State expected to be in $152M deficit
State economic experts met Friday to determine estimated revenues into the state’s budget for the rest of fiscal year 2021, which ends July 1, and the next fiscal year.
Their calculations will be the basis on which the governor and state lawmakers will build the annual budget next session.
“The key word really for this year is uncertainty,” said J.G. Scott of the Kansas Legislative Research Department, noting that estimates can change thanks to the precarious situation with the coronavirus.
For the current fiscal year, the revenue estimate was increased by $477.2 million, or 6.6 percent, to $7.7 billion. Taxes in FY2021 are expected to have a 11.3% increase.The experts’ first ever estimate for fiscal year 2022 is $7.48 billion, a decrease partly driven by a expected decrease of taxes by 2.1%.
That up-and-down trend, however, is “artificial,” with tax receipts low in fiscal year 2020, high in fiscal year 2021 and back to normal next fiscal year thanks in part to the extension of tax filing deadlines earlier this year as a result of COVID-19.
But a better-than-expected economy also played a part, at least when compared to April. Actual tax revenues so far have consistently beaten out estimates.
“When we did the estimates in April, we were in the middle of a lockdown,” said Scott. “Do we think things are better now? Yes. Do we think they’re really good now? No.”
Many of the industries in Kansas have seen some sort of a rebound in the past year, with Kansas regaining nearly half of its jobs lost from the beginning of the pandemic. The aerospace industry in Kansas is still not doing well, however, with manufacturing taking a disproportionate hit, said Scott.
In April, experts had estimated a $1.4 billion deficit for next fiscal year. Now, the deficit is expected to be only $152 million.
“It is uncertain, but it is also encouraging,” said Larry Campbell, director of the Kansas Division of the Budget.
Lawmakers and the governor will have to figure out how to handle that deficit next session, such as potentially cutting funding for certain programs.
The estimated budget picture does not include the $704 million allotment from the governor, who used that to get to a zero balance for this fiscal year. There is also still a $81.9 million rainy day fund that could be used, Campbell said.
“She still has to look at tightening the ship the best that we can,” he said of the governor. “There’s a number of tools in the toolbox, thankfully.”