Kansas is at a pivotal moment. The state must adopt policies that balance fiscal responsibility with economic competitiveness to secure a prosperous future. Our annual Responsible Kansas Budget outlines the pressing need to rein in spending, utilize surplus triggers for tax relief, and draw lessons from successful state policies nationwide.
The Economic and Labor Landscape in Kansas
Kansas’s labor market demonstrates resilience but faces challenges. As of September 2024, the civilian labor force reached 1.51 million, with employment at 1.46 million and an unemployment rate of 3.3%. Total nonfarm employment rose modestly by 1.3% year-over-year, with sectors like trade, transportation, and utilities growing by 2.1%, while manufacturing declined by 0.5%. These figures highlight the need for targeted policies to sustain job growth and encourage private-sector investment.
Regarding economic competitiveness, Kansas ranks 25th overall on the Tax Foundation’s 2025 State Tax Competitiveness Index. While the state benefits from competitive excise tax rates and sales tax uniformity, it lags behind states in reducing income tax rates, ultimately to zero, where seven states have their income tax rate today. Transitioning to single-rate tax structures and reducing tax burdens could enhance Kansas’s ability to attract businesses and talent; tax changes in the 2024 Special Session should be viewed as a first step, not a destination.
Kansas’s Spending Problem: Appropriations Exceed Population and Inflation Growth
State appropriations in Kansas have consistently outpaced population growth plus inflation, creating a trajectory that threatens fiscal sustainability. Table 1 highlights the substantial appropriation increases in general, state, and federal funds between 2005 and 2025.
Over the past decade, state appropriations have grown at an average annual rate of 5.7%, compared to a modest 2.5% annual growth in population plus inflation. Figure 1 illustrates the widening gap between appropriations and affordability.
Figure 1: Kansas’s Initial Appropriations vs. Population Growth Plus Inflation
Had Kansas adhered to population-plus-inflation spending limits, the state could have avoided billions in unnecessary expenditures, creating room for meaningful tax relief.
Figure 2 highlights that the latest 2025 Kansas budget for state funds was $6.7 billion more than if it had followed population growth plus inflation since 2005. This overspending has cumulatively amounted to $53.3 billion more out of taxpayers’ pockets than otherwise, meaning that Kansas could have substantially reduced, if not eliminated, its income taxes by now had spending been held in check.
Figure 2: Kansas’s State Funds Initial Appropriations vs. Population Growth Plus Inflation
The Case for Surplus Triggers: Ensuring Sustainable Tax Relief
Some states, like North Carolina and Louisiana, rely on revenue triggers to implement tax cuts, which depend on projected revenue growth. This mechanism is fraught with uncertainty, delaying tax relief when revenue forecasts fall short. Surplus triggers, by contrast, leverage actual surpluses to fund immediate tax cuts, ensuring fiscal responsibility while providing predictability for taxpayers.
For instance, adopting surplus triggers could accelerate reductions to Kansas’s top income tax rate of 5.7%, aligning it closer to North Carolina’s flat 4.75% or Texas’s lack of an income tax altogether. This approach would position Kansas as a regional leader in tax competitiveness and sustainable budgeting.
The Kansas Legislature should start to right this overspending by passing a budget far below the 2026 Responsible Kansas Budget. Using the average population growth of 0.06% and chained consumer price inflation of 4.84% over the last three years from 2022 to 2024, the spending limit is 4.9% for the RKB. Increasing the 2025 budget of $19.27 billion by the maximum rate of 4.9% provides a 2026 RKB of $20.21 billion in state funds, as noted in Figure 3.
Figure 3: 2026 Responsible Kansas Budget
Drawing Lessons from Other States
Kansas can look to states like North Carolina and Texas for successful fiscal reforms:
- North Carolina: By reducing its corporate tax rate to 2.49% and flattening its individual income tax structure, North Carolina has attracted businesses and boosted its economy.
- Texas: With a strict spending cap tied to population plus inflation, Texas has effectively used budget surpluses to reduce property taxes and maintain a zero personal income tax rate.
These examples underscore the importance of aligning budgetary policies with taxpayer affordability while fostering economic growth.
Recommendations for Kansas’s Fiscal Policy
To place Kansas on a sustainable path, we recommend:
- Implementing a Spending Cap: Limit annual appropriations growth to a maximum rate of population growth plus inflation, ensuring spending aligns with the average taxpayer’s ability to pay for government spending.
- Adopting Surplus Triggers: Use surplus funds to implement immediate tax cuts, providing certainty and relief to Kansas families.
- Increasing Transparency: Mandate priority-based budgeting for state agencies to justify all expenditures annually, reducing inefficiency and waste.
- Prioritizing Economic Freedom: Expand pro-growth policies to attract businesses, improve labor market outcomes, and enhance Kansas’s national ranking.
Conclusion: A Roadmap for Prosperity
As the new legislative budget committee starts crunching the numbers and Gov. Kelly releases her budget early next year, we’ll have an even better understanding of where the Kansas fiscal situation rests. Once those numbers are available, we’ll fully flesh out the 2026 Responsible Kansas Budget to offer a clear, data-driven framework to address the state’s fiscal challenges. Kansas can foster a robust economy that supports families and businesses by capping spending, leveraging surplus triggers, and reducing tax burdens. Policymakers have a critical opportunity to secure Kansas’s economic future. Adopting these reforms will ensure the state remains competitive, prosperous, and a beacon of opportunity for generations.
