TOPEKA — Kansas missed revenue projections in March, continuing a monthslong trend that puts the state $175 million below forecasts for the fiscal year. 

Tax collections in March missed expectations by 10.7%, or nearly $69 million. Collections for the fiscal year, from July through March, were stronger but still 2.5% below estimates, or $175.7 million down.

Gov. Laura Kelly called the numbers “concerning” In a news release about the March numbers. 

Adam Proffitt, Kansas Department of Administration secretary and the state’s budget director, said he watches for trends, and he noted the state missed projections during three of the last four months. 

March tax collections were affected primarily by corporate income taxes and, to a small degree, insurance premium taxes, he said. 

“It was actually a negative number for corporate, meaning more money went out than came in during the month,” Proffitt said. “That suggests that there were some large corporate refunds.”

Corporate tax collections decreased by $23.5 million, which was $63.5 million below what the state projected, about 159% down. The Kansas Legislative Research Department attributed the fiscal year drop in corporate sales tax receipts to refunds associated with economic development programs. 

Proffitt said he focuses on trends because one month doesn’t necessarily offer enough insight to assess what’s happening. Corporate taxes, for instance, have been slowing “pretty significantly” for the past 12 to 18 months, he said. 

“Corporate profits had seen a boom through the pandemic and carried through for a couple years after that, but it seems like they’re kind of returning to more normalized levels,” he said. 

Economist Donna Ginther, director of the University of Kansas Institute for Policy and Social Research, said the Kansas economy is seeing effects of its dependence on manufacturing and agriculture, as well as tax cuts made last year. 

“Ag continues to be in a deep recession, and manufacturing has also been affected by the tariffs because some of the inputs are imported,” she said. “We don’t see a huge uptick in unemployment, but nobody’s hiring. The labor market is kind of frozen in amber, so we’re not seeing increases in earnings that would also contribute to tax collections.”

Individual income taxes saw an “inexplicable” spike in withholdings — meaning the money individuals have taken out of their checks for taxes — throughout the summer and fall, Proffitt said, adding that he wasn’t sure what caused that. Now, there are higher refunds than last year going out to individuals, Proffitt said. 

“That’s obviously great news for taxpayers, and that’s kind of by design, sending money back to them, but having it come in below forecast does alter the available resources we thought would be available to sustain the budget,” he said. 

The state made money on interest, which means revenue collections are down in total by $162 million, Proffitt said. 

That won’t continue with the spending pattern the state is undertaking, he said. 

“It’s fantastic to be able to earn the interest on the idle funds,” Proffitt said. “It’s great for the taxpayer to the extent we have surplus funds for earnings on interest, but our ending balance is diminishing and is forecasted to diminish further over the next couple of years.”

“The ability to earn interest is going to quickly erode, which means that the interest earnings won’t be able to offset any misses in tax receipts in the pretty near future,” Proffitt added.

He said the budget, which the House and Senate passed amid dissent, could cause the state to spend as much as $475 million over expected revenue in the upcoming fiscal year. 

“Our ending balance is diminishing and is forecasted to diminish further over the next couple of years, so the ability to earn interest is going to quickly erode, which means that the interest earnings won’t be able to offset any misses in tax receipts in the pretty near future,” he said.

Kansas gave one of the five-largest cuts to millionaires in 2025, according to the Institute on Taxation and Economic Policy, joining Mississippi, Missouri, Ohio and Oklahoma. That followed a $1.2 billion tax cut package in 2024, and other tax cuts in recent years.

“These costly and regressive tax cuts are especially alarming in light of the long list of economic and policy realities beginning to weigh on states,” the organization’s assessment said. “Revenue growth has slowed just as federal budget cuts have shifted enormous new costs to states, and tariffs have begun inflating those costs and slowing economic growth.”

A more “reasonable approach,” the organization said, was to be cautious in budgeting, roll back recent tax cuts and look at new ways to raise revenue. 

Tax cuts in Kansas gave millionnaires an average tax break of $51,260 while giving non-millionaires $610 in cuts, ITEP’s research said, pointing to a flat tax bill in 2025 that aims to bring the state’s individual and corporate income taxes to flat rates of 4%, down from the current respective top rates of 5.58% and 7%.

“Future reductions in tax rates will go into effect when income tax collections exceed Fiscal Year 2024 revenues plus the rate of inflation,” ITEP said. “This approach conceals the fiscal impact of moving to a flat tax, but the full impact of the income tax cuts is estimated to cost the state more than $1 billion a year.”

This fiscal year’s revenue estimates included the cost of previous years’ tax cuts, Ginther said.  

“The state general fund is living on borrowed time,” Ginther said. “We’re spending more than we’re taking in. Up until last year, the state had done a very good job of not doing that. As time goes on, that budget surplus will go away.” 

Kelly chastised the Legislature’s leadership for rushing through the 2026 session and leaving before April revenue estimates were announced. 

“This reckless, irresponsible approach to budgeting is not smart and it is not fair,” Kelly said in a news release. “I hope that future Legislative leadership understands that the people expect them to be good stewards of Kansas taxpayers’ dollars and that means working until the job is done right, even during election years.”

Kansas Reflector is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Kansas Reflector maintains editorial independence. Contact Editor Sherman Smith for questions: info@kansasreflector.com. Follow Kansas Reflector on Facebook and Twitter.

Latest state news:

MORE …