TOPEKA, Kan. (AP) — A new Kansas fiscal forecast issued Wednesday predicted that inflation will boost state tax collections more than previously expected, intensifying the dispute between Democratic Gov. Laura Kelly and the Republican-controlled Legislature over how to cut taxes.
Legislators also are likely to face increased pressure to add new spending to what already is set to be a relatively generous, $22 billion-plus state budget for the 12 months beginning July 1. Even before the new forecast, public school officials are pushing for additional dollars for special education programs.
The forecasters increased their projections for tax collections through June 2023 by $760 million. Their new projections are 4.6% higher than a forecast issued in November for the 2022 budget year that ends June 30 and 3.8% higher for the 2023 budget year. Tax collections had run ahead of expectations for each of the past 20 months.
But J.G. Scott, the head of the Legislature’s research staff, and Adam Proffitt, the governor’s budget director, said inflation — at its highest level in the U.S. since the early 1980s — is responsible for much of the newly anticipated growth in tax collections. The forecasters include Scott’s and Proffitt’s staffs, state Department of Revenue officials and university economists.
“Really, the big impact on state receipts is really around inflation,” Scott said during a Statehouse news conference with Proffitt. “In the short-term, it’s really positive to receipts, but it could be really destabilizing if that is a continuing long-term trend.”
The new forecast predicts that the fund Kansas uses to pay for general government programs will collect $9.3 billion in taxes for the 12 months ending June 30. The forecast predicts those tax collections will grow to $9.5 billion for the 2023 budget year.
The new forecast came the same day Kelly signed budget legislation that will set aside $500 million to deal with future financial problems, give state employees a pay raise and increase spending across state government.
Lawmakers expect to finish work on the state’s next budget after they return April 25 from their annual spring break. However, they’re also looking to cut taxes by $1.5 billion over the next three years.
Republican lawmakers are at odds with Kelly and fellow Democrats over eliminating the state’s 6.5% sales tax on groceries, among the highest in the nation. Even before the new forecast, Kelly argued that the state’s finances are strong enough that it can eliminate the tax this year.
Democratic lawmakers had a Statehouse news conference after the new forecast to press that point and urge Kansas residents to text photos of their grocery receipts to top lawmakers.
Jon McCormick, president and CEO of the Retail Grocers Association Missouri and Kansas, blamed the tax on groceries for his group losing more than 20 stores in border communities over the past 12 years. He also said that low-income families in those areas often spend money on gas and lunch while driving more than 20 minutes to stores.
“Already, stores have closed,” McCormick said. “People have to drive further. We’ve got inflation.”
GOP lawmakers are poised to approve a plan to phase out the sales tax on groceries over three years. Republicans are pursuing other tax cuts as well. House Speaker Ron Ryckman Jr., an Olathe Republican, said in a statement that lawmakers should “stay the course” of paying down state debt, setting aside funds for future emergencies and reducing property taxes.
The spending bill Kelly signed Wednesday includes the bulk of the next state budget aside from money for the state’s public K-12 schools. The governor said Kansas can “confidently make critical investments in our state,” and the 2022-23 budget “allows us to continue to improve core services while investing in our future and setting the stage for additional economic growth.”
The Legislature opened its annual session in January with its researchers forecasting that the state would end June 2023 with nearly $3.8 billion in cash reserves.
Kelly proposed setting aside $600 million for future emergencies, while GOP lawmakers pursued a proposal to use $1 billion in surplus funds to bolster the state pension fund for teachers and government workers.
