Despite an international conflict, quick and unpredictable swings in the stock market, higher agricultural inputs and rising interest rates, the state’s economy and budget are proving to be stable and resilient, state revenue forecasters concluded Monday.
The state’s Consensus Estimating Group, which includes economists from the University of Kansas, Wichita State and Kansas State, met Monday and revised the state’s revenue forecast downward by about $55 million for fiscal years 2026 and 2027 combined.
The group reduced revenue estimates by about $127 million for the current fiscal year ending June 30 and increased them by about $73 million above the previous estimate for 2027.
The reduced estimate for the current 2026 fiscal year was attributable to the fact that state general fund revenues for March were off from estimates by $162.1 million.
The state is still spending more than it’s taking in, although the ending balance remains in the black, partly because the Legislature is using interest generated by the rainy-day fund to supplement the general fund.
The state is expected to spend about $703 million more than it will take in this year. The spending deficit is projected to drop to $407.6 million in 2027.
Deficit spending is expected to extend out through 2029 and 2030, although that could change depending on the composition of the Legislature where House members are for up for election later this year and in 2028.
The state’s ending balance is expected to be $1.82 billion in 2027 but falling to $686.1 million by 2030.
While the state’s ending balance will remain in the black, a budget proviso calls for using interest from the $2.1 billion rainy-day fund to prop up the state general fund under certain conditions.
The proviso takes effect only when the balance in the rainy-day fund reaches 20% of actual tax receipt revenues in the previous fiscal year.
The transfer is limited to 50% of the amount of tax-only receipts that exceed Consensus Revenue Estimates.
The budget forecast includes moving about $65 million a year from interest in the rainy-day fund to the general fund for 2027 to 2030, meaning the projected ending balance of $686 million in 2030 is about $260 million larger than it would otherwise be without that transfer.
While there are a number of risks facing the state’s economy including the war in Iran, Shirley Morrow, director of legislative research, said most changes in the economic forecast were small and largely involved shifts across real growth and inflation.
She said elevated oil prices associated with the Iran war would be largely “transitory,” but state gains in severance taxes associated with those prices are partially offset by the decline in state oil production.
Morrow said there was upside in manufacturing with Boeing’s reacquisition of Spirit AeroSystems expected to be a stabilizing force in south-central Kansas and demand for new aircraft exceeding the ability of manufacturers to meet that demand.
Further, there is strong demand for maintenance, repair and overhaul of planes, especially defense aircraft.
She also said that the new Panasonic plant in De Soto employed about 1,400 people in February and hope to reach 4,000 workers at some point in 2027.
Morrow said the state’s agricultural sector is facing rising costs for key input commodities, especially fertilizer.
But she said farmer outlook is positive even if current economic conditions are lukewarm.
“Prices for crops are largely stable, but input prices, especially for fertilizer, make turning a profit difficult for producers,” she said.
Agricultural exports, she said, have remained strong, growing 3.25% for 2025 compared to 2024 despite a difficult trade economy.
“Trade with Mexico has been especially strong, picking up slack from their declining trade with many Asian nations,” she said.
She said livestock producers are benefiting from high cattle prices, but demand for cattle and high input prices have kept producers from increasing the state’s herd size.
Gov. Laura Kelly scolded the Legislature on Monday, saying if it had waited until the new revenue estimates were available instead ending the session ahead of time, lawmakers would have seen that they had money to increase pay 2.5% for state employee and increase special education funding.
In the past, the Legislature would take a break for most of April and return at end of the month or early May after new revenue estimates were available.
“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,” Kelly said in a statement.
“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,” she said.
House Speaker Dan Hawkins embraced the new revenue forecast.
“Today’s consensus revenue estimates show that our financial outlook is holding steady, which is very encouraging,” Hawkins said in a statement.
“It’s also a reminder to stay on the disciplined path the Legislature has been working toward this session.
“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,” he said.
“We’re focused on a sustainable future for Kansas that protects taxpayers over the long term.”
