DALLAS – A revised revenue estimate that is $229 million below previous forecasts will delay highway projects and force other state spending cuts, Kansas officials said.
The estimate of lower revenues for the next 15 months came as legislators prepare to return to Topeka April 27 for their "veto session," a follow-on to the main session that could last a few days or several weeks as it did last year.
The revised revenue estimate delivered Wednesday came after months of revenue reports falling short of projections, even after the forecast was previously lowered in November.
Gov. Sam Brownback, whose tax cuts have been blamed by some for the ongoing budget imbalance, outlined three scenarios to fix the problem, but dismissed the idea of restoring tax rates.
"After carefully reviewing the final CRE [consensus revenue estimate] numbers I do not believe it would be useful to have a debate about raising taxes on small businesses or anyone else," Brownback said in a written statement. "Instead, we will focus our support and attention on controlling government spending more efficiently."
One option would include issuing bonds backed by tobacco settlement funds to create a cash infusion. Other states have issued bonds securitizing revenue from a multi-state settlement with the tobacco industry.
Brownback would also reduce most of the remaining sales tax going into the State Highway Fund, transferring $70 million to the State General Fund in fiscal year 2016 and $115 million in FY 2017.
That scenario brought an immediate announcement from the Kansas Department of Transportation that it was putting 25 modernization and expansion projects on hold through fiscal year 2018, saving more than $550 million.
Modernization and expansion projects are generally the larger projects under the current T-WORKS transportation program. Modernization includes work such as the addition of shoulders, passing lanes and remediation of hills and curves. Expansion projects add capacity to the highway system.
"Despite the delays, the overall good condition of the 10,000-mile state highway system won't be impacted since KDOT's preservation projects will be let to contract as scheduled and will be funded at the $400 million per year level." said Kansas Transportation Secretary Mike King. "Nor will these delays affect projects that are already underway."
Brownback's first budget option also calls for a 3% cut in funding for the state's universities.
In the second option, in addition to transferring sales tax from the State Highway Fund, Brownback would seek legislative approval to delay the Fiscal Year 2016 fourth quarter payment to the Kansas Public Employee Retirement System pension and delay its repayment until Fiscal Year 2018. The Legislature last year authorized $1 billion of pension bonds designed to reduce the state's unfunded pension liability.
Brownback's final option includes the transfer of sales tax from the State Highway Fund and legislatively authorized cuts of up to 5% for most state agencies.
The governor's critics cited the cuts in income tax rates for business as a major factor in the continuing shortfalls.
"Yet again, the state will bring in less money than it takes to meet public needs," said Annie McKay, director of the Kansas Center for Economic Growth. "More one-time 'fixes' will be used to inadequately support schools, health care, and other areas key to a prosperous future for all Kansans. Unfortunately, unprecedented and unaffordable tax policy continues to wreck our state's prospects."
Standard & Poor's has a negative outlook on its AA rating for Kansas. Moody's Investors Service rates the state Aa2 with a stable outlook after a 2014 downgrade.
