The Budget Blog

Revenue slips further

Last spring, estimators predicted that State General Fund revenue would fall $456 million in fiscal year 2014. The newly completed Consensus Revenue Estimate now forecasts a larger drop and provides further evidence that the state’s revenue stream does not support the current level of programs and services.

A larger drop in revenue means a greater budget imbalance. In FY 2014 (July 1, 2013, to June 30, 2014) the state now expects to take in $5.856 billion but has an approved budget of $5.964 billion. Approved spending exceeds estimated revenue by $108 million.

For the upcoming FY 2015 (July 1, 2014, to June 30, 2015), the Kansas Legislative Research Department had assumed in its long-range forecast that revenue would total $5.937 billion. The new revenue estimate brings that assumption down slightly to $5.917 million and reveals a $204 million gap between spending and revenue when compared with the FY 2015 budget of $6.121 billion that the Legislature passed.

State General Fund, millions of dollars

FY 2015 spending levels will likely rise, which means the $204 million gap will widen. After the Legislature passed a FY 2015 budget, Gov. Sam Brownback line-item vetoed all the funding for the Department of Corrections, saying he considered it inadequate. Higher education advocates will seek to reverse deep cuts that are part of the FY 2015 budget. The approved budget for the Judicial Branch appears to be $8 million short. The cost of human service caseloads could go higher. And hanging over everything is the question of school finance state aid, which is down significantly from what it once was.

The state currently has a healthy “savings account” or “bank balance,” which provides a way to cover a gap between revenue and spending in the short term, but not for long.

While the new estimate does confirm a marked drop in revenue, it will be important to monitor receipts over the coming months and pay very close attention to the April Consensus Revenue Estimate. Accurately estimating the effect of a significant change in tax policy is not easy. FY 2014 is the first full fiscal year to be affected by the tax changes. The true test of the estimate’s accuracy comes next spring.

—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.

Duane Goossen