TOPEKA ó Kansas House Speaker Ray Merrick is frustrated with Kansasí use of estimate-based budgeting, sharing his views a week before a new revenue forecast will reveal if the state budget is in the red.
The Stilwell Republican acknowledged the stateís revenue forecasting method is unlikely to change, but he expressed uncertainty over the way Kansas uses revenue estimates to budget.
The Consensus Revenue Estimating Group ó made of up of legislative staff, executive branch budget staff and university economists ó will meet next week to produce a new revenue forecast. Many observers expect the group to lower the forecast, forcing the governor and Legislature to find ways to close the deficit.
ďIt ought to be interesting to see what the numbers end up being,Ē Merrick said.
ďI donít understand, and Iíve never ó Iíve been (in the Legislature) 17 years ó I never, never knew how you could run governments on estimates. Right? The real number, weíre at $53 million ahead of a year ago. To me, thatís the real number. Itís not six guys sitting in a room doing an estimate.Ē
The figure cited by Merrick appears to refer to the March revenue report, which showed the state had taken in $53 million more in tax revenue than at the same point in the previous fiscal year ó or about 1.3 percent more.
ďFifty-three more than we did last year. Now, to me, thatís progress,Ē Merrick said.
The figures include insurance premium fees. One percent growth is roughly in line with inflation.
Regardless of the increase, the state has budgeted based on projections of a higher revenue growth rate. The gap results in shortfalls and the need for cuts.
ďBut thatís why I donít think the way we budget ó and Iíve said that for 17 years ó the way we budget is based on estimates. I think we ought to be in the real world,Ē Merrick said.
Asked what that would look like, Merrick said the system hasnít changed in 17 years and he doesnít think it will.
House Minority Leader Tom Burroughs, D-Kansas City, defended the estimating process.
ďThe revenue estimating process, while not perfect, is a practical way to predict future revenue and draft a budget. Additionally, the monthly revenue updates and the bi-annual review allow the Legislature and the governor to make necessary adjustments as needed to ensure the budget is balanced at the end of the fiscal year,Ē Burroughs said in a statement.
Kansas revenue has had difficulty meeting projections over the past year and a half. A forecast downgrade in April 2015 forced lawmakers to find $400 million to make ends meet, sparking a weeks-long standoff over tax policy. Ultimately, the Legislature raised sales and cigarette taxes.
Less-than-expected revenues have continued. Earlier this year, Gov. Sam Brownback cut the stateís higher education system by $17 million in response to a $53 million tax revenue shortfall in February.
Opponents of the 2012 tax policy have said the policy has made it difficult to produce accurate revenue estimates. Some supporters of the policy, including Brownback, have called for refinements to the estimating process to improve its accuracy.
Every state uses some form of revenue estimating. A 2011 report from the Pew Center for the States and the Nelson A. Rockefeller Institute of Government found estimate accuracy suffered throughout the nation in the wake of the Great Recession. In 2009, for example, the median forecasting error was 10.2 percent ó meaning 50 percent of states overestimated tax revenue by more than 10.2 percent.
Kansasí forecasts were more accurate, however. During the height of the recession in 2009 Kansas overestimated revenue by 2.1 percent. By contrast, Kansas experienced a 5.6 percent miss in 2014 ó the largest since it began using the consensus revenue estimating process more than 40 years ago.
Merrick takes questions Monday in Olathe
Question: Do you think it is going to take a long time to wrap our heads around the budget situation or do you see a pretty clear path forward? Obviously, it depends on what happens with the estimates.
Merrick: It ought to be interesting to see what the numbers end up being. I donít understand, and Iíve never ó Iíve been there 17 years ó I never, never knew how you could run governments on estimates. Right? The real number, weíre at $53 million ahead of a year ago. To me, thatís the real number. Itís not six guys sitting in a room doing an estimate.Ē
Q: Youíre saying weíre bringing in $53 million more than last year?
M: Fifty-three more than we did last year. Now, to me, thatís progress.
Q: The problem is you guys budget assuming a rate thatís faster than what it turns out to be.
M: But thatís why I donít think the way we budget ó and Iíve said that for 17 years ó the way we budget is based on estimates. I think we ought to be in the real world.
Q: What would that look like? The CRE, all of that stuff is established in law. Iím not sure what the ideal system would work out to be.
M: Well, we havenít changed it in 17 years so I donít think itís going to change.