Kansas revenue estimate rises slightly; forecast warns of structural imbalance

The Kansas Consensus Revenue Estimating group revised its state general fund receipts upward for fiscal 2025 and fiscal 2026 at a press conference, but officials warned the updated profile still shows rapidly eroding reserves and a structural imbalance.

The group now estimates State General Fund (SGF) receipts for fiscal 2025 at $9,890,000,000, an increase of $157,900,000 (1.6%) from the fall estimate. For fiscal 2026 the SGF estimate is $10,066,000,000, an increase of $219,600,000 (2.2%) from the fall estimate and roughly $175,800,000 (1.8%) higher than the revised fiscal 2025 estimate, presenters said.

Those revisions, officials said, reflect actual receipts that outpaced the previous estimate by more than $200 million through March and updated economic assumptions. The forecasters raised their 2025 inflation estimate from 2.3% to 2.9% and trimmed their real Kansas GDP forecast for 2025 from 2.1% to 1.7%, while raising nominal Kansas GDP to about 4.5–4.6%, according to the presentation.

"The recurring theme throughout the forecasting cycle is an increased volatility in the state's economy," said Shirley, a revenue-estimating official, summarizing the group’s findings and listing risks including persistent elevated inflation, trade policy changes, sustained high interest rates and geopolitical risks.

The updated forecast includes sector notes: Kansas payroll employment rose by about 3,300 jobs year over year through February (roughly 0.2%); nominal average hourly earnings were up about 6.7% year over year through February; crop commodity prices have fallen while cattle prices have risen; drought remains a constraint for agriculture; manufacturing employment was down about 2,900 jobs year over year through February; and the forecast incorporates recent announcements affecting aviation and new manufacturing investment in the Wichita area.

Energy forecasts were largely unchanged from the fall: Kansas crude was forecast at $62 per barrel for fiscal 2025 (unchanged) and $52 per barrel for fiscal 2026 (down from $58). Natural gas was forecast near $2.15 per thousand cubic feet for 2025 and $3.10 for 2026 (up from prior estimates), presenters said.

On tax policy, forecasters said the revenue estimates reflect current law and the state interpretation of enacted legislation, but do not include bills still on the governor’s desk. A particular uncertainty is the full-year impact and timing of Senate Bill 1 from the 2024 special session, forecasters said, because much of that law’s effect plays out when income tax returns and related payments and refunds are finalized.

"A key uncertainty in these estimates is the timing of the impact associated with Senate Bill 1 from last year's 2024 special session," Shirley said, noting the effect will be clearer as recent tax payments and returns are processed. The team plans to publish an adjustments memo next month and expects to have a better picture by May, though some late filers could extend into October.

Reporters asked whether the forecast would trigger provisions in Senate Bill 269 (the reporters referenced trigger provisions). Forecasters said that, based on the current projection through fiscal 2026, it appears unlikely that the first trigger would be reached through fiscal 2026, but they did not publish an out‑year forecast that would confirm year-of-trigger timing.

Net transfers also affected the fiscal picture. Forecasters said a legislative suspension of a recurring Build Kansas transfer in fiscal 2026 is reflected in the profile and acts as a one-time increase to available SGF resources in that year.

The forecast shows projected ending SGF balances of about $2.29 billion for fiscal 2025 and $1.735 billion for fiscal 2026. Forecasters also highlighted a structural mismatch between projected receipts and spending: the presentation showed SGF receipts below expenditures by roughly $930 million in fiscal 2025 and about $555 million in fiscal 2026, and cited a multi-year structural imbalance figure of about $831 million.

"We are structurally imbalanced," said Adam, a budget office staff member. "There are no two ways about it. The ending balance is eroding rather rapidly." Adam said the imbalance stems from both reductions in revenue (including tax cuts) and rising expenditures.

On the question of possible federal-policy shocks such as tariffs or changes to federal grants, forecasters said those are active downside risks. They noted some federal data the Federal Reserve may be using were not available to the revenue estimating group and therefore were not incorporated into the forecast.

Officials said they aim for forecasts that come within roughly 1% of actual collections and will continue to monitor developments and update projections in the next regularly scheduled forecast.

Projections, caveats and sector notes were provided by the Kansas revenue estimating presenters and staff; forecasters acknowledged input from multiple agencies including the Kansas Department of Revenue, Kansas Department of Agriculture, pooled money investment staff, and economists at state universities in preparing the profile.

The press conference included questions from reporters representing the Associated Press, Kansas Reflector, Sunflower State Journal and the Topeka Capital-Journal.