U.S. Markets close in 2 hrs 33 mins

Kan. officials issue new financial forecast

John Milburn

TOPEKA, Kan. (AP) -- Kansas revenue forecasters predicted Tuesday the state will collect nearly $705 million less in the next fiscal year than it will this year as income tax cuts take effect and a sales tax increase expires.

The prediction is the first glimpse at how the experts believe the cuts adopted in May will affect state revenue. The cuts take effect in January.

The forecasters shaved $5.2 million from their earlier prediction of revenues in the fiscal year that ends June 30, bringing it down to $6.17 billion. They also say they expect the state to collect $5.46 billion in the 2014 fiscal year, which begins in July.

Steve Anderson, budget director for Republican Gov. Sam Brownback, said the new forecast takes in to account uncertainties in the U.S. with the expiring of federal income tax cuts and required reductions in federal spending. He said a lot of the uncertainty would be decided by the presidential election, which would determine how businesses respond and how quickly they invest in the economy.

"Business is waiting on the sidelines for certainty. I think the money will come out anyway (into the economy). How it comes out is the question," Anderson said.

He said state agencies were asked earlier this year to prepare budget requests that showed how they could absorb a 10 percent cut in spending should the economy weaken.

Anderson said the administration still believes it can maintain funding for K-12 schools and essential services, adding, however, that "more pruning" in state spending may be necessary to balance the budget in the coming year.

House Minority Leader Paul Davis issued a statement saying the revenue projections add to a "growing heap of evidence" that the state can't afford the income tax cuts.

"The difference between the pending budget crisis and the budget crisis we faced a few years ago is that Gov. Brownback chose this path. It didn't trickle down as the result of a global economic downturn," said Davis, a Lawrence Democrat.

Projections by the Kansas Legislative Research Department indicate Brownback and legislators would have to reduce spending by $327.7 million in fiscal year 2014 to prevent the state from going in the red. Brownback will present the budget to legislators in January when the 2013 session begins.

The reductions in revenue projections also take into account that the statewide sales tax rate will be allowed to decrease as required by law on July 1, 2013. Allowing the rate to drop from 6.3 percent to 5.7 percent means Kansas will collect $262.3 million less in sales taxes in the coming fiscal year.

The forecasting team includes legislative researchers, members of the governor's budget stuff, Department of Revenue officials and economists from three state universities.