Kansas tax collections for May fell short of projections by about $74 million, and legislators said Wednesday they fear that will mean more cuts to Medicaid.
The May shortfall comes despite the state’s revenue estimating group revising projections downward for the third consecutive time about six weeks ago.
It wipes out the meager savings Gov. Sam Brownback created when he made cuts two weeks ago after the Legislature sent him a budget that didn’t balance.
Brownback now must find millions more to get the state through the current fiscal year that ends June 30 — and his options are limited.
“It’s higher education and Medicaid, realistically,” said Rep. Steven Johnson, a Republican from Assaria. “We’ve got very few places to go.”
The governor’s spokeswoman, Eileen Hawley, said his office does not expect any further allotments, or unilateral spending cuts, this year. She has not yet responded to a request for more information on how the budget will be balanced.
The Topeka Capital-Journal reported that a $50 million package of fee sweeps, topped by $16 million from the Children’s Initiatives Fund, is being floated as a possible solution.
The May revenue numbers cast a pall over Wednesday’s ceremonial “sine die” one-day legislative meeting, the last official gathering of the 2016 session.
A Kansas Supreme Court decision released Friday ordering the Legislature to appropriate more money to equalize school funding among districts also loomed large over the proceedings.
It would take about $40 million to comply with the order. Legislators opted not to address that Wednesday, increasing the possibility of a special session before July 1, when the court said it might close schools.
Sen. Jim Denning, vice chairman of the Senate budget committee, alluded to the revenue shortfall Wednesday during a caucus of Senate Republicans. He said a special session would serve little purpose if the Legislature is unable to comply with the court order because it has to “scrape any money up” to pay for other items, including Medicaid.
“I just don’t see anything good about trying to come back and appropriate money where we need to leave it in the checking account to pay for our core services,” Denning said. “That may not be constitutional, but it’s real life.”
Few budget-balancing options left
Public schools are by far the largest expense in the state’s general fund budget of almost $6 billion. But K-12 education is exempt from more spending cuts under the budget the Legislature passed.
Brownback and the Legislature already have agreed to delay the state’s remaining payment into the state employee pension plan for the current fiscal year. The state highway fund is largely tapped out. Other special funds also have been depleted.
Johnson is one of a group of Republicans who have tried the last two sessions to help balance the budget by rolling back a business income tax exemption Brownback signed in 2012.
Johnson said the May numbers are more evidence that the state needs to increase its income tax revenue stream, but he also acknowledged it’s too late for that to solve the current crisis.
Income tax changes would not go into effect until Jan. 1, 2017.
Medicaid and higher education already have taken cuts, but Rep. Barbara Bollier, a Republican from Mission Hills, said they may be in for more. But she also said the Children’s Initiatives Fund, which provides grants to a host of early childhood programs, also might be in the crosshairs.
“These would be tragically possible consequences,” said Bollier, who also has pushed to roll back the 2012 tax cuts.
A retired physician, Bollier said some medical providers in the state have given up billing Medicaid because the reimbursements don’t cover the time and resources it takes to procure them.
Some serve Medicaid patients for free and some drop out of the program. Bollier said more cuts would lead to fewer providers.
“It’s going to really strain the system, I believe,” Bollier said.
Revenue shortfalls common
Revenues have come in short of estimates more often than not in the last two years, but the May shortfall was large even by recent standards.
Revenue Secretary Nick Jordan said layoffs in the aviation, agriculture and oil industries were to blame.
“This is a trend reflected throughout the region,” Jordan said.
Plummeting oil prices are being blamed for a larger budget crisis in neighboring Oklahoma, which relies more heavily on that industry.
Senate Majority Leader Terry Bruce said during the Republican caucus that three Kansas oil and natural gas companies recently filed for bankruptcy, a sign of that sector’s severe downturn.
A news release from Jordan’s office said $58 million of the May shortfall was from individual income tax receipts. Corporate income tax receipts came in $15 million below estimates and sales tax revenue came in a bit above expectations.
Kansas Democrats like Rep. Tom Sawyer of Wichita said the income tax cuts are a bigger factor in Kansas’ continued budget shortfalls than energy prices.
“It’s continued bad news, and it’s amazing with as many times as we’ve had to downgrade the (revenue projection) numbers,” Sawyer said. “Again, it shows the failure of the Brownback tax plan. We’ve got to change it.”
Brownback’s office said it’s conducting “a full, independent review with outside experts” to determine why the revenue estimating process is struggling to accurately predict how much tax money the state will take in.
Rep. Vicki Schmidt, a Republican from Topeka and a pharmacist, said even if Medicaid is spared further spending cuts, there’s cause for concern.
“We’re already destroying Medicaid, before the revenue numbers came out today,” Schmidt said. “I mean it is dreadful. It is access to care, it’s breaking promises. It’s people’s lives.”
Andy Marso is a reporter for KHI News Service in Topeka, a partner in the Heartland Health Monitor team. You can reach him on Twitter @andymarso
