Kansas projected to have millions in surplus for next fiscal year
by Rachel Mipro, Kansas Reflector
Topeka — Kansas legislators want to use a projected budget surplus to address the state’s “Social Security cliff,” which they say is driving retirees out of the state.
Kansas taxes income from Social Security benefits, with an income tax exemption for those who make $75,000 in federal adjusted gross income or less. Critics of the tax policy say retirees are put under unnecessary financial strain.
During Friday’s legislative hearing on taxation, Sen. Caryn Tyson, R-Parker, said she supported removing state income tax on Social Security entirely. Tyson and other lawmakers have tried to pass legislation on this subject for the past few years.
Most recently, lawmakers tried to pass House Bill 2597 in 2022, which would have exempted several thousand dollars in retirement plan income and provided for that amount to annually increase by the Internal Revenue Code cost of living adjustment.
“All the committee members, we definitely made an attempt, a great attempt, to address this last year and in previous years,” Tyson said. “If there’s any type of tax on social security that plays into it and discourages people at different levels to not work. We engineer behavior through our tax structure.”
With Kansas carrying a record surplus of more than $2 billion this fiscal year and a surplus of $400 million expected next year, lawmakers are trying to decide what to do with the extra money.
Surplus estimates for the 2023-2024 state general fund were produced by the Division of the Budget and Kansas Legislative Research Department using a consensus process. The governor and the Legislature use these estimates when making the annual budget and spending blueprint.
For the 2023 fiscal year, the estimate increased in November from previous estimates made in April by $794.2 million. Total tax estimates increased by $773 million, and other revenue estimates increased by $21.2 million, making the revised estimate for the 2023 fiscal year $9.701 billion.
The initial estimate for fiscal year 2024 is $10.124 billion, a 4.4% increase from the 2023 fiscal year estimate. The amount of total taxes is estimated to increase by 0.9%, following an increase in 2023.
Gov. Laura Kelly campaigned for reelection on a platform of more quickly eliminating Kansas’ 6.5% sales tax on groceries, fully funding special education and working to reduce the Social Security income tax cliff. Kelly’s budget will be released in January, and it’s expected that some of these issues will be addressed in the budget.
Sen. Tom Holland, D-Baldwin City, said Social Security issues needed to be a priority in the upcoming legislative session.
“As far as it comes with Social Security, I am very interested in addressing the cliff issue,” Holland said. “That’s a real problem to me, for people who have paid into Social Security, particularly for those who are seniors who don’t have other additional sources of income. I think it’s imperative that they get access to those funds.”
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