Kansas revenue estimates increase as lawmakers eye override of Kelly veto on tax bill

Kansas budget officials said Tuesday there is cause for “cautious optimism” as the state’s revenues and economic indicators are beginning to return to pre-pandemic levels.

The newly-released Kansas Consensus Revenue Estimates projected the state would bring in $361 million more in fiscal years 2021 and 2022 than predicted in November. That nearly doubles the estimated surplus in the legislature’s 2021 budget from $618 million to $1.16 billion.

“Overall things are going much better but we still have a long way to go,” said J.G. Scott, director of the state’s non-partisan Legislative Research Department.

“We’re up to where we were in 2019 for estimates, I think things are looking for the economy pretty solid but .. there’s always storm clouds out on what’s going to happen with COVID.”

Despite Scott’s caveat, Speaker of the House Ron Ryckman said the revised surplus strengthens the case for the legislature to override Gov. Laura Kelly’s veto of a tax bill that would cut $94 million from the state budget.

“The resulting balances show our state has more than enough resources to give Kansans the tax relief they have been entitled to since 2017,” Ryckman, an Olathe Republican, said.

The bill would permit multinational companies to bring money from overseas back to Kansas without paying state taxes. It would also increase the state’s standard deduction and allow Kansans to itemize state tax returns whether or not they itemize their federal taxes. It offsets some of those costs by imposing state sales taxes on goods sold online to Kansans.

Kelly urged continued caution in a statement Tuesday that did not directly address the tax proposal.

“Kansas has been through a lot and we need to allow adequate time to recover and rebuild by continuing to invest in our schools, our infrastructure and the economic development tools that helped bring in a record amount of capital investment last year,” Kelly said.

Kelly vetoed the bill last week, saying it would bring the state back to the era of budget shortfalls seen after expansive tax cuts under former Governor Sam Brownback.

Even ahead of the new estimates, Sen. Caryn Tyson, a Parker Republican who chairs the Senate tax committee, pointed to the state’s revenue consistently over performing estimates as evidence that the state could afford the bill and bring relief to Kansans after the pandemic.

“All you have to do is look at the revenue that has come in over the last seven months,” Tyson said last week.

Scott and Adam Proffitt, the state’s budget director, cautioned that the budget estimates had been calculated without the tax cut in mind. Even with the higher revenue estimates, Kansas is expected to spend $337 million more in fiscal year 2022 than it brings in. The year would end with an $820 million surplus because of excesses carried over from previous years.

“We’re just now getting back to where we thought we would be a couple of years ago even with all this new money that we’re adding to the forecast,” Proffitt said.

While prospects for a veto override remain uncertain, it is not an insurmountable task for Kansas Republicans. The Senate approved the bill with the required two-thirds majority and the House only fell three votes short.

Representatives Trevor Jacobs and Michael Houser, both Republicans, said they voted no on the bill because of concerns over provisions that increased some taxes.

“Maybe instead of expanding government, government should become less burdensome and more efficient and save taxpayers their own hard-earned money,” the representatives said in a statement written in the House journal.