Democratic Gov. Laura Kelly and Republican leaders of the Legislature offered conflicting interpretations Friday of new tax revenue projections placing an extra $207 million in the state government's treasury during the current fiscal year.
If the assessment by university economists and executive and legislative branch analysts holds, state lawmakers would end the 12-month budget cycle in June 2020 with more than $900 million on deposit.
Pressure by the governor to deepen public investment in education, Medicaid expansion, transportation, child welfare and other programs during the 2020 legislative session would influence the bottom line, just as GOP demands for tax cuts would diminish cash reserves.
Kelly said modification of the financial forecast wasn't an invitation to engage in fiscally irresponsible political maneuvering.
"As we look forward to building the budget for next year, the consensus revenue estimates will allow us to reinvest in important priorities such as our infrastructure and our schools, and give us the ability to expand Medicaid while exploring common-sense tax reform options," the governor said.
Under the updated report, the state's hefty financial reserves might not be exhausted until 2023. In April, the view was the state could burn through its stockpile of cash more quickly.
Larry Campbell, the governor's budget director, and J.G. Scott, director of the Legislature's nonpartisan research division, said the more optimistic assessment was justified by major economic trends, such as low unemployment, income expansion and modest inflation.
"We are experiencing and should continue experiencing steady growth," Campbell said.
However, Campbell said he was concerned state spending could eventually overtake revenue growth. Scott said a wild card in the process was potential of a regional or national economic recession.
House Speaker Ron Ryckman, R-Olathe, said growth of sales and income tax revenue were a sign of economic strength in Kansas, driven primarily by federal tax policy changes signed by President Donald Trump in 2017.
"Unfortunately, here in Kansas, the governor's plans continue to have Kansas spending more than we have," Ryckman said. "Her policies are unsustainable and leave Kansans increasingly vulnerable when there is an economic downturn."
He said House Republicans would oppose "large and reckless spending increases" if proposed by the Democratic governor in January.
The official estimating group decided Thursday to boost the current fiscal year's tax revenue target by $207 million, or 2.8% above projections made in April and tweaked in May. That would mean the state general fund would take in $7.7 billion this fiscal year.
The estimating group said state tax revenue in the 2021 fiscal year, which starts July 1, 2020, would be $303 million, or 4%, greater than previously expected and produce an annual total of $7.9 billion. Based on current expenditure obligations, the state could be sitting on more than $700 million in savings at the end of that fiscal year.
Senate President Susan Wagle, a Wichita Republican and candidate for U.S. Senate, said positive state revenue horizon shouldn't be used as a lever to inflate state government.
She said the 2020 Legislature ought to resume debate about adjusting Kansas law so individual taxpayers could take advantage of a doubled standard deduction on federal income taxes and still make itemized deductions on state income tax forms. Existing Kansas law prohibits that decoupling on state and federal tax forms, which produced a windfall to the state of about $60 million annually.
In addition, she said, state lawmakers should cut the state's 6.5% sales tax on food. Bipartisan support for lowering the state's tax on groceries stalled because it was packaged with tax policy opposed by Kelly.
"We must pass the Trump tax cuts onto Kansans, lower the sales tax on food and allow Kansans to itemize their mortgage interest and property taxes," Wagle said. "There are no excuses for not passing the additional funds back to the taxpayer."
In May, Kelly vetoed a bill championed by GOP conservatives funneling the majority of a three-year, $245 million tax package to wealthy individuals and multinational corporations. It was a pared-down version of a multi-year, $500 million tax bill rejected by the governor.