08 December 2021 | Tax and budget

Revenue Estimate Group Provides Cautious Optimism for Kansas Economy

Karuva Kaseke
December 8, 2021

In April and November of each year, the Consensus Revenue Estimating (CRE) group meets to project the state revenues and establish the base from which the Governor and the Legislature build the annual budget. The November estimate revises the current fiscal year’s estimate and forecasts the next fiscal year. The group, which includes the Director of the Budget, staff from the Division of the Budget, the Director of Legislative Research, staff from Legislative Research, staff from the Kansas Department of Transportation, and three consulting economists from state universities, met on November 10, 2021, and released its report revising the estimates for FY 2022 and making the initial forecast for FY 2023. The first State General Fund Revenue Receipt update since that meeting was released on December 1.

Revenues were increased by $1.3 billion from the June legislation adjusted FY 2022 estimate of $7.6 billion with the estimate for total taxes increasing from $7.6 billion to $8.9 billion.

Despite concerns about the ongoing COVID-19 pandemic and the impacts of higher inflation, the report is optimistic that the Kansas economy will continue to see robust growth in real Gross State Product (5.7 percent in calendar year 2021 and 3.6 percent in 2022) and nominal Kansas Personal Income (11.1 percent in calendar year 2021 and 7.3 percent in 2022).

Rebounding Workforce

The report is very positive for Kansas workers and employers as the state has (as of September) recovered 73.5 percent of the 158,000 non-farm jobs lost at the height of the pandemic in February to April 2020 and seen a 1.2 percent increase in workers’ hourly earnings for that same time period.

· Kansas workers have shown their readiness to work as labor force participation (67.6 percent) has exceeded pre-pandemic levels (of 67.2 percent in January 2020).

· Unemployment rates are forecasted to drop to 3.5 percent in calendar year 2022. Unemployment insurance claims are the lowest they have been since the COVID-19 pandemic began.

November Revenue Estimates

November revenues still managed to exceed estimates but due to the CRE update earlier in the month, the numbers tracked closer than seen in the past few months. Total tax collections for November were $626.8 million, which was 3.1 percent, or $18.9 million, more than estimated, and 12.6 percent higher than November 2020.

Corporate income tax collections were $13.7 million, which is 64.1 percent, or $5.4 million, higher than expected and $8.5 million more than November 2020. Individual income tax collections were lower than projected because of remittance due dates bringing in $288.9 million, which was $4.6 million, or 1.6 percent, less than estimated, but were still $13.5 million above November 2020 collections.

Sales and use taxes remained positive, bringing in a combined $285.4 million for retail and compensating use – $8.5 million above the $277 million estimated and $34.5 million more than November 2020 for the same taxes.

The estimated $1.3 billion increase in revenue is good news for investments needed to strengthen Kansas and improve the lives of families and children. The projected revenue and growth over the next two years will allow the state to reduce or eliminate the food sales tax, as proposed by the Governor, returning money into the hands of hard-working Kansans, and begin making the recommended deposits into the state’s emergency funds in preparation for the next economic downturn. The CRE group will meet again in April 2022 to produce final estimates for the fiscal year ending in June and until then, will be monitoring the changes in the state and national economies.

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