Kansas tax collection forecast improves

JOHN HANNA - Associated Press
Kansas state Rep. Joe Patton, a Topeka Republican, talks about proposals to eliminate the state's income tax during a news conference, Friday, Nov. 4, 2011, outside the Statehouse in Topeka, Kan. Patton favors the idea, seeing it as a way to promote economic growth.  (AP Photo/John Hanna)
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Kansas state Rep. Joe Patton, a Topeka Republican, talks about proposals to eliminate the state's income tax during a news conference, Friday, Nov. 4, 2011, outside the Statehouse in Topeka, Kan. Patton favors the idea, seeing it as a way to promote economic growth. (AP Photo/John Hanna)

TOPEKA, Kan. (AP) — Kansas officials and economists issued a new, more optimistic fiscal forecast for the state Friday, and its prediction that tax revenues will grow by almost 5 percent during the next budget year was certain to intensify a debate over cutting income taxes.

The forecast projecting state revenues through June 2013 came only hours after a new group, Kansans for No Income Tax, began a two-day, five-city bus tour to build public support for eliminating the tax. Republican Gov. Sam Brownback and many of his allies in the GOP-controlled Legislature are already receptive to the idea, believing it will stimulate the economy and spur offsetting growth in sales and other taxes.

The new fiscal forecast is important because governors and legislators use the numbers in their budgeting. Brownback's administration also is developing proposals to overhaul the distribution of aid to public schools and the state's Medicaid program, covering health care for the needy.

The forecasters acknowledged uncertainty about the economy's future, but their predictions remained positive. They increased their estimate of tax collections for the current fiscal year, which runs through June, by 3.5 percent. They also predicted tax revenues would grow again during the fiscal year that starts July 1.

The forecast updates one issued in April that predicted tax collections through June. It now estimates the state will bring in a little more than $6 billion, $205 million more than previously expected.

It also projects the state will take in $6.3 billion in taxes during the 2013 fiscal year, an increase of $293 million over the current fiscal year.

Brownback didn't hint about how the numbers would affect the proposals his administration is developing. Earlier this year, he successfully pursued cuts in spending that included a reduction in aid to public schools.

"The latest revenue projections show the power of economic growth and controlling spending," he said in a statement. "It proves the long-term solution for our state involves more jobs and limited government."

The forecast was issued by Budget Director Steve Anderson and members of his staff, Department of Revenue officials, legislative researchers and economists from the state's three largest universities. Neither Brownback nor legislative leaders participated in its creation.

Alan Conroy, the Legislative Research Department's director, said forecasters expect the state's unemployment rate to decline slightly in 2012, after hovering around 7 percent this year. Also, Conroy said, the state is withholding more income taxes from paychecks this year than last, suggesting growth in payrolls.

Yet Conroy also rattled off issues that could stall the state's economy, including energy costs and Greece's financial crisis.

Joan Wagnon, the Kansas Democratic Party's chairwoman and a former state revenue secretary, said she is confident the forecasters are nonpolitical but described the projected growth in tax revenues as "pretty steep."

"I think that's a rather optimistic revenue growth," she said. "The economy doesn't seem to support that kind of revenue growth."

The kickoff for the Kansans for No Income tax bus tour drew about three dozen people to the Statehouse— a mix of conservative Republican legislators and political aides and advocates for limited government or replacing income taxes with taxes on consumption.

Ashley McMillan, the group's president, acknowledged that its backers don't yet agree on any one proposal. The group planned to wrap up its tour Saturday in Wichita.

"We started this organization to take the conversation out of the bubble that surrounds Topeka and move it out to folks throughout the state of Kansas so they can actually talk about what our state can look like if we do not have state income tax," she said.

One of the group's contributors is Rex Sinquefield, a St. Louis billionaire businessman who recently donated $1.3 million to an effort to get an anti-income tax measure on the ballot in Missouri. The Kansas City Star first reported his support for the Kansas group, quoting the president of the group pursuing the Missouri ballot initiative.

Critics of eliminating income taxes say Sinquefield's interest confirms that the move would benefit the wealthy far more than middle class or poor residents.

Wagnon said eliminating income taxes could force the state to raise money in other ways — possibly by eliminating sales tax exemptions, cutting programs or decreasing public school aid, which consumes more than half of the state's tax dollars.

But advocates insist eliminating the income tax would not hurt middle-class or poor Kansans or force service cuts.

Led by Republican conservatives, the House earlier this year approved a bill to phase out individual income taxes and cut corporate income taxes. The cuts would have started when overall state revenues grew. The plan stalled in the Senate but is likely to get another look from legislators next year.



Kansans for No Income Tax: http://www.kansansfornoincometax.com/

Kansas Democratic Party: http://www.ksdp.org/

State of Kansas: http://www.kansas.gov/