Kansas revenues projected to rise by $1.3B. Here's what it means for the state's budget and taxpayers.
Kansas is flush with cash, updates to the state's fiscal forecast released Wednesday project, and the news is sure to prompt considerable jockeying among legislators and Gov. Laura Kelly over how to spend the expected windfall.
The state avoided the worst case scenario of seeing revenues plummet due to COVID-19 and instead has seen its tax collections soar in recent months, with experts saying the state's economy has rebounded from the pandemic.
Officials now project the state will take in $1.3 billion more than initially thought for the current fiscal year, a 17% increase which brings the current revenue estimates to $8.8 billion overall. That combines with over $2 billion in the bank from last session, giving lawmakers plenty of ammo for a raft of legislative priorities — the projected budget surplus, even when taking into account current spending, is over $2.9 billion.
"(These are) certainly exciting numbers to talk about," Adam Proffitt, director of the budget office, said during a press call. "What it does for the budget is let us focus in on some of the key areas to be addressed."
Experts cautioned that growth in some key areas will slow in future years and other economic headwinds, including inflation, remain present. Still, forecasters projected tax revenues in fiscal year 2023 would also grow, increasing by $288 million to over $9 billion.
Lawmakers set to square off on how to spend windfall
While everyone agrees that Wednesday's announcement was good news, how to spend the money is set to prompt considerable debate among legislators and Kelly.
The governor and Republican Attorney General Derek Schmidt, her presumptive foe in the 2022 governor's race, have both come out in support of eliminating the state's sales tax on food, an item long desired by members of both parties.
Kansas is one of only a handful of states that tax food at the regular sales tax rate and changing that would cost roughly $450 million. Still, Kelly and Schmidt argue it would be money well spent and members of both parties reiterated those calls in the wake of Wednesday's projections.
"Kansas families have shouldered the economic consequences of tax experiments in Topeka for far too long," Senate Minority Leader Dinah Sykes, D-Lenexa, said in a statement, adding that child care and "additional policies that deliver real relief and stability to Kansans can and must be on the table next legislative session.”
Still, members are likely to be cautious, with an expectation that sky-high revenues won't necessarily hold into future years.
"The thing that we have to be cognizant about is this is not going to last forever," said Rep. Troy Waymaster, R-Bunker Hill, chair of the House Appropriations Committee.
House Speaker Ron Ryckman, R-Olathe, said in a text message that lawmakers should not be "too quick to find new ways to spend."
"We need to reinvest those dollars in Kansas and in our future through meaningful change, like tax reductions on working families, eliminating the sales tax on food, securing the rainy day fund, reducing debt and stabilizing KPERS for our retirees," Ryckman said.
And Waymaster suggested other options, including eliminating transfers out of the state fund used to bankroll road construction, colloquially known as the "bank of KDOT," a year earlier than anticipated. Doing so would free up more money for transportation projects, especially at a time when the state is in line for billions in funds from a federal infrastructure package.
Other proposals could include using the money to pay off debt or simply sock it away in the state's budget stabilization fund, where it could be used to plug future spending holes.
"It may not be sexy, but it's a financial responsible approach," Waymaster said.
Andrew Bahl is a senior statehouse reporter for the Topeka Capital-Journal. He can be reached at email@example.com or by phone at 443-979-6100.