Kansas tax revenue lags revised November projection by more than 5%

TOPEKA — The revised Kansas tax revenue projections proved too bullish in November as the state government collected 5.3% less than anticipated during the month.

Economists and fiscal analysts increased by more than $750 million the state’s projected revenue for the current fiscal year, reasoning inflation would continue to stimulate expansion in tax collections. The adjustment was made prior to Gov. Laura Kelly completing budget recommendations for presentation in January to the 2023 Legislature.

Kansas sits on a $1 billion rainy day fund, but predictions of large state budget surpluses fueled expectations the Legislature could cut income tax rates and accelerate the planned three-year phase out of the state’s 6.5% sales tax on groceries. Kelly vowed to include in her budget an immediate end to the state’s food sales tax.

The Consensus Revenue Estimating Group expected the state to receive $678 million during November, but actual receipts from income tax, sales tax and other sources topped out at $642 million. That resulted in a monthly shortfall of $36 million or 5.3%.

It was the first time in more than two years the Kansas Department of Revenue reported tax revenue to the state didn’t surpass the monthly projection.

The Department of Revenue also reported Thursday the state collected $3.58 billion in the initial five months of the fiscal year that began July 1. That was $184.5 million, or 5.4%, more than the opening five months of last fiscal year.

In November, the state’s sales and compensating use tax collections reached $304.9 million, which was $8.7 million or 2.8% below the monthly estimate. Last month’s return was $19.5 million, or 6.8%, more than in November 2021.

In terms of individual income tax collections, the state took in $292.4 million during November. That was $21.1 million or 6.7% less than projected for the month, but 1.25 higher than in November 2021.

Corporate income tax collections hit $13.2 million, or $478,000 or 0.6% shy of the estimate. In November 2021, Kansas banked $482,000 more in corporate income taxes.