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Kansas fiscal picture better but big hike for schools iffy

Shawn Sullivan, budget director for Kansas Gov. Sam Brownback, answers questions about a new fiscal forecast for state government during a news conference, Thursday, Nov. 2, 2017, at the Statehouse in Topeka, Kan. The new forecast is more optimistic than the previous forecast, but Sullivan says the state's economy is still mixed. (AP Photo/John Hanna)
November 02, 2017 - 6:09 PM

TOPEKA, Kan. - Kansas saw its budget picture improve Thursday because of a new fiscal forecast for state government, though legislators doubted the higher projected revenues will be enough to cover a court-mandated increase in spending on public schools.

The state's economic forecasting group boosted projections for tax collections by a total of nearly $225 million for the state's current and next budget years, through June 2019. That's an average of 1.8 per cent better than a forecast issued in April.

But the state officials and economists issuing the new forecast were cautious about predicting improvements in the state's economy. They concluded that parts of it will remain soft, particularly agriculture and energy production.

"More is better than less, but we shouldn't quite throw a party yet," said Shawn Sullivan, a member of the forecasting group and Republican Gov. Sam Brownback's budget director.

Legislators raised individual income taxes earlier this year to help balance the state budget and provide extra money for public schools, rolling back past cuts championed by Brownback. Lawmakers expected the tax increase to raise $1.2 billion over two years, and the latest forecast sticks with that projection.

The forecasting group issued its new numbers a month after the Kansas Supreme Court ruled that an increase in spending on schools approved earlier this year still is not enough to finance a suitable education for every child. The court didn't set a specific spending target but hinted that it must rise by at least several hundred million dollars annually.

The new forecast would allow for some extra spending on schools, but legislators see plenty of other needs, including social services and better staffing in state prisons and mental hospitals. And even with higher taxes, lawmakers still siphoned off money from highway projects and shorted annual contributions to public pensions to patch holes elsewhere in the budget.

"We have infinite demands and limited resources," said Senate Majority Leader Jim Denning, an Overland Park Republican.

The new forecast predicts that Kansas will collect almost $6.5 billion in general taxes during the current budget year, increasing the projection by more than $102 million. If the state hits the target, total tax collections will grow 11.5 per cent over the previous fiscal year, largely because of the income tax hike.

The forecast predicts tax collections of more than $6.6 billion during the fiscal year that begins in July 2018. The new projection is more than $122 million higher than the old one and anticipates tax collections will grow a modest 2.2 per cent from the current budget year.

The sunnier forecast wasn't a surprise: Tax collections have been running ahead of expectations for five consecutive months. Revenue Secretary Sam Williams said Wednesday that better-than-expected sales and income tax collections suggested an improving economy.

The jobless rate has stayed below 4 per cent since March, and the forecasters are predicting it will remain so through next year. But the state also has seen this year's total nonfarm employment lag slightly behind last year's.

"I would say it's mixed," Sullivan said. "There's certain sectors that are showing positive signs of growth. There are others like the agriculture and energy sectors that continue to struggle."

With this year's tax increase, legislators phased in a $293 million increase in aid to public schools over two years, making it about $4.3 billion annually. The state Supreme Court has directed legislators to draft a new, more generous school funding law before July.

Sen. Laura Kelly, a Topeka Democrat, said legislators will have to demonstrate to the court that any increased funding for schools can be sustained into the future.

"I don't think we can send the court something without dealing with our revenue situation again," Kelly said.

The fiscal forecasting group consists of legislative researchers, university economists, state Department of Revenue officials and members of Brownback's budget staff.

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Follow John Hanna on Twitter at https://twitter.com/apjdhanna .

News from © The Associated Press, 2017
The Associated Press

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