DALLAS — A steeper-than-expected decline in Kansas state tax collections could require quick budget cuts totaling $460 million to balance the books for fiscal 2010, with more in store in fiscal 2011.

The Consensus Revenue Estimating Group on Thursday revised its official prediction of fiscal 2010 revenue by $235.2 million. The new estimate of $5.3 billion in state general fund collections represents a 5% drop from final fiscal 2009 revenue of $5.6 billion and a 4.2% drop from April’s estimate.

State general fund revenue from July through October totals $1.6 billion, $109 million less than expected in the group’s April estimate and $242.5 million less than collected in the same period of fiscal 2009.

The Department of Revenue said October collections totaled $400 million instead of the expected $415 million. Collections in the first three months of fiscal 2010, which began July 1, were $67 million less than expected when the budget was developed.

Appropriated expenditures exceed expected revenue by $253 million. The shortfall could be as much as $459 million due to increased state expenditures as a result of the economic downturn, said Alan Conroy, director of the Kansas Legislative Research Department.

“We’re seeing people who have lost their jobs in other states moving back to Kansas, staying with mom and pop or their grandparents,” he said. “We have a lower cost of living than you’ll find in Nevada or Florida and the West Coast. That is increasing the number of students in our public schools and adding to the caseload of our social agencies.”

Conroy said it could require an additional $155 million to fully fund state aid for local school districts this year due to a decline in local property tax valuations and increased enrollments. More students also are qualifying for the state’s free lunch and special education programs, he said.

Failing to fund the current state finance law would cut another $150 in expected per-student state aid to Kansas’s 293 local school districts, Conroy said. The state has already cut the base rate from the $4,492 expected when the fiscal 2010 state budget was passed to a current level of $4,218.

The Consensus Revenue Estimating Group also adopted an initial estimate of $5.18 billion in fiscal 2011 general fund revenue, which is $123 million less than the latest prediction of fiscal 2010 revenue. Scheduled increases in education funding and higher social agency budgets would result in a shortfall of $264 million in fiscal 2011, according to the estimate by the Legislative Research Department.

Balancing the current budget would require an 8% cut in expenditures.

Gov. Mark Parkinson said he would “consider all the options available” to balance the budget without a special session. Lawmakers are set to convene in January.

Parkinson called the deficit numbers “challenging” but manageable, and called on legislators to cooperate on a long-term solution.

Despite the gloomy revenue report, Conroy said he sees a glimmer of hope, but not until the next fiscal year. “We’re seeing some examples of growth in revenue,” he said. “We expect to see some segments begin to rebound in the second half of fiscal 2011.

Kansas is rated AA-minus by Fitch Ratings, Aa1 by Moody’s Investors Service, and AA-plus by Standard & Poor’s.

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.