Kansas tax revenue projected to decline by $72M after tax cut bill

A new state revenue estimate shows the state collecting $72 million less than expected in the current fiscal year, and $400 million less than the previous year.

TOPEKA — Kansas is expected to take in about $72 million less in tax revenue next year than initial estimates projected, officials said.

The revised state revenue estimate announced Friday is the first since Gov. Laura Kelly signed a major bipartisan tax cut bill in June, which is expected to slash state taxes by $1.2 billion in the next two and a half years.

The new estimate contained updated projections for state general fund revenue for fiscal year 2025, which ends in June.

Officials estimated the state government will take in about $9.73 billion in revenue in fiscal year 2025, which is a 4%, or $400 million, decrease from 2024 total receipts. While tax revenues are expected to decrease in 2025, estimates for other revenue sources increased by more than $12 million.

The revised estimate is crafted through a consensus process with state officials and three consulting economists from state universities. Kelly and the Legislature will use the revised estimate to inform the annual budget process.

Officials also presented their first estimates for fiscal year 2026, which begins July 2025, and they predicted $9.85 billion in revenue, an increase from the revised fiscal year 2025 estimate.

In the spring, when officials last updated the state’s revenue estimates, the state’s revenue and economy were deemed “stable,” said Shirley Morrow, director of the Kansas Legislative Research Department, at a Friday press conference.

“That is relatively the same,” Morrow said.

However, some risks still exist, she said. Among them are persistent inflation, high interest rates, potential global geopolitical impacts on commodities, and price declines in the agricultural sector that began in 2023.

Over the past year, overall “farm financial conditions have deteriorated,” she said.

“We still have worries over drought conditions, which seem to have gotten a little worse over most of the state,” she said.

Following officials’ spring estimate, the number of open jobs and the number of available employees have moved closer together, and Kansas jobs have grown by 20,500, Morrow said. But job openings continue to outpace the number of unemployed individuals.