Analysts Bolster Kansas Revenue Projections, Envision Less Dire Budget Outlook

From the Kansas Reflector:

By
Sherman Smith - November 6, 2020

TOPEKA — Kansas’ official revenue forecasters say economic damage from the COVID-19 pandemic will be far less severe than previously projected for the state’s bottom line.

Next year’s budget shortfall now is expected to be $152 million, a considerable upgrade from the $1.4 billion deficit anticipated earlier this year.

The Consensus Revenue Estimating Group, composed of state analysts and university economists, released revised figures on Friday that include an increase of $477.2 million in revenue for the 2021 fiscal year, which ends in June.

J.G. Scott, director of the Kansas Legislative Research Department, said positive economic factors include job gains between April and September, improved trade with China, farm revenue bolstered by federal subsidies and a rise in commodity prices, and recovery of oil and gas sectors.

The forecast remains filled with uncertainty, Scott said.

“It’s clear that economic conditions during the COVID-19 pandemic are more uncertain than they are in most typical times,” Scott said. “Calendar year 2020 has already seen both the worst and the best quarters ever recorded in nationwide economic growth.”

The revenue group’s previous estimates were forged six months ago, amid the turmoil of a statewide lockdown. Revenues in recent months have beaten expectations.

The new forecast predicts the state to collect $7.7 billion in revenue in the current fiscal year, and for revenues to fall by 2.9% to $7.4 billion in the 2022 fiscal year.

Those revenues combined with adjustments to state expenditures, including an increase in federal contributions to human services caseloads, would leave lawmakers with $363.5 million in reserves by June. The drop in revenue and greater contributions to public schools would leave the state with a $152.5 million hole for the following year.

Larry Campbell, the budget director for Gov. Laura Kelly, said the governor will have to make difficult decisions as she drafts a budget proposal for lawmakers to consider in January. One option would be tapping into the state’s rainy day fund, where the Legislature stashed $81.9 million earlier this year.

“There’s a number of tools in the toolbox,” Campbell said. “Thankfully, the governor worked hard. You heard her say that repeatedly — we had to get tools back in the toolbox. And thankfully, we had two great years. This year has been a tough one.”

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