May 30, 2024

A new, stable fiscal forecast for Kansas reinforces the dynamics of a debate over tax cuts

Kansas House Taxation Committee Chair Adam Smith, R-Weskan, watches the House debate leading to the rejection of a plan for cutting taxes, Thursday, April 4, 2024, at the Statehouse in Topeka, Kan. Smith had expected before the debate that the plan drafted by Republican leaders and Democratic Gov. Laura Kelly would fail. (AP Photo/John Hanna)

By JOHN HANNA AP Political Writer
TOPEKA, Kan. (AP) — The picture for tax cuts in Kansas and the next state budget remained stable Friday with the release of a new fiscal forecast that reinforced the dynamics of a conflict over proposed tax cuts between Democratic Gov. Laura Kelly and the Republican-controlled Legislature.
The new forecast from state officials and legislative researchers came with lawmakers scheduled to reconvene Thursday after a spring break for the final six days of their annual session. Kelly has until Thursday to act on a bill cutting income, sales and property taxes and another measure containing the bulk of the next state budget.
The new forecast replaces projections made in November for tax collections through the end of June 2025. It trims the previous estimates by about 1.2% or $119 million for the current budget year, which ends June 30. But it boosts them by $80 million for the budget year that begins July while projecting that the state also will earn more interest than previously expected on its idle funds.
In both budget years, the state’s annual tax collections are expected to exceed $10 billion, and a new profile of the state’s finances by legislative researchers projects that Kansas will have more than $3.7 billion in surplus funds at the end of June 2025, even with the tax cuts approved by lawmakers.
“Everything is relatively stable at this point,” Shirley Morrow, the acting director of the Legislature’s research staff, said during a Statehouse news conference.
The tax bill on Kelly’s desk would cut taxes by a total of more than $1.5 billion over the next three years. Kelly’s chief of staff has described it as larger than Kelly deems affordable over the long term, and the governor said Tuesday that she wanted to see the new fiscal forecast before making any decision.
House Speaker Dan Hawkins, a Wichita Republican, said in a statement that the new forecast should make signing the tax bill “an easy ‘yes’ for the governor.”
The bill would move Kansas from three individual income tax rates to two, with the top rate dropping to 5.55% from the current 5.7%. Republican leaders wanted to go to a single rate, but Kelly views that idea as helping “the super wealthy.” She has told fellow Democrats that she opposes going to two rates.
The measure also would eliminate income taxes on Social Security benefits, which kick in when a retiree earns $75,000 a year. It would reduce the state’s property taxes for public schools and eliminate an already-set-to-expire 2% sales tax on groceries six months early, on July 1.
The plan split Kelly’s fellow Democrats. Those in the Senate largely opposed it and echoed Kelly’s concerns. The House approved it without any opposing votes — and many Democrats there praised it as providing tax relief for all classes of Kansas residents.
The same unity among House Democrats isn’t likely during a vote to override Kelly’s veto because some will want to support Kelly. But House Minority Leader Vic Miller, a Topeka Democrat, said he can’t in good conscience ask Democrats to back a veto if he can’t be sure a better plan is possible.
“I’m very happy with the product that we ended up with,” he told reporters Tuesday. “I don’t know that there’s anything out there that would be better than this one.”