••• Tax & Spending •••

April 2022 Kansas Tax Collections: Remember a Balanced Budget

fiscal mismanagement

In April 2022, the state of Kansas took in a total tax revenue of $1.5 billion, which was 13.2% greater than the original estimate. This includes a sales tax collection that was 0.4% higher than expected and an income tax collection that was 17.8% higher than expected. Legislators should remember the importance of a balanced budget into the future after seeing this data though.

The revenue collected for April of this year was 54.3% higher than what it was in April 2021 – largely due to a 78.6% increase in collected income taxes. However, the $1.5 billion collected in April 2022 is slightly more comparable to the $1.2 billion collected pre-pandemic in FY 2019 (a 27% difference). The main reason for the big gap between this year and the last was because FY 2021 collections revolved around 2020, which saw decreased economic activity as a result of the COVID-19 pandemic.

In total, the tax revenues thus far in FY 2022 are approximately $7.8 billion – roughly 2.3% greater than the current budget predictions for FY 2022 and 12.5% greater than the amount that Kansas had in annual tax revenues in the same month last year. Kansas continues on its way towards having an ending balance of around $3 billion by this June – if not more considering that revenues continue to exceed expectations.

Kansas’ increased revenue intake over the past year isn’t unique as almost every state across the country is seeing an influx of cash. Missouri currently holds more than $4 billion in unappropriated funds from the past year. Colorado alone has $3.3 billion it can spend – not to mention $2.6 billion in COVID-19 relief funds on their plate too.

Legislators should be careful about a “use-it-or-lose-it” approach to spending off a surplus though: that could ruin a balanced budget. A report by University of Chicago and Harvard professors found that the rush to spend government money in the last days of a fiscal year lead to spending 4.9 times higher than the weekly average for the rest of the year on projects that were between two to five times more likely to fall below the median value of annual projects. While the professors’ study relates to expiring funds whereas Kansas’ surplus won’t vanish if it isn’t spent, the same lesson is there: the government needs to return some of this surplus cash to Kansans, while also ensuring that the government doesn’t grow under a surplus and become unsustainable when the surpluses inevitably stop.

When it comes to reducing spending, there’s many opportunities for a balanced budget outcome. Every state provides the same basket of services (education, transportation, social services, etc.), but some states do this more efficiently than others.  For example, our 2021 Green Book research report shows that in 2019, the states that tax income spent 56% more per-resident than the states without an income tax.  Kansas spent 42% more than the states without an income tax.

For instance, counties whose populations were between 6,000 to 10,000 people in 2018 varied in their per-resident spending from a high of $3,038.58 to a low of $949.97 with an average around $1,402.61. Despite these counties being roughly the same size, there were some spending more than triple per resident to provide the same basket of services.

Immediate savings can be found by deep dives into discretionary spending.  Audits on expenditures such as advertising, travel, cell phones, active landlines, outdated equipment, maintaining empty buildings, and more should be subject to yearly analysis to determine if they are a meaningful contribution to state endeavors. Just a little oversight goes a long way here.

Not replacing employees who retire or otherwise leave also has big potential.  Kansas state and local governments have about 37% more employees per capita than the national average; right-sizing local government employment can save up to $2 billion.

Part of the increase is a rebound from lower collections last year, but this still points to a need for tax relief.  Kansas imposes a heavy tax burden on businesses and individuals, which hurts families and businesses and prompts some taxpayers to move to other states.  Legislators need to get runaway spending under control and reduce taxes on everyone rather than ambitiously spend, leading to a deficit in the future.