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Yahoo
18-04-2025
- Business
- Yahoo
Analysts raise Kansas' short-term revenue forecast, warn of budget woes on horizon
Adam Proffitt, state budget director, and Shirley Morrow, director of the Kansas Legislative Research Department, brief reporters on revised state revenue estimates that outline unanticipated growth in revenue this year and next year. They warned of budget problems if the Legislature continued to expend more money than collected in revenue. (Tim Carpenter/Kansas Reflector) TOPEKA — A bullish revenue picture for state government in Kansas through the current and next fiscal years couldn't sugarcoat projections the state budget could end up with a $730 million deficit by 2029 if lawmakers continued spending more than what was collected in revenue. The new forecast released Thursday by the Consensus Revenue Group, which is responsible for updating financial reports twice each year, indicated the treasury could expect to collect $157 million more in the current fiscal year than projected in November. In addition, the state could receive $219 million more in the 2026 fiscal year than predicted six months ago. The state general fund takes in about $10 billion annually. The estimating group said the state's budget ending balance could sit at $2.29 billion at close of the current fiscal year in June, but fall to $1.73 billion in 2026, $903 million in 2027 and $63 million in 2028 before going under water by $730 million in 2029. Democratic Gov. Laura Kelly said the latest revenue estimates from university economists and state financial experts could be viewed as positive news. 'In reality, they underscore the seriousness of the financial predicament ahead,' Kelly said. 'The bizarre and irresponsible budget gimmicks used by the Republican-led Legislature spend more than the state takes in by nearly $800 million per year. Ultimately, this will lead to a historically large budget deficit.' She said the revenue update came one week after GOP House and Senate leaders adjourned the annual legislative session. Traditionally, the Legislature remained in session until the revenue forecast was updated so spending and tax policy could be refined. 'Kansans need to demand their legislators restore fiscal sanity and fairness when they return in January,' Kelly said. House Speaker Dan Hawkins, a Republican from Wichita, said the Legislature successfully assumed a more direct approach to developing the new state budget and produced a plan that spent less than recommended by the governor. He said the Legislature was confident in the wisdom of the three-year, $1.2 billion income tax cut adopted in the 2024 special session and the additional tax relief approved in the 2025 regular session. 'Be wary of those who want to make political hay by invoking the budget boogeyman and screaming that the sky is falling,' Hawkins said. 'These positive consensus revenue estimates reaffirm we're headed down a smart and sustainable path as we continue to monitor all fiscal data as it's available.' Adam Proffitt, secretary of the Kansas Department of administration and budget director for the governor, state tax reductions and elevated spending were significant drivers of the state's financial prospectus. He said the extended assessment was that state revenue could remain below expenditures during the next four years unless a different approach was taken by state lawmakers. 'We need to get more structurally balanced,' Proffitt said. 'This is something we've been watching for a couple years. I think the governor's been pretty consistent in her message that we need to be showing fiscal restraint and making sure we have a good handle on expenditures and don't grow them unnecessarily.' Proffitt said the projected $800 million decline in state budget ending balances in fiscal years 2027, 2028 and 2029 would leave the state in dire financial condition. An unknown for forecasters, for a couple more months after close of tax season, was the influence of retroactive income tax cuts approved by the state lawmakers in 2024, he said. In addition, he said, the forecast changes didn't take into account the influence of tax bills on Kelly's desk nor possible federal policy shifts. Shirley Morrow, director of the nonpartisan Kansas Legislative Research Department, said during a news conference at the Capitol the solution to the state's future budget predicament was obvious. 'To me,' she said, 'the simple answer — and this is going to be too simple — is increase revenue and decrease expenditures.' Morrow said forces that could influence the state's bottom line were tied to volatility in the U.S. economy. Factors capable of altering the fiscal assessment included persistently elevated inflation, trade policy changes relevant to agriculture exports and aviation manufacturing, shifting unemployment rates, sustained high interest rates, cuts in federal funding to states, monetary policy and geopolitical dynamics, she said. 'The reoccurring theme throughout the forecast cycle is an increased volatility in the state's economy,' Morrow said. She said the Kansas inflation rate in 2025 was raised from 2.3% to 2.9% while the estimate for inflation in 2026 was raised from 2.2% to 2.5%. Kansas has added 3,300 jobs over the year, she said. In terms of agriculture, she said, crop producers continued to struggle with low commodity prices and high input costs. Livestock producers were looking to expand beef herds based on continued escalation in market prices, she said.
Yahoo
18-04-2025
- Business
- Yahoo
Kansas budget faces $731 million hole in four years. Will lawmakers cut spending?
Kansas politicians have a budget problem to figure out. New revenue projections show the state government budget faces a $731 million hole in four years, at the end of fiscal year 2029. The budget hole comes after a series of massive tax cuts in recent years, a limited appetite to reduce spending and a torrent of COVID-era federal funding that has dried up. The new estimates were released April 17, a week after lawmakers adjourned for the year. "We are structurally imbalanced; there are no two ways about it," said Adam Proffitt, the governor's budget director and secretary of the Kansas Department of Administration. "The ending balance is eroding rather rapidly. As a budget director ... that gives me concern. It's something that needs to be addressed. It's something that we've been looking at for some time." While the state faces bleak news of a looming shortfall, it does still have a healthy rainy day fund. That budget stabilization fund is projected to end the fiscal year with $1.8 billion and grow to nearly $2 billion by the end of fiscal year 2029. The budget profile was prepared by the Kansas Legislative Research Department on April 17. It incorporates new revenue projections from the Consensus Revenue Estimating Group as well as the latest expenditure changes from the budget enacted by the Legislature and governor. The group revised its revenue estimates upward, meaning the state is now expected to bring in $169 million more in fiscal year 2025 than was previously anticipated. Additionally, projections for fiscal year 2026 were increased by $220 million, for a total annual revenue that year of $10.1 billion. Despite the predictions for higher-than-previously-expected revenue, the state is still spending more than it takes in. Proffitt said the budget profile line he looks at is the figures for receipts above or below expenditures. It shows that over the current fiscal year and the next four year, Kansas will spend an average of $790 million more per year than it takes in. "You can see that in fiscal '25 we are overspending our receipts by $930 million," Proffitt said. "In fiscal '26 we're overspending by $555 million — and this is just SGF. If you look across time, we're structurally imbalanced by $831 million, so the ending balance is eroding rather rapidly, based on the forecast that we provided today." The result is an ending balance that Proffitt said "shrinks dramatically" in the coming years, eventually going in the red by the end of fiscal year 2029. "Expenditures are far in excess of anticipated revenues over the next couple of years," he said. While acknowledging that tax cuts have reduced revenues and expenditures have gone up, Proffitt said, "I don't think you can point to any one thing." "To me, the simple answer is — and this is going to be too simple — is increase revenue and decrease expenditures, which I know the Legislature, that was part of their message this last session," said Shirley Morrow, the KLRD director. So how much spending does the state need to cut to get to structural balance? "I'm not going to assign a number to it today," Proffitt said. "I mean, when we look at the structural imbalance of a negative $831 million, clearly that's an issue. You can sustain that for a year or two, but you cannot sustain that in perpetuity, which is what's happening. "So the reality is, we need to get more structurally balanced. We need to find the right way to do that, and that takes a lot of time, thought and effort." In recent years, state coffers burgeoned with budget surpluses. When November 2021 revenue estimates were released, they projected a $3.8 billion ending balance for fiscal year 2023. Since then, politicians passed tax cuts while growing government spending. Now, the ending balance for the current fiscal year 2025, which ends June 30, is project to be $2.29 billion. The ending balance is projected to drop to $1.74 billion for fiscal year 2026, $900 million for fiscal year 2027 and $63 million for fiscal year 2028. In Fiscal Year 2029, the ending balance is expected to be negative $730 million. More: After tax cuts, Kansas budget director tells agencies to limit spending requests Politicians have passed massive tax cuts in recent years. In 2022, there was bipartisan support for a law gradually eliminating the sales tax on grocery food, reducing tax revenues by $1.3 billion over four years. The law took full effect in 2025. Politicians also agreed to a bipartisan package of 29 tax cuts that was projected to reduce revenues by $310 million over three years. In 2024, after months of disagreement, politicians passed a compromise during a special session. Among other provisions, that plan's most significant cuts come from a restructuring of income tax rates and brackets and an exemption of Social Security benefits from income tax. It was projected to cut taxes by about $472 million in its first year and nearly $2 billion over five years. That same year, the governor signed a different bill making tweaks to tax law. Then, bipartisan supermajorities overrode a veto to enact a package of sales tax cuts, and Republican supermajorities overrode a veto on another tax cut bill. According to previous reporting by The Capital-Journal, the three bills combined reduce state revenues by $237 million over five years. In 2025, lawmakers and the governor eliminated 1.5 mills in state property tax. The fiscal note indicated a reduction in revenue of $81 million in FY 2027 and $257 million over three years. The Republican supermajorities also overrode a veto to enact a gradual flat income tax plan, but revenue experts were unable to predict how much the new law will cut taxes. While politicians of both parties focused on cutting taxes, they showed less bipartisan enthusiasm for cutting spending. The budgets passed by the Republican-led Legislature and signed by the Democratic governor increased all-funds spending year-over-year from fiscal year 2019 to fiscal year 2025. State general fund spending increased year-over-year from 2019 to 2025, except in 2021. In fiscal year 2019, the state spent $7 billion in general funds and $16.9 billion in all funds. For fiscal year 2025, that grew to $10.8 billion in general funds and $27.1 billion in all funds. The latest budget cuts year-over-year spending in fiscal year 2026. The state is budgeted to spend $10.6 billion in general funds and $25.6 in all funds. The Democratic governor and the Republican-led Legislature showed more interest in limiting spending this year. When the governor's administration was putting together its budget proposal in the fall, her budget director sent a memo to state government entities advising them "to keep new spending requests to a minimum" as the governor was "trying to keep next year's total spending as close to flat as possible." Meanwhile, Republican leadership decided to have the Legislature draft its own budget for the first time in decades. House Speaker Dan Hawkins, R-Wichita, said the Legislature's intent in taking over the budgeting process was to address the number of last-minute provisos added to the budget. Provisos are conditions on budget items that must be met for funding to be dispersed. He said because lawmakers didn't get a full detailed budget bill until about three weeks into a legislative session that they're left with insufficient time to vet budget items. 'The provisos need to go through the process. They are not going to come in at the end, in a conference committee at the last day with no vetting,' Hawkins said in October, when the Committee on the Legislative Budget was being established. Presenting a budget is one of the governor's core responsibilities, and though Republican leadership maintained that assuming the power was to fix the process, Democrats accused them of orchestrating a power grab. Republicans also asked state agencies to say what they would cut if their budgets were reduced by 7.5%. The House then passed a budget, which the Senate made changes to, before a small group of representatives and senators negotiated differences. The governor signed the budget but had several line-item vetoes, many of which were overridden by the Legislature. Unlike recent years, the Legislature adjourned before receiving the April consensus revenue estimates. In the past, lawmakers passed an omnibus budget after getting updated revenue projections. Gov. Laura Kelly's message to the Legislature on Senate Bill 125 said "I have serious concerns with how this budget endangers our state's long-term health and jeopardizes our ability to fund the essential programs and services that matter most to Kansas families." Kelly noted the budget puts the state in the red by fiscal year 2028 and that lawmakers left town before receiving the spring revenue estimates. "This is reckless and irresponsible policy making," Kelly said. "Kansas families don't set their household budgets without an accurate picture of their finances, and the state shouldn't either." She said politicians need to "correct the structural imbalance we are currently facing." After Kelly voiced her concerns in a public radio appearance, Hawkins accused her of lying. He said state spending must be cut because "Kansas doesn't have a revenue problem — we have a spending problem." "But our Governor thinks you're stupid," Hawkins wrote in his April 4 newsletter. "That's right. She must think the people of Kansas just fell off the turnip truck because this week, she went on the radio and proclaimed that the legislature is spending the state into the depths of despair." Hawkins criticized the governor's budget proposal for being higher than what the Legislature passed, praised lawmakers for cutting spending and touted higher-than-projected tax revenues this fiscal year. "It was only when the legislature didn't agree to her spending spree that she attacked us for spending too much," Hawkins said. When the budget was debated in the Legislature on March 27, there was bipartisan angst over the looming problem. Sen. Rick Billinger, R-Goodland and chair of the ways and means committee, said that "some people think we spent way too much; some people don't think we spent enough." Sen. Virgil Peck, R-Havana and vice chair of the tax committee, was among a handful of Senate Republicans to vote against the spending plan after criticizing the growth in government in recent years. "I cannot in good conscience support increasing government spending by nearly $2 billion over a four year period. ... When we continue to spend as we have, ballooning up the budget, it makes it so much more difficult to do the right thing," Peck said. "The right thing is to cut taxes in Kansas." Rep. Henry Helgerson, D-Eastborough and a prominent Democrat in budget debates, warned that lawmakers could face a choice of raising taxes or dipping into the rainy day fund. "We are in a financial mess," Helgerson said. "I appreciate all of the work that was done by the appropriation committee, but the chickens are coming home to roost, and we are in a hole — a hole that was created by the ARPA funds and the magnitude of our appetite. Right now, if we don't get a hold of it and control our spending and put a financial plan together, you are going to have more problems than you know how to deal with." Rep. Troy Waymaster, R-Bunker Hill and the chair of the appropriations committee, acknowledged that "we do have a tough road ahead of us." He said that is the reason lawmakers have taken over the budget process, which he said "worked very well." "Now, are there items that we need to address next year? Yes, there is, and we learn from it," Waymaster said. "You're always going to have a learning curve when you try something new. And yes, we are going to have to analyze the budgets. We did get ... generous when we had the federal money. That's not coming in anymore. And there may be the case where there won't be additional federal dollars not coming in that's funding programs in the state, and we are going to have to scrutinize our budget." When lawmakers overrode line-item vetoes, Rep. Brett Fairchild, R-St. John, said he wants more line-item vetoes because that is a way to "cut waste out of the budget." "She isn't vetoing nearly enough spending out of the budget," Fairchild said of the governor in a Facebook post afterward. "Right now we're spending around 600 million more than we're bringing in. I would like to see far more line item vetoes of spending items in the budget." (This story was updated to add new information.) Jason Alatidd is a Statehouse reporter for The Topeka Capital-Journal. He can be reached by email at jalatidd@ Follow him on X @Jason_Alatidd. This article originally appeared on Topeka Capital-Journal: Kansas faces budget shortfall after cutting taxes while spending more
