Monday, September 8, 2014

Kansas Revenue Remains in Critical Condition

By Duane Goossen

Don’t be misled by campaign season rhetoric.

Income to the State General Fund (SGF) remains critically low. As a result, Kansas is headed toward current year spending cuts that will affect education and other key programs.

Here’s the summary: In FY 2014, SGF revenue dropped dramatically — $688 million from the previous fiscal year. In order for the SGF to barely stay solvent this fiscal year, revenue must rebound by $300 million. If revenue does not grow, spending will have to be cut. After the first two months of FY 2015, receipts are below the FY 2014 level. Revenue went way down in the last fiscal year, and is staying down.

The Kansas City Star was on the mark with its September 2 editorial about revenue collections.

For readers who want to dig deeper into the numbers: Look first at the current FY 2015 SGF budget summary below. Kansas began FY 2015 two months ago with $380 million in the bank. The official revenue estimate of $5.974 billion (established last April with incomplete information about individual income tax receipts) is $321 million higher than the amount received in FY 2014.

Approved spending has been set $351 million above the optimistic revenue estimate. Even if the revenue estimate somehow comes true, the state will end FY 2015 with a dangerously low $29 million bank balance.

Now look at the figures below comparing receipts from the first two months of FY 2015 to that same period in FY 2014. Revenue is flat and not on track to grow. In fact, the FY 2015 amount of $764 million is artificially high because $34 million in transfers — transactions that reduce revenue — were not made as planned in August, and instead will reduce revenue in some future month.

Revenue during September is likely to follow the same pattern. For taxpayers making quarterly income tax payments, the third quarterly installment is due in September. Quarterly payment amounts in April and June were significantly below previous years. Low quarterly payments in September could easily cancel revenue gains that might come from sales tax or corporate income tax.

FY 2015 looks bad, but it’s only a warm-up for FY 2016. Expenses will keep growing, but even more income tax rate cuts are set to take effect all the way through 2018. The governor’s tax plan has produced a dismal outlook for the State General Fund.

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