April revenue estimates project stable revenue, economic growth and education funding at lower share of income than past decade

April revenue estimates project stable revenue, economic growth and education funding at lower share of income than past decade

The latest state revenue forecast, released April 18 by a group of legislative and executive fiscal experts and economists from state universities, contained generally positive news for school leaders and the state.

Here are the key points for school leaders:

  • After steep income tax cuts were passed in 2012 then largely repealed in 2017, state revenues are projected to be stable. State revenue estimates for 2019, 2020 and 2021 changed little since the November report.
  • State personal income growth – a key measure of economic well-being – is expected to be higher during the next three years than from 2013 to 2017.
  • Even after significant increases in school funding beginning in 2018 and continuing under the five-year funding plan passed last session, total K-12 expenditures as a percentage of state personal income are expected to remain well below most years in the 2000’s.

State revenue projections for the next three years were almost unchanged from November.

State general fund revenues were raised $14.9 million combined for Fiscal Years 2019, 2020 and 2021. Taxes are expected to increase $162 million more than projected in November, but other expenses are expected to provide $147.1 million less, mostly because the Legislature voted to transfer $115 million out of the state general fund to make a missed payment to the Kansas Public Employees Retirement System. Here is a link to the “short memo” on the new revenue estimate.

Projections for both state personal income growth (which measures the total income of all state residents) are higher than 2013 through 2018.

Kansas personal income growth projections for each year was reduced from 4 percent to 3.9 percent from the November estimate. However, that would still be the best three-year period of state income growth since 2011 to 2013.

Note that state personal income had lower growth after major state income tax cuts in 2012 took effect but begins to recover after most of those cuts were repealed in 2017.

Personal income growth estimates were slightly lowered, but so was inflation.

The consensus group reduced the projected increase in the consumer price index from 2.2 percent each year to 1.9 percent in 2019 and 2.1 percent in 2020 and 2021.

That would be slightly lower than the last two years, higher than 2013 through 2016, but lower than most of the 2000’s. Lower inflation means the “real” impact of income, as well as funding for education, is higher.

Kansas income growth is expected to catch up with the rest of the nation.

Since 2013, Kansas personal income growth has been lower than the rest of the nation. However, the April estimates believe that U.S. personal income growth will fall from 4.5 percent in 2018 to 4.1 percent in 2019, 4.0 percent in 2020 and 3.9 percent in 2021. Kansas personal income is expected to increase from 2.3 percent in 2018 to 3.9 percent in each of the following three years.

Again, it is noteworthy Kansas fell behind the rest of the nation in personal income growth after the 2012 tax cuts and is expected to improve to the same rate as the U.S. average after the tax cuts were largely repealed.

School funding as a share of state personal income will continue to be lower than most of the previous decade.

Based on the consensus revenue estimates, Kansas personal income will increase from $146.0 billion in 2018 to $163.8 billion in 2021. KASB estimates that school district general fund budgets (state foundation aid), special education aid and local option budgets will increase from $4.3 billion in 2018, or 2.98 percent of personal income, to $4.9 billion in 2021 – also 2.98 percent.

(KASB bases its estimate on the increase in base state aid under SB 16, adding $7.5 million each year in special education state aid, and increasing Local Option Budgets by the same percentage as Kansas State Department of Education estimates for LOB state aid.)

KASB estimates that total school district spending will increase from $6.5 billion in 2018, or 4.45 percent of Kansas personal income, to $7.5 billion in 2021, or 4.55 percent. The higher share of state personal income is mostly due to an increase in KPERS contributions, which are not part of the general fund, special education aid and local option budgets, but are included in total district expenditures.
However, both total spending and general fund/special education aid/local option budgets will remain at an equal or lower percentage of personal income than any year between 2000 and 2011, and all but three years between 1990 and 2011.