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Kan. gov.'s team contests budget gap projections

Published on -5/3/2012, 6:49 AM

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TOPEKA, Kan. (AP) -- Top officials in Gov. Sam Brownback's administration objected strongly Wednesday to new projections from the Kansas Legislature's staff showing that tax cuts endorsed by the governor would create a budget shortfall exceeding $700 million by July 2018.

The Department of Revenue countered the pessimistic forecast from the Kansas Legislative Research Department with two, more optimistic sets of projections. The administration's most favorable scenario showed no budget shortfall resulting from the tax cuts and a surplus of $138 million by mid-2018.

Lawmakers in both parties want assurances that the tax cuts wouldn't create a shortfall, as critics predict the plan could force cuts to spending on public schools, social services and other programs. The Republican governor and many members of the GOP-controlled Legislature believe cutting taxes will stimulate economic growth without causing budget problems.

The disagreement over projections complicates the debate. Legislators historically have used numbers from their nonpartisan research staff, and its figures have varied widely over the past week. Many backers of the tax plan could be receptive to relying on the administration's figures instead.

Revenue Secretary Nick Jordan said the administration is confident enough in its methods that it will continue making its own forecasts public -- and ask legislators to use them. The administration disagrees with methods used by legislative researchers.

A former state senator, Jordan said the administration isn't criticizing the Legislature's staff, only pointing out an unresolved disagreement over how to make difficult calculations about the effects of the tax cuts.

"Can you project 2018?" Jordan asked reporters during a Statehouse news conference. "There's a lot of time for growth. There's a lot of time for budget adjustments."

Raney Gilliland, the Legislative Research Department's acting director, declined to respond, except to note that it is relying upon methods it has used successfully for years. Several legislators, from both parties, said they expect to continue using their staff's figures.

"Research is apolitical," said Senate Majority Leader Jay Emler, a Lindsborg Republican. "I assume that we would continue to depend upon our own agency."

The draft plan would cut the state's individual income tax rates; exempt 191,000 partnerships, sole proprietorships and other businesses from income taxes; and reduce the sales tax to 5.7 percent in July 2013 from its current 6.3 percent.

On Monday, the Legislative Research Department said consultations with Department of Revenue officials prompted a projected shortfall of $161 million by July 2018 if the tax plan, drafted by House and Senate negotiators, is approved.

But the Legislative Research Department's latest projected budget shortfall for mid-2018 is $712 million, based on revised projections for how much sales tax revenues would drop after the rate is reduced before growing again. That forecast was circulating Wednesday, and legislative researchers considered it solid.

But lead Senate tax negotiator Les Donovan, a Wichita Republican, said the numbers are still in flux.

And one of the House tax negotiators, Marvin Kleeb, an Overland Park Republican, said the Legislative Research Department's projections are an "exercise" because they show a budget shortfall emerging by July 2015, then rolling forward and growing -- when the state is prohibited by its constitution from running a deficit.

"You really aren't going to run in the red every year," he said.

Steve Anderson, the governor's budget director, made the same point, but the administration's key disagreement with the Legislative Research Department is over calculating the annual revenue declines caused by tax cuts.

The tax cuts in the compromise plan are projected at $143 million for the fiscal year that begins July 1, growing to $471 million for the next fiscal year. The Research Department's projections subtract the full $471 million from revenues for the next fiscal year; Jordan and Anderson said only the difference, $328 million, should be subtracted. They said the administration consulted certified public accountants.

The Department of Revenue's two scenarios differ in their assumptions for increased economic activity in 2013 and 2014, after the tax cuts start. The less optimistic scenario predicts a budget shortfall of $121 million by July 2017 but sees that gap shrinking by the following year.

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Online:

Kansas Department of Revenue: http://www.ksrevenue.org/

Kansas Legislature: http://www.kslegislature.org

John Hanna can be reached at www.twitter.com/apjdhanna

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