DALLAS — Kansas tax collections fell $3.7 million below expectations in July, the first month of the fiscal year, according to the Kansas Department of Revenue.
The report was the first of a year marked by significant increases in the state's sales and tobacco taxes and $63 million in budget adjustments ordered by Gov. Sam Brownback to shield against potential emergence of a deficit.
A $6 million decline in taxes on general sales, financial institution, and oil and gas receipts offset gains in income taxes, which were $3.8 million above expectations, according to Secretary of Revenue Nick Jordan.
The report represents taxes levied in June and tabulated in July. Therefore, the revenue report does not include an increase in the sales tax rate to 6.5% from the previous 6.15%. That tax increase and another on tobacco and liquor went into effect July 1, the beginning of the 2016 fiscal year.
Nevertheless, some state officials expressed concern that sales tax revenues fell at a time when the state is shifting its reliance to them to offset reduced income tax rates.
At a budget study committee hearing in July, lawmakers and state officials theorized that online sales and weakness in the national economy may have contributed. With the higher sales tax rate in Kansas, some lawmakers fear that consumers in the Kansas City area will cross the border to Missouri to make purchases.
Kansas ended the 2015 fiscal year June 30 about $30 million short of projections that had been steeply reduced from optimistic forecasts embraced by the Brownback administration and state legislators in early 2014. State tax collections were $22 million short in June.
During the record 113-day legislative session, Brownback and lawmakers closed a $650 million deficit through spending cuts, fund transfers and tax increases.
In July Kansas budget director Shawn Sullivan closed a $62 million deficit through $24 million in cash transfers and $38 million in spending cuts.
House Bill 2135 authorized Sullivan to lapse appropriations or transfer funding from special revenue funds to the State General Fund, up to a total of $100 million, at any time during fiscal year 2016. Among the cuts was an $8 million reduction to the Kansas Department of Transportation that state officials said would not reduce highway construction.
"These cost savings are in line with the governor's priority to protect core state services including K-12 education and public safety," Sullivan said.