Kansas Gov. Laura Kelly and lawmakers will head into 2020 with more revenue than previously expected, but the state is still spending more than it takes in.
The improved outlook is likely to renew Republican calls for tax cuts and intensify pressure on the Legislature to allow agencies to spend more as Kansas continues to climb out of the financial problems that plagued the state under Gov. Sam Brownback.
Kansas is expected to have $305 million more in revenue than previously anticipated during the fiscal year that begins July 1. The figures were released Thursday as part of a new revenue forecast developed by state budget officials and university economists.
“I’ve moved from a perfect storm of uncertainty to cautiously optimistic,” Larry Campbell, the state budget director, said, describing how he views the state’s finances.
“One reason for caution is we are still spending more money than we bring in,” Campbell, who was appointed by Kelly, said.
Kansas is also expected to take in an additional $220 million above previous estimates during the current fiscal year, which ends June 30.
After lawmakers repealed Brownback’s signature income tax cuts in 2017, Kansas’s cash reserves quickly swelled to $1.1 billion.
The new revenue forecast means the surplus is not expected to decline as fast as before. Long-term projections previously showed Kansas ending fiscal year 2022 in the red. But J.G. Scott, director of the Legislature’s research arm, said he doesn’t anticipate projections now showing negative numbers that year.
Scott, in explaining the better figures, cited strong wage growth and demand for labor. He also said the U.S. and China appear to be moving closer to a trade deal that will reduce tariffs.
“Bottom line is we worked with what we have available,” Scott said, adding that they looked at key economic indicators.
He acknowledged the forecast does not take into account the possibility of future recession.
The new projections mean the state is expected to end the current fiscal year with cash reserves of $945 million, assuming lawmakers don’t increase spending this spring. Under current spending levels, Kansas will end the next fiscal year with a surplus of $722 million.
But those reserves are now shrinking as lawmakers pump more money into new spending on education and state agencies. Campbell on Thursday named Medicaid expansion, corrections and the Department for Children and Families as key priorities going into the new year.
Republicans seized on the improved numbers as reason to cut taxes. Conservative lawmakers tried unsuccessfully this spring to pass a bill that would have held down tax bills for some residents who no longer itemize their federal taxes because of changes made by President Donald Trump’s 2017 tax cut.
Senate President Susan Wagle, a Wichita Republican, said Kansas is experiencing a strong economy like other states.
“Large receipts shouldn’t mean more dollars to grow government,” Wagle said in a statement. “We must pass the Trump tax cuts onto Kansans, lower the sales tax on food, and allow Kansans to itemize their mortgage interest and property taxes. There are no excuses for not passing the additional funds back to the taxpayer.”