Kansas outperforms grim budget expectations, has highest ending balance on record

The state of Kansas overcame bleak expectations to collect 9.3% more tax revenue than expected in the 2021 budget year, the Department of Revenue reported Friday.

The $8.9 billion general revenue haul outperformed expectations by $758 million, leaving Kansas with its highest ending balance since at least 1980. The $1.9 billion in reserves represents a quarter of the spending financed by general taxes.

A fiscal forecast at the height of COVID-19 shutdowns in April 2020 painted a grim economic picture for the state, projecting a $653 million budget shortfall. By November, analysts were less pessimistic, but the new revenue report is an even more encouraging economic sign.

“Our efforts to rebuild our state’s economic foundation and strengthen our economy are paying off,” Gov. Laura Kelly said in a statement.

The budget flexibility afforded by the high revenue intake is sure to stoke heated debate over the relative merits of slashing taxes and further bolstering public services.

The new state budget is anticipated to tap the cash reserves for roughly $600 million to cover extra spending, including on public schools.

In May, the Kansas Legislature overrode Kelly’s veto on a $94 million tax package that included $130 million in tax cuts and $35 million in new sales taxes.

Kelly has sparred with Republicans seeking to cut taxes since she took office in 2019. The Democrat was propelled to office after deriding her predecessor, Sam Brownback, for his signature tax cuts that led to deep budget reductions.

Kelly didn’t mince words after the veto override, blasting the move as “reckless” and “shortsighted.”

“It’s as if legislative leaders want to return to the days of budget crises, gutting transportation spending, and 4-day school weeks,” Kelly said in a statement.

But Republicans cite promising revenue returns as justification for the cuts.

“We are collecting more taxes in this state than we ever have,” Sen. Caryn Tyson, a Parker Republican, said after the vote.

General revenues in Missouri government have also far exceeded expectations since the onset of COVID-19.

Gov. Mike Parson’s office estimated that in the fiscal year that ended last week, the state would collect $10.2 billion. It ended up with a more than $1 billion surplus, his office announced Friday. The amount collected grew by more than 25% compared to the prior fiscal year.

Includes reporting by Katie Bernard of The Kansas City Star.