refund.”
Kelly said she didn’t think the boosted revenue predictions meant legislators had enough money to increase funding for schools to satisfy the court.
An attorney representing the school districts suing the state has repeatedly called for an extra $600 million each year.
Consensus revenue estimators didn’t change their predictions for individual income tax collections, though monthly receipts have come in ahead of expectations. Sullivan said those are difficult to predict because estimators don’t know when filers who were benefitting from a tax break for pass-through entities will start making payments.
The Legislature repealed that exemption — for organizations like LLCs — this spring when it passed a tax increase expected to bring in $1.2 billion over two years. Denning said that part of the tax plan was expected to bring in more than $250 million.
“We won’t know if that number is right or wrong until June of next year,” Denning said. “That’s why they’ve had such a difficult job because those corporations have been off the tax rolls for so long that they had to do a best guess.”