The Kansas Legislature returned for session the last week of April. The key item was to finalize the budget as well as finish up some policy initiatives and consider whether to override vetoes from the governor.

The revenue estimating team meets right after the April income tax filing deadline to update revenue forecasts. In that meeting, tax revenue for this year was increased $411 million and next year increased $349 million. Those increases are attributed to activity driven by federal stimulus payments in recent years and inflation.

While increases are good news in terms of meeting the budget, these reasons indicate that going forward our expenses are likely to grow faster than revenues.

(This is due to onetime revenues from the stimulus which disappear and inflation that impacts both the expense and revenue side.)

The appropriations committee met April 21 and 22 to go over the revenue forecast and final budget recommendations. We saw the inflation impact on several expense items. One of the forecast numbers I find useful is the trend in revenues vs. expenses.

This issue is central to the debate on the reduction in food sales tax. Proponents of eliminating this tax immediately argued against debt reduction so we could use our current ending balance funds to reduce the sales tax on food.

With the fiscal note for food sales tax at about $500 million per year, a $2 billion ending balance would last four years if other revenue and expenses are equal. But what do we do at

But what do we do at that time?

That question doesn’t make the tax elimination right or wrong, but we will have to consider what expenses can be cut or taxes increased at that time.

Our current legislative budget profile shows the increased expenses to keep up with inflation (especially in wages) and several smaller tax adjustments bring us to roughly balance revenues and expenses. That balance is before the impact of food sales tax reduction.

The Food Sales Tax reduction passed by the legislature occurs over the next three years. In fiscal years 2025 and 2026, our expenses exceed our revenues by the amount of revenue needed for the food sales tax reduction. Granted there will be adjustments to the projected num bers, especially that far out. If we can remain at full employment and keep inflation under some degree of control, it is possible our growth will exceed the estimates and keep our receipts above expenditures. If we face a recession, we could face a more severe shortfall.

At this time our 2026 ending balance is $305 million. However, with expenses roughly $500 million above revenues, that balance would be wiped out the next year.

Senate Bill 421 did pass the Senate last week (it passed the House in March) which applies $1.125 billion to the pension debt over the next year. It reduces ongoing payments and interest by just shy of $100 million/year. That is $100 million in annual savings which can be applied against ongoing tax cuts.

Another factor is the tax incentive given to bring the large, unknown company to Kansas. That cost does grow to $124 million for FY 2026. It is, however, limited in the number of years it applies and would bring significant growth in related jobs and companies which is not included in our current revenue projection. It is possible this growth could more than pay for the food sales tax reduction long term. It remains uncertain whether or not this company will locate in Kansas.

These are some of the main budget considerations. While there are many other important issues, I hope to provide some context of the relative impact of these budget items.

We will be returning to session on May 23. If you have questions on these or other issues, please email me at steven.johnson@house.ks.gov. I hope we get some rain, and have a great May!

Prior to the updates to expenses, revenues were roughly $170 million/year of expenses in FY 2026.

Steven Johnson represents Ellsworth County in the Kansas House.