Murky Economic Outlook Calls Legislative Priorities into Question

Nathan Kessler | May 8, 2025

The newest consensus revenue estimates were released April 17, predicting a lackluster fiscal performance for the state in the coming months and years.

The Consensus Revenue Estimating (CRE) Group meets twice a year (April and November) to project state economic conditions in the coming fiscal year. This group is comprised of the Director of the Budget, Director of Legislative Research and staff from the nonpartisan Kansas Legislative Research Department, and economists from state agencies and universities. You can learn more about the estimating process here.

Compared to most recent ending balances, the latest profile shows a less robust economic outlook for the state. 

Here are the key takeaways from the newest estimates:

• Total receipts for FY 2025 are expected to decline by 2.5% to $9.89 billion, reflecting a $476.8 million reduction in State General Fund (SGF) receipts driven by changes made to the Kansas tax code through SB 1 from the 2024 Special Session.
  
  
• SGF receipts in FY 2026 are expected to increase by 1.8% to 10.07 billion, which represents a decline compared to FY 2024. This increase will be exacerbated by higher inflation expectations.
  
  
• Higher cash balance expectations, combined with elevated interest rates, are expected to add $405 million to the SGF. This is an increase of $56.7 million above November’s estimate.
  
  
• The Kansas unemployment rate is forecast to rise from 3.6% in 2024 to 4.0% in 2025. While still well below the forecasted U.S. unemployment rate, this upward tick partially reflects increasing economic uncertainty.
  
  
• Significant uncertainty exists within the domestic and global economy, leading to a broad-based softening of expectations for the state economy over the next few years.

The Big Picture

Forecasts from the April 2025 CRE meeting reflect the extensive uncertainty present in the U.S. and global economic conditions. The report itself sums it up quite well early on, saying that “significant concerns exist for the economy as a whole relative to inflation and U.S. monetary policy, tariffs and trade policy, volatility in energy prices, and geopolitical risk spanning the globe.”  

Digging into the report, this uncertainty manifests in the form of higher expectations for unemployment, inflation, and interest rates.  

Typically, lawmakers would have this information available before adjourning for the year, but the new timeline for the 2025 legislative session meant that lawmakers were gone before estimates were released. This report would have added valuable context as the Legislature determined which tax cuts to adopt and which priorities to fund. As it stands, decisions made this session appear to have us barreling toward a budget crisis amidst deeply concerning economic conditions. 

In November, KAC noted that the wise thing for state lawmakers to do would be to resist enacting legislation that could substantially alter the state budget or tax code until economic conditions have improved. Since then, conditions have worsened and the latest SGF profile shows that newly enacted tax cuts will further reduce the state’s revenue and ultimately leave us in the red beginning in FY 2028.  

If conditions continue to worsen, this timeline will accelerate as expected revenues fail to materialize.

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