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October 25, 2012
With one-quarter of the current fiscal year completed, the FY 2013 state general fund budget is playing out in a stable way, but FY 2014 will be difficult.
A healthy bank balance, with revenues and expenditures matched, defines a good budget. The FY 2013 budget fits that definition. Kansas began FY 2013 with a $466 million balance in the bank. Estimated receipts of $6.175 billion almost perfectly match with budgeted expenditures of $6.171 billion, which leaves a projected balance of $470 million to begin FY 2014 on July 1, 2013. Some policymakers may wish that the FY 2013 budget contained a different mix of revenues or higher spending in some areas, but the basic financial structure of the FY 2013 budget works.
Revenues to support the FY 2013 budget are coming in on track. The state collected $16 million more in taxes than expected from July through September, as noted in the September Division of Budget revenue report and September Kansas Legislative Research Department report. This $16 million represents only about 1 percent of the total revenue collected in the first quarter, and the extra amount came almost entirely from corporate income tax collections, which can be an up-and-down revenue source. While it would be a stretch to assume receipts will outpace estimates all year, for now they are on track.
Total expenditures budgeted for FY 2013 are higher than FY 2012. With the FY 2013 budget, expenditures have increased three years in a row following steep FY 2010 cuts required by the recent economic recession. However, FY 2013 spending is still only slightly above the amount spent five years earlier, in FY 2008, as shown in the chart below.
Although the FY 2013 budget is balanced and stable and projects a healthy ending balance, the upcoming FY 2014 budget will be much more difficult to balance. Revenue will drop as the three-year temporary one-cent sales tax expires in FY 2014 and the recently enacted income tax cuts take full effect, but at the same time, spending pressures for school finance, Medicaid and KPERS will increase.