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July 1, 2013
A new revenue forecast has been put in place for fiscal year 2014. The updated forecast predicts that State General Fund (SGF) revenue will decline sharply in FY 2014 (July 1, 2013 to June 30, 2014). The decline occurs even though the Legislature just raised taxes in an effort to blunt some of the effect of the 2012 tax bill, which lowered income tax rates dramatically.
The new forecast adjusts the official April Consensus Revenue Estimate to account for tax law changes made by the Legislature. This updating process happens each year in June and often goes mostly unnoticed, but last year and this year the June adjustments have been substantial.
The key table from the updated estimate is shown below.
Look especially at the last line labeled “Total Receipts.” In FY 2012 the SGF collected $6.412 billion. Then estimated revenue falls to $6.250 billion in FY 2013 (which ended June 30). In FY 2014 the revenue estimate falls again, this time all the way to $5.885 billion.
As part of the tax bill passed in early June, policymakers increased tax revenue by phasing out a number of state income tax deductions, but the changes do not nearly offset the income tax rate reductions approved last year. FY 2014 individual income tax collections are still expected to fall $337 million from the FY 2013 level.
The estimate of sales tax collections to the SGF also declines. During the recession the state sales tax rate was temporarily raised from 5.3 percent to 6.3 percent. The rate was supposed to drop back to 5.7 percent on July 1, 2014, with 5.3 percent going to the SGF and 0.4 percent to the Highway Fund. The Legislature extended the rate at 6.15 percent. However, the combination of taxing at a slightly lower rate and giving a portion of the sales tax collection to the Highway Fund means the SGF gets less in FY 2014 than in FY 2013.
State officials will now track monthly revenue collections against this updated estimate until November, when the official Consensus Revenue Estimate for FY 2014 will be updated again.
—Duane Goossen, KHI's Vice President for Fiscal and Health Policy, served as state budget director for 12 years in the administrations of three governors — Republican Bill Graves and Democrats Kathleen Sebelius and Mark Parkinson. He also served in the Kansas House of Representatives from 1983 to 1997.