DALLAS — The Kansas Senate’s Ways and Means Committee has endorsed the largest tax hike in state history, a $434 million package of measures aimed at easing a revenue shortfall that keeps getting worse.
The committee approved the tax proposals on Friday, but within hours the Department of Revenue reported that tax collections in April fell $65 million below the level predicted in lwast month’s revised revenue estimate.
The department said sales tax collections were $11 million more than expected in the April revenue revision, but individual income tax payments were $75 million less than predicted.
Before the latest drops, the Consensus Estimating Group had put the expected revenue shortfall for the remainder of fiscal 2010 at $93 million. The state must balance its budget by the end of the fiscal year by constitutional mandate.
The April revenue decline was called “disappointing but not surprising” by Gov. Mark Parkinson. “We can still manage to get through the current fiscal year without additional cuts,” he said.
The full Senate was slated to begin debate on the tax package today, but legislative leaders said the unexpected 10% revenue drop may require a revision in the schedule. The House was set to consider a proposed budget for fiscal 2011 developed by the Appropriations Committee.
Unlike the Senate proposal, the House plan would not raise taxes to balance the budget. However, it relies on an expected but not assured infusion of $131 million in new federal highway funds, and does not replace $86 million in federal stimulus funds that went to public schools in fiscal 2010 but are no longer available.
The Senate committee’s tax plan would generate an additional $417.2 million in general fund revenue in fiscal 2011, which begins July 1, and another $21 million for highway projects. The additional revenue would restore a scheduled 10% reduction in health care reimbursements and protect public education from additional cuts.
Parkinson has vowed to veto any budget proposal that cut spending on public education or social services for the poor, elderly, or disabled.
The revenue plan proposes a three-year, 1% increase in the state sales tax rate to 6.3%, beginning June 1, that would generate an estimated $365 million in fiscal 2011. The rate would drop to 5.6%, with 0.3% dedicated to the highway fund.
The tax package also includes an increase in the tax on a pack of cigarettes to $1.34, the national average, up from the current 55 cents per pack, and an increase in the tax on the wholesale price of tobacco products to 40% from the current 10%. The two measures would raise an estimated $63.1 million a year.
The revenue increases also include elimination of a state tax deduction for some manufacturing activities that would generate $17 million a year.