As we enter the second half of this year’s legislative session we continue to receive positive economic news. The State’s tax-only revenues were $21.5M above estimates for February, putting the state $83.2M above the amount upon which the Governor based her FY 2008 budget. The February increases were mainly from individual income tax receipts (28.4% above estimates or an additional $14.2M) Corporate income tax receipts were a whopping 131% above the latest $2M estimate and sales tax receipts were nearly $8M above estimates. There was a significant decline in the cigarette tax receipts, $2.6M below the $9.5M estimate, but many would say this is actually good news since it translates to lower consumption and perhaps lower overall health care costs in the long run.
After a relatively slow January revenue-wise, the beefed up February numbers bode well for finishing the session and the fiscal year in good economic shape. The income tax receipts, in particular, are putting us in a position to provide some significant tax relief this legislative session. In addition to trimming or completely eliminating the state’s franchise tax and reducing significantly the unemployment tax, the House this week is also considering elimination of the state income tax on social security benefits for the elderly. The House is trying to muster support in the Senate for at least $60M in tax relief, not counting the unemployment tax cut which simply draws down the balance in the unemployment trust fund and does not affect the State General Fund.
The House Economic Development Committee held its hearing on the Eaton job protection legislation this week and we had a positive reception. The measure has already passed the Senate and we’re optimistic the House will also approve the measure, providing the final financial piece of the incentive package to retain the Eaton plant jobs.
In the coming couple of weeks, look for the House to announce its health care reform initiative and a plan to address the state universities’ and community colleges’ deferred maintenance needs. Ticket and tuition surcharges are on the table for negotiation in addition to other funding proposals.
The House Federal & State Affairs Committee will start holding hearings next week on one or more gaming proposals. The Governor is pushing expanding gaming in the state and trying to garner support by tying revenues to several projects, such as pay raises for state employees, COLA’s for retirees, deferred maintenance and more. Unfortunately, the expected additional revenue wouldn’t completely fund any particular initiative, especially on an ongoing basis, and probably only represents a redistribution of the same revenue dollars. There has been no credible data that expanding gaming in the state would attract a significant amount of out-of-state dollars. Kansans would, instead, be spending their disposable money on expanded gaming and not for other goods and services. A mere redistribution of income away from existing Kansas merchants to expanded gambling interests is probably not the way to grow the Kansas economy. Nevertheless, a good deal of time will be spent again this year debating the subject.