Kansas reports tax revenue shortfall for February of $71 million
More cuts may follow
By John Hanna - Associated Press Writer
February 26, 2010, 3:35 p.m. Updated: 26 February 2010, 11:53 p.m.
Topeka — Kansas Gov. Mark Parkinson backed away Friday from his opposition to additional cuts in the state’s current budget after a report showed tax collections this month were $71 million short of expectations.
Parkinson said he will outline a plan next week to address the revenue shortfall. He described further spending cuts as “a last option” but said they must be considered.
The Democratic governor had said previously that he opposed further cuts because he believed they would cripple public schools, social services and other government programs. He proposed raising sales and tobacco taxes to forestall future reductions.
“The situation that we face right now, I think you have to look at all possible options,” he told The Associated Press. “It would be disingenuous to say that this number wasn’t disappointing and doesn’t cause us to re-evaluate the budget situation in its entirety.”
The Democratic governor’s comments came only hours after House Speaker Mike O’Neal, a Hutchinson Republican, called for additional cuts to keep the current budget balanced.
Other legislative leaders weren’t ready to join O’Neal in pushing for new spending cuts. They said they need to know how much of the shortfall is tied to the state’s soft economy and how much to Kansas paying income tax refunds earlier than expected.
Friday’s report complicated an already difficult debate over the budget and tax policy. It came only hours after House members gave first-round approval to a bill aimed at creating jobs by expanding an existing business tax break.
Parkinson and the Republican-controlled Legislature must keep the current budget in balance and eliminate a budget shortfall for fiscal 2011, which begins July 1. The 2011 gap is projected at $416 million, but that figure will rise next week after legislative researchers consider Friday’s report.
“This obviously is a game-changer,” O’Neal said. “These numbers are grim enough that we will have to make adjustments.”
The state expected to collect $266 million in taxes in February and took in $195 million, a difference of 27 percent.
It was the third consecutive month collections fell short of expectations. The gap for the 2010 fiscal year through February is now $105 million, with total tax collections of $3.1 billion falling 3.3 percent short of expectations.
Officials said Kansans appear to be filing for income tax refunds more quickly this year than last. That could mean fewer refunds than expected in March and April — causing a rebound in tax collections.
Senate President Steve Morris, a Hugoton Republican, rejected the call for new budget cuts.
“We don’t know what the March numbers are,” he said. “We don’t know what the April numbers will tell us.”
The state had five rounds of cuts and other adjustments last year to keep the 2010 budget balanced. If revenues met expectations for the entire fiscal year, the state would break even.
After the February figures were released, Parkinson issued a statement saying the state will overcome its financial problems by “not panicking.” He told AP that the news is “very bad.”
“One of the mistakes that people can make when facing a difficult budget situation is to act too quickly and not thoroughly examine all their options,” he said.
Raising taxes has proven unpopular so far, and many Republican legislators haven’t given up on using tax breaks or incentives to stimulate the economy.
On Friday, the House voted 84-27 to give first-round approval to a bill expanding a tax break for businesses that move workers to Kansas from other states. Members plan to vote again Monday to determine whether the measure goes to the Senate.
Under the bill, more companies would be eligible, as would nonprofit groups and even some federal government agencies. Also, the wages they’d have to pay would be lower than they have to pay now to qualify.
The tax bill is Sub for HB 2538.
A previous version of this story, citing out-of-date figures from the Department of Revenue, incorrectly stated the size of the state budget deficit.
Posted on Tue, Mar. 02, 2010
Nixon's budget may have overestimated Missouri revenues by up to $1 billion
By JASON NOBLE
The Star’s Jefferson City correspondent
JEFFERSON CITY | The state budget presented six weeks ago by Missouri Gov. Jay Nixon may have overestimated revenues by as much as $1 billion, lawmakers warned Tuesday.
The stunning deficit could force lawmakers to go beyond program and service cuts to consider major structural changes to state government.
“It is clear that even as Missouri’s economy begins to rebound, state revenues will continue to lag for a prolonged period of time,” Nixon, a Democrat, said in a statement Monday. “As a result, we will need to downsize the scope of state government, while protecting necessary services to the citizens of Missouri.”
That announcement was underscored Tuesday by the release of state revenues for February, which showed a year-to-date decline of 12.7 percent compared with this time last year, and a 14.6 percent drop in revenues for February.
“The budget challenges are just staggering,” said Senate leader Charlie Shields, a St. Joseph Republican.
The budget Nixon presented to lawmakers in January totaled $23.8 billion, of which $7.2 billion came from the state’s general revenue fund, largely made up of tax revenues. The shortfall being discussed could represent 10 percent — or more — of the $7.2 billion that the General Assembly controls.
Nixon has declined to comment publicly since releasing the statement, but Tuesday he met privately with House and Senate lawmakers from both parties.
Following his meeting with Senate Republicans, lawmakers described the budget situation as one of unprecedented proportion.
“This is a crisis in the state budget that we have never, ever seen before in the state of Missouri,” said Sen. Kurt Schaefer, a Columbia Republican and vice chairman of the Appropriations Committee.
Year-over-year revenues have never declined as they have since 2008, said Schaefer, who added that it was a fiscal reality that would require a new approach to balancing the budget.
“We are way beyond cutting a few hundred thousand here, a few hundred thousand there,” Schaefer said. “This is a whole-scale restructuring that’s going to have to occur.”
Just what that restructuring will look like — and what departments, programs and services might be affected — is still unclear.
Lawmakers were leery of offering any specifics before better revenue projections were determined and strategies mapped out. Shields described meetings with Nixon as just the beginning of discussion between lawmakers and the governor’s office.
House leaders, however, complained that Nixon brought little to the table.
“He submitted a budget that he says is out of balance. … It’s based on funny money,” said House Speaker Pro Tem Bryan Pratt, a Blue Springs Republican. “So now we’re saying, ‘Governor, if your budget is based on funny money, give us a budget where you think the revenues are.’ And it’s falling on deaf ears.”
Lawmakers point to two issues that have arisen since January to derail Nixon’s proposed budget by the estimated $750 million to $1 billion:
•Hundreds of millions in anticipated federal assistance have not materialized. The governor’s office built into the budget $300 million in additional federal “budget stabilization” funds that were under discussion in January, but have not been included in various recession-relief bills poised for passage in Congress.
“We all acknowledge now — even the governor acknowledges — it’s not going to happen,” Schaefer said.
Nixon Budget Director Linda Luebbering said the administration was holding out hope of receiving the federal funds, but would not rely on them in the coming year’s budget.
Senate Appropriations Committee Chairman Rob Mayer, a Dexter Republican, also noted about $173 million in Nixon’s budget that relied on proposed changes in state law to free up funds or empower agencies to collect revenues more forcefully. That money is “not assured” either, because it relies on legislative action, he said.
•The continuing decline in state revenues is rapidly rendering obsolete the estimated revenue numbers for the current fiscal year, which ends June 30, and the coming year.
Nixon’s budget is based on an estimated 6.4 percent drop in revenues for the current year and a 3.6 percent increase for next year.
Considering February’s numbers and the overall pace of economic recovery, however, lawmakers and budget officials are all but certain those projections will not be realized.
“That number (6.4 percent) is looking unlikely at this point,” Luebbering said. “We’re much more likely to end below that 6.4 percent.”
Nixon already has cut $760 million from the current-year budget, and Luebbering said more reductions were possible.
Taken together, the absence of additional federal funds and the decline in revenue bring the state to a fiscal precipice.
“In all likelihood, that’s pushing a billion dollars,” Schaefer said of the deficit.
Next is a recalculation of the revenue estimate used to craft the budget. Once lawmakers know how much less money they are dealing with, they can renew talks about the cuts and structural changes necessary to balance the budget.
In his private meetings Tuesday, Nixon offered a handful of budget-cutting suggestions — including consolidating state vehicles and certain services under a single agency. But a growing consensus among lawmakers and hints from Nixon suggest something broader may need to be done.
In the Senate, leaders are amenable to major changes, but are looking for cooperation from Nixon.
“We probably have a lot of tolerance in terms of restructuring state government, but we have to have the executive branch as equal partners in that,” Shields said.
Mayer, the appropriations chairman, said he expected Nixon to resubmit his budget or provide a detailed proposal for addressing the shortfall.
Shields has initiated that process, introducing legislation this week that he said could be used to make the statutory and constitutional changes necessary to consolidate departments or otherwise downsize state government.
One such bill would remove a listing of state departments from the constitution — a necessary step if any departments were to be eliminated or consolidated.
“We have a state budget that is in deep trouble right now … and probably the only way we’re going to get ourselves into a position where we can deal with that budget is to
restructure,” Shields said.
However, one direction that lawmakers and the governor are apparently unwilling to go in an election year is a tax increase.
“The magnitude of a tax increase that you would have to pass to fix the budget situation in the state is almost impossible,” Shields said. “That is not a viable option.”
KANSAS’ CRUNCH
In Kansas, lawmakers are struggling to eliminate a budget deficit that is quickly approaching $500 million, but are divided over whether to cut services or raise taxes.
Meanwhile, Kansas revenues also continue to tumble. Tax receipts for February were $71 million below estimates.
For the full story, see Page A8.
@ For all politics, all the time, go to KansasCity.com and the Prime Buzz blog.
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