DALLAS - Kansas lawmakers may be facing a shortfall of almost $1 billion in fiscal 2010 when they convene next year following Tuesday's lowering of officially expected revenues.

The Consensus Estimating Group cut the estimate for the state's general fund revenues for fiscal 2009, which began July 1, by $211 million or 3.5%. The group said in April that revenues during the current fiscal year should total $5.99 billion, but the latest estimate is $5.78 billion.

Total general fund revenues in fiscal 2008 were $5.69 billion.

Based on current estimates, the group said that Kansas will end fiscal 2009 with a shortfall of $136.8 million. That would result in available revenues in fiscal 2010 of $5.65 billion with expected expenses of $6.6 billion.

Kansas is constitutionally prohibited from deficit spending, so the Legislature and Gov. Kathleen Sebelius must either cut expenses or raise revenues if there is a predicted shortfall in tax collections.

Alan Conroy, director of the Legislative Research Department and a member of the forecasting panel, said the news is "bad with a capital B."

"We revised the anticipated revenues downward by $211 million, with $180 million of that being a reduction in the collections from the individual income tax," Conroy said. "We think that is driven by anticipated lower capital gains."

The estimating group reduced its estimates of revenues from the individual income tax, which generates about half of the general fund, and the sales tax, which generates about a third of general fund collections for fiscal 2009, with only small increases the next year.

The current estimate is that excise tax collections, which include sales and severance taxes, will drop from $2.35 billion in fiscal 2008 to $2.32 billion in fiscal 2009 before rising slightly to $2.33 billion in fiscal 2010. Total income tax collections are projected to drop from $3.36 billion in fiscal 2008 to $3.26 billion in fiscal 2009 before increasing to $3.39 billion in fiscal 2010.

Revenue in fiscal 2010 is projected to essentially show no increase over fiscal 2009 collections, the group said. The April estimate had included a 4% increase in state revenues.

The revised report from the group said Kansas had a general fund balance of $934.9 million at the end of fiscal 2007 and $528 million in fiscal 2008.

At a speech on Tuesday, Sebelius said the Kansas economy is healthy but turmoil on Wall Street and declining consumer confidence will take its toll.

"As the national economy worsens, the Kansas economy will follow," she said.

In June, Sebelius asked state agencies to cut spending by 2% in fiscal 2009 and 5% in fiscal 2010.

The governor and Legislature use the estimate of general fund revenues by the Consensus Estimating Group when preparing the next year's state budget.

The group makes an initial estimate in the fall that the governor uses to prepare the executive budget for the upcoming fiscal year. The group then revises the estimate in April, with that report used to reconcile any differences between the budget developed by the Legislature and the proposed executive budget.

The group includes officials of the Division of the Budget, Department of Revenue, and the Legislative Research Department, and one economist each from the University of Kansas, Kansas State University, and Wichita State University.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.