Kansas Budget Outlook

Washington Days Issue Forum March 8, 2014

Duane Goossen

Kansas Health Institute

www.khi.org

Opening Summary:

A dramatic tax reduction bill was enacted in the 2012 legislative session.

As a result, lawmakers faced a very large gap between revenue and spending.

In response, the tax bill was modified and spending cut in the 2013 legislative session.

Even with the tax modifications and spending cuts, the state is spending more than it receives.

Fiscal Year 2014July 1, 2013 to June 30, 2014

Fiscal Year 2015July 1, 2014 to June 30, 2015

Lawmakers have already approved budgets for:

The governor has proposed budget revisions which are being considered by the 2014 Legislature.

Future Revenue Stream Restricted

Kansas Income Tax Rates

2012 2013 2014 2015 2016 2017 2018Top Rate 6.45 & 6.25 4.9 4.8 4.6 4.6 4.6 3.9Bottom Rate 3.5 3.0 2.7 2.7 2.4 2.3 2.3

Pass-through Business Income Exempt From Tax

2 Percent Limit on Future Revenue Growth

The state will collect $3.7 billion less as a result of the 2012 and 2013 tax bills.

School Finance Lawsuit

All Day KMedicaid Caseload

Medicaid Expansion

Restore Cuts

State Employee Salary Increase KPERS

Judicial Budget

Dept. of CorrectionsPublic Health

Spending Issues

State General Fund (Dollars in Millions)

FY 2014 (July 1, 2013 to June 30, 2014)

Beginning Balance 709$ Consensus Revenue Estimate 5,857 Governor's Revenue Adjustments (10) Total Available 6,556

$169 million deficitApproved Spending* 5,995 Governor's Proposed Increase 31 Total Spending 6,026

Ending Balance 530$ *Includes spending authority carrying over from FY 2013.

State General Fund (Dollars in Millions)

FY 2015 (July 1, 2014 to June 30, 2015)

Beginning Balance 530$ Consensus Revenue Estimate 5,917 Governor's Revenue Adjustments 5 Total Available 6,452

$288 million deficitApproved Spending* 5,775 Governor's Proposed Increase 430 Total Spending 6,205

Ending Balance 247$ *The Legislature originally approved $6,120 million but the governor line-item vetoed all funding for the Dept. of Corrections.

$3,200

$3,500

$3,800

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FY2000

FY2001

FY2002

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FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014Gov.

FY2015Gov.

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rs in

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Receipts

Expenditures

State General FundReceipts and Expenditures

Governor’sRecommendation

Closing Summary:

The governor’s spending proposals for FY 2014 and FY 2015 can be financed by drawing down the state’s bank account, but are not sustainable in the future.

The state’s revenue stream does not support current spending patterns or allow for new investments.

Lawmakers will be required to make hard decisions to balance revenue and spending.