Kansas faces $349M budget shortfall in latest forecast

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TOPEKA, Kan. (AP) — Kansas faces a $349 million shortfall in its current budget and even bigger gaps in the near future after officials issued a new, more pessimistic fiscal forecast for the state.

The forecasters slashed the state’s previous projections for tax collections through June 2017 by 5.9 percent, or $355 million. They also issued the first projections for the two fiscal years beginning in July 2017 and kept their estimates for revenue growth conservative.

Legislative researchers projected budget shortfalls totaling $1.1 billion through June 2019, based on current legal requirements for spending. The state’s annual spending is $15.5 billion.

The state’s fiscal woes come amid a national debate over taxes. President-elect Donald Trump promised big income tax cuts while campaigning. Kansas has struggled to balance its budget after slashing personal income taxes in 2012 and 2013 in hopes of stimulating its economy, and Republican Gov. Sam Brownback touted the experiment as a national model.

Brownback blames the state’s ongoing budget woes on slumps in agriculture and energy production that have also affected other states. The new fiscal forecast — replacing one issued in April — assumes that the sluggishness continues for the next two years.

“I don’t think with some of the struggles that we’ve seen, that we’re going to see much of anything turn around in a year or two,” Shawn Sullivan, Brownback’s budget director, said during a news conference.

The new forecast also assumes that unemployment rises over the next three years, Kansans’ income growth remains below normal, farmers collectively will have a negative net income this year and the gross state product doesn’t grow at all this year. Forecasters reduced current-year estimates for sales and corporate and individual income tax collections.

“The economy, generally, is not robust,” said Raney Gilliland, director of the Legislature’s research staff.

The state’s monthly tax collections have fallen short of expectations in 33 of the 46 months since the first tax cuts championed by Brownback took effect in January 2013. Its twice-a-year fiscal forecasts have been more pessimistic than their predecessors for the past two years.

Kansas slashed its top income tax rate and reduced its number of tax brackets. Trump has proposed doing both with the federal income tax while also reducing corporate income taxes.

“Some of the Trump tax package is things that we’ve done here,” Brownback said during an Associated Press interview Wednesday.

But while the federal government can run annual deficits, the Kansas Constitution prohibits them for the state. Brownback has said he’ll wait until the Legislature convenes its next annual session in January to outline proposals for closing any gap the state faces.

While lawmakers and legislative candidates in both parties have talked about rethinking income tax cuts championed by Brownback, the conservative governor hasn’t given an indication of what he might accept. Any tax increase would not generate revenue quickly enough to patch holes in the current budget.

The state in the past has diverted funds for highway projects and delayed aid payments to schools or contributions to public pensions to help balance its budget. Former Budget Director Duane Goossen, who served both Democratic and Republican governors, said the budget has been “structurally out of balance” since the first tax cuts.

“If tax policy had been left alone, Kansas would have had no problem weathering the ups and downs that have occurred in the oil and ag economy,” said Goossen, now a senior fellow with a think tank that’s regularly criticized Brownback’s tax policies.

The state’s ongoing budget problems also sparked a political backlash against the term-limited governor’s allies. The GOP-dominated Legislature will be less conservative next year.

 

Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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