Kansas revenue forecast shows sliding income tax collections and budget shortfalls

Shirley Morrow, director of the Kansas Legislative Research Department, provides an update on consensus revenue estimates during an April 20, 2026, news conference at the Statehouse in Topeka. (Photo by Anna Kaminski/Kansas Reflector)

TOPEKA — Kansas revenue forecasters expect income tax collections to fall below previous predictions for this year and next, complicating a budget outlook that shows the state plunging deep in the red for the next five years.

A group of economists from two state agencies, the Kansas Legislative Research Department, the University of Kansas, Kansas State University and Wichita State University revealed their latest “consensus revenue estimate” on Monday. The estimate is revised each April and November.

“The group’s examination of the economy this spring noted many potential risks,” said Shirley Morrow, director of the Kansas Legislative Research Department. “We have the Iran military conflict. We have market volatility, high input prices, interest rates and the potential for a re-acceleration of inflation. However, the Kansas economy and our corresponding state general fund receipts appeared to be resilient and largely stable in the face of these risks.”

Morrow said elevated oil prices from the Iran war were considered “largely transitory” for the purposes of the forecast. Upsides for the state include Boeing reacquiring Spirit AeroSystems and Panasonic’s plans to add employees at its De Soto vehicle battery plant. The employee total there is expected to grow from 1,400 this spring to 4,000 next year, Morrow said.

Overall, the new estimate lowers revenue collections by $127.4 million for the fiscal year that ends June 30. From a budget standpoint, the state now is expected to spend $702.7 million more than it collects this fiscal year.

The decline in revenue is mostly attributed to cratering income tax collections. This fiscal year’s forecast for income taxes is down $138 million from November, while next year’s collections were revised down by $28 million. Those numbers are offset by better-than-expected interest gained from idle funds.

The new estimate for fiscal year 2027 is up $72.7 million overall. That means the state is on track to spend $407.6 million more than it takes in next year.

For 2028, the state is expected to be $427 million in the red.

Those numbers are expected to eat into the state’s $2 billion surplus fund.

The release of consensus revenue numbers following the legislative session is unusual. Before last year, lawmakers would take a three-week break in April and return for a few days in May. That would allow them time to make budget adjustments based on the latest revenue forecast. This year and last, GOP leadership fast-tracked the session so that it would end by mid-April.

Democratic Gov. Laura Kelly fought with lawmakers over their refusal this year to include a 2.5% pay raise for state employees in next year’s budget. Lawmakers chose instead to give themselves a 4% pay raise and their own staff a 10% pay raise.

“Had the Legislature not rushed out of session prior to today’s updated consensus revenue estimates, it would have seen that there are indeed funds available to invest in our state workforce by instituting a 2.5% pay increase and to increase special education funding,” Kelly said.

“I remain steadfast in the belief that it is unwise to craft and pass budgets without using all the information and tools at your disposal,” she added. “While the CRE forecast is neither dire nor overwhelmingly positive, it still reflects the fundamental structural imbalance created by the Legislature’s budgets that has the potential to undo the hard work done to regain fiscal stability over the last eight years.”

Kansas lawmakers in past years adopted changes in tax policy that largely benefit multinational corporations and the wealthiest individual wage earners.

House Speaker Dan Hawkins, a Wichita Republican who is running for state insurance commissioner, said the state’s financial outlook is encouraging.

“While some want to have it both ways with talks of spending increases but also warning of poor legislative budget trends, today’s numbers prove that the work the Legislature has accomplished is setting up the state for success into the future,” Hawkins said. “We’re focused on a sustainable future for Kansas that protects taxpayers over the long term.”