Kansas slashes revenue forecast, adjusts budget to avert gap

TOPEKA, Kan. (AP) - Kansas slashed its revenue projections on Friday, and Republican Gov. Sam Brownback's budget director immediately announced $124 million in budget adjustments to allow the state to keep paying its bills on time.

University economists, legislative researchers and officials in Brownback's administration issued a new, more pessimistic fiscal forecast for state government after months of disappointing tax collections. The new numbers recognize recent economic slumps in agriculture and energy production and what state officials have said is a national softness in recent months in consumer spending.

The state has struggled to balance its budget since GOP legislators cut personal income taxes dramatically in 2012 and 2013 at Brownback's urging, in an effort to stimulate the economy. Most of those income tax cuts have been preserved, but Republican lawmakers raised sales and cigarette taxes in July.

The new fiscal forecast projects the state will collect $354 million less in revenue from now through June 2017 than the old forecast had predicted. The state's current budget is based on the older numbers, so the new ones immediately created a projected deficit.

Budget Director Shawn Sullivan announced more than a dozen changes to the budget to keep it balanced, many capturing unanticipated savings in programs and reflecting lower estimates for items such as contributions to teacher pensions. The list also includes diverting $50 million in funds for highway projects to general government programs - something the state has done repeatedly when the budget gets tight.

Asked whether the state faces delays in paying some of its bills, Sullivan told reporters, "That's the point of us making these budget adjustments."

"We can continue to have the cash to pay our bills," he said during a Statehouse news conference.

The new revenue forecast came the same day the Kansas Supreme Court heard arguments on whether a school funding law enacted earlier this year complies with the state constitution - and whether Kansas immediately owes its 286 local school districts an additional $54 million in aid.

Sullivan said the budget adjustments will spare aid to public schools, spending on higher education and services for the poor and disabled. But figures from legislative researchers showed that even with those adjustments, the state will have to close a $170 million shortfall for the fiscal year beginning next July.

Brownback has ruled out additional tax increases. Democratic legislative leaders continued to blame the income tax cuts for the state's fiscal problems - and to argue that they need to be reconsidered.

"We are seeing cuts. We're seeing continued blame, and we're seeing continued failures," said House Minority Leader Tom Burroughs, a Kansas City Democrat.

Republican legislators had predicted a significant lowering of revenue expectations, but not as much as what actually occurred. But GOP leaders blamed national economic trends, not the 2012-13 income tax cuts, for the budget troubles.

"I am confident we would be in far worse shape had the tax cuts never happened," Senate President Susan Wagle, a Wichita Republican, said in a statement.

The previous forecast, issued in April and revised in July, had predicted Kansas would collect $6.3 billion in general revenues during the current fiscal year. The new estimate is less than $6.2 billion - lower by $159 million, or 2.5 percent.

The old forecast had said Kansas' revenues would be nearly $6.5 billion during the fiscal year beginning in July 2016. Forecasters lowered that estimate by more than $194 million, or 3 percent, to less than $6.3 billion.

Senate Minority Leader Anthony Hensley, of Topeka, said after Republicans raised sales and cigarette taxes, "You would think we would have some stability within our budget."

"We've just had colossal mismanagement for the last several years," Hensley told reporters.

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Online:

Report with new Kansas revenue estimates: http://bit.ly/1NhPvh1

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